The Certificate in Financial Maths & Modelling awarded by the Association of Corporate Treasurers in the period ended 2016.
Overview of the course
CertFMM equips you with the practical insights and understanding to:
- Challenge and use the outputs from models to support important risk management and valuation decisions.
- Build and validate models in MS Excel, or on other platforms.
CertFMM provides a rigorous integrated set of tools to understand and explain:
- Financial instruments
- Financial risk
- Corporate value and
- The fundamentally important relationships between them.
The most important benefit of working with these tools is developing the skill to identify assumptions, and the confidence to challenge them.
This is essential in practice because so many real life assumptions are unstated, unrecognised, and expensively or dangerously wrong.
The emphasis is on the practical investigation of real life problems and opportunities to either:
- Save costs or
- Reduce risk or
- Identify pricing bargains.
Techniques include interest, foreign exchange and commodity risk modelling.
The general purpose tools and techniques are then applied to practical case studies.
The course introduces and analyses the use of options for financial risk management.
It incorporates the valuation of different types of option using binomial pricing models and the Black Scholes model.
It also introduces and applies Value at Risk (VaR) measures, their important uses and their even more important limitations.
The course is structured into six units covering:
- Financial modelling fundamentals
- Applied debt modelling
- Foreign exchange modelling applications
- Practical derivatives modelling
- Applied corporate finance and real option modelling
Financial modelling fundamentals
These are the nuts and bolts of financial maths and modelling in the five essential areas of:
- Practical interest rate optimisation
- Modelling series of fixed, growing or declining future cashflows, including pension liabilities
- Modelling the term structure of interest rates using no arbitrage
- Expensive misconceptions in statistics
- Value at Risk and its limitations
The platform used on the course is MS Excel.
The principles illustrated and applied are also fully relevant to all other platforms.
Applied debt modelling
This unit investigates debt in the important areas of:
- Present values
- Future cash flows, timing and risk
- Interest rate sensitivity and hedging
You will gain a deep and broad applied understanding of the relationships between value, risk, maturity, coupon rate and coupon frequency.
Foreign exchange modelling applications
This unit introduces and applies the key tools to model foreign exchange (FX) including:
- FX quoting conventions
- Hedging using forward foreign exchange contracts
- Relationships between foreign exchange rates, interest rates and inflation rates
- Applying VaR to foreign exchange risk management
Practical derivatives modelling
This covers the maths and modelling of derivatives in:
- Derivatives modelling fundamentals
- Modelling long-term swaps
This unit investigates options in depth in the four areas of:
- Option payoffs
- Modelling option hedges
- Option valuation modelling
- Options arbitrage and the put-call parity relationship
Applied corporate finance and real option modelling
The final unit of the CertFMM course integrates the techniques introduced earlier, and covers:
- Modelling for corporate finance including corporate valuation
- Capital structuring in practice
- Real option modelling
- Annuity factor
- Association of Corporate Treasurers
- Capital asset pricing model
- Cross-currency interest rate swap
- Day count conventions
- Discount rate
- Dividend growth model
- Financial maths
- Financial model
- Foreign exchange forward contract
- Four way equivalence model
- Interest rate parity
- Internal rate of return
- Model risk
- Present value
- Real option
- Spreadsheet risk
- Swap points
- Value at risk