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The Department of Mathematics and Computer Science Approved this
program unanimously by a 12-0-3 vote, 9/1/12
Background: The Stillman School of Business requires a single
mathematics course, MATH 1205, a finite math course with some Calculus
content, for all its majors. However, it is increasingly apparent that this
“one-size –fits-all” approach does not serve all of its majors. For example,
students majoring in Finance who wish to pursue graduate studies in the area
would need significantly more mathematics in their background.
Unfortunately, most do not arrive at this realization until their junior year.
Thus, the addition of (at least) four mathematics courses (Calculus 1-3, plus
Linear Algebra) to a curriculum including significant finance content would
position these students much better for graduate study.
In addition, this program, while affecting not a single student in Arts and
Sciences, will not impinge significantly on department resources. It also
opens the door for a future collaboration in “Financial Mathematics” as an
option for mathematics majors.
The course descriptions for the four courses that are to be a part of the
program are at the end of the document.
In conclusion, this program has been vetted and approved by the School of
Business’ EPC.
Proposal to Create an
Undergraduate Concentration Mathematical Finance
Prepared by Tony Loviscek, Chair
Department of Finance
May 1, 2012
I. Program overview, rationale, and expectations
Finance is a sub-discipline of economics, focusing on the measurement of time and risk
in the management of financial resources. At its very core, it has a strong grounding in
mathematics, as seen, for example, in models of asset pricing (which rely on linear and
non-linear relationships between expected returns and micro- and macroeconomic
variables), risk (which involve stochastic measures of volatility), options pricing (which
applies advanced calculus), and portfolio analysis (which focuses on optimization
algorithms).
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Currently, Seton Hall does not offer students a program that formally broadens and
blends the educational experience across these two complementary disciplines. This
observation is not new; both the Department of Mathematics and Computer Science and
the Department of Finance have long discussed the possibility of offering such a
program. The challenge has not been with the desire but with the ability. Succinctly,
while the Department of Mathematics and Computer Science has long had a dedicated
and capable faculty to deliver the program, the same could not be said of the Department
of Finance (which successfully recruited a number of excellent faculty members, but was
unable to retain them for a significant stay in what was a “hot” market for holders of
Ph.D.’s in finance) until 2008. Since then, the department has been able to attract and
retain five faculty members with strong quantitative backgrounds. For example, the
faculty has degrees in mathematics, statistics, and chemistry – the strongest quantitative
experience in the history of the department – and with strongly supportive teaching and
research credentials (including publications in nationally-recognized “A”-level journals).
The concentration in Mathematical Finance seeks to broaden and deepen the educational
experience of students by offering them the opportunity to be active participants –
effective problem solvers – in what is becoming a structural shift in thinking since the
global financial crisis of 2007-2009. This shift is occurring in both the academic and
corporate communities. Current research in the academic community, for example,
reveals strong evidence of perverse and complex executive compensation incentives
grounded in the advanced mathematics of derivatives products, incentives that have led to
excessive risk-taking and a bias toward short-term performance. An understanding of the
impact of these perverse incentives is possible only with advanced training in both
finance and mathematics. In addition, the corporate community and regulatory agencies
have increasingly turned to researchers in the academic community for insights and
analysis on new financial models of risk management and securities trading now being
implemented for stress testing and metric transparency. Without them, the likelihood of
another financial crisis of the kind recently experienced is not insignificant. Thus, the
demand is not only for new thinking but new talent in both communities. As a response,
the concentration in mathematical finance seeks not only to prepare students for careers
in the corporate sector but also to groom them for graduate degrees that would further
advance their knowledge of finance and mathematics.
II. Internal and External Assessment
By all accounts in both the public and private sectors, the demand for individuals who
have a strong background in mathematics and finance is rising, and will continue to rise
throughout the decade. For example, an understanding of the causes and consequences of
the global financial crisis of 2007-2009 is almost impossible without an understanding of
the underlying mathematics of the models used by corporations worldwide. As
mentioned, these models failed financial institutions during the crisis. As a result, new
ideas on risk management, financial modeling, financial engineering, currency hedging,
and actuarial sciences, for example, are sorely needed.
The Department of Finance currently houses approximately 170 students. The goal is to
have at least 25 students enrolled in the program within two years. The aim is to draw
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from both current and future students. In particular, the pool of future students could be
larger than expected. This is because the proposed program is one of the few
undergraduate mathematical finance programs among Seton Hall’s aspirant schools, such
as Boston College and Villanova.
As preliminary evidence of the program’s potential draw, a departmental survey reveals
16 current students expressing strong interest in the program. Students majoring in
mathematics and applied mathematical sciences at Seton Hall as well as other area
schools who are drawn to the discipline’s application to finance constitute another
candidate pool. In addition, the concentration has drawn significant interest from highscoring SAT prospective students, as seen in university open house events. Moreover,
the program will complement an existing multi-year incremental effort to raise the
mathematical competency of all finance students.
III. Internal Impact
The program is effectively a joint one between the Department of Mathematics and
Computer Science and the Department of Finance. There will not be a duplication of
courses, a duplication of concentrations, or cross-listings of courses at this time. The
proposed courses in both departments are well established with full-time faculty actively
engaged in their delivery. Each is offered at least once per year, with several offered
twice per year. The proposed concentration is as follows:
Concentration Requirements (with course descriptions given below):
Calculus I (MATH 1501) (4 credits)
Honors Calculus II (MATH 1511) (4 credits)
Honors Calculus III (MATH 2511) (4 credits)
Linear Algebra (MATH 2813) (4 credits)
Financial Strategy (BFIN 3211) (3 credits)
Investment Analysis (BFIN 4227) (3 credits)
Select two of the following:
Futures, Options, and Other Derivatives (BFIN 4234) (3 credits)
Fixed Income Analysis (BFIN 4250) (3 credits)
Financial Modeling (BFIN 4255) (3 credits)
Total Credits: 28
As a guide to the structure of the concentration, Babson College currently offers an
undergraduate program similar in spirit to the proposed concentration, although requiring
only 12 credit hours and with far fewer mathematics and finance courses:
Required Courses:
QTM 3625 Financial Modeling with Simulation
Select two of the following:
FIN 3520 Security Valuation
FIN 4510 Corporate Financial Policy
FIN 4530 Investments
FIN 4560 Options and Futures
Select one of the following:
QTM 3610 Applied Multivariate Statistics
QTM 3615 Time Series Analysis and Forecasting
QTM 3675 Probability for Risk Management
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QTM 3676 Financial Mathematics
The proposed concentration stands alone; no competition among programs will occur.
IV. Program needs
The concentration will require the same support from the Walsh Library as the finance
concentration and the mathematics concentration currently do. No additional services
beyond the excellent support already provided will be necessary. In addition, the
Department of Finance houses the Center for Securities Trading and Analysis, which has
rich data feeds that promote the application of quantitative research that can help drive
the enrollment in the program. Students and faculty have the opportunity to work in an
environment similar to what is found in chemistry and biology laboratories, in which
theory and concept are put to work in realistic settings.
V. Program Evaluation
In addition to the standard academic indicators of success (e.g., scholarships, induction
into the Finance Honor Society, etc.), program evaluation in mathematical finance will be
at two levels. At one level will be the number of students enrolled. Because high school
students with “AP” credits will be targeted, the success of the program will be measured
by the number of students with above-average SAT scores in mathematics. At another
level will be job placement. The more quickly students are able to acquire internships and
secure desired employment, the more aligned the program will be with market demand,
which would drive enrollment further.
Course Descriptions
MATH 1501 Honors Calculus I
Real numbers, proof by induction, functions, definition by recursion, limits, continuity,
derivatives and applications, definite integral, Fundamental Theorem of Calculus and
inverse functions. Applications using computer software packages. Emphasis on theory.
Prerequisite: MATH 1015 or appropriate placement. 4 credits
MATH 1511 Honors Calculus II
Applications of integration, polar coordinates, techniques of integration, infinite series,
conics, two-dimensional vectors and differential equations. Applications using computer
software packages. Emphasis on theory. Prerequisite: MATH 1401 or MATH 1501. 4
credits
MATH 2511 Honors Calculus III
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Vectors in space, vector-valued functions, partial differentiation, multiple integrals,
vector analysis, and line and surface integrals. Applications using computer software
packages. Emphasis on theory. Prerequisite: MATH 1511. 4 credits
MATH 2813 Linear Algebra
Matrix algebra, determinants, solutions of systems of linear equations, Rn, abstract vector
spaces, linear transformations, inner product spaces and eigenvectors. 4 credits
BFIN 3211 Financial Strategy
Extension of basic financial principles with emphasis on corporate finance. Advanced
topics include capital budgeting, capital structure and cost of capital estimation, and longterm financial policy. Prerequisite: BFIN 2201. Offered: Fall, Spring. 3 credits
BFIN 4227 Investment Analysis
Coverage of the fundamental principles underlying investment decisions, including
security market structure, asset pricing, portfolio theory, valuation of stocks and bonds,
portfolio performance evaluation and an introduction to derivatives. Prerequisite: BFIN
2201. Offered: Fall, Spring. 3 credits
BFIN 4234 Futures, Options and Other Derivatives
Examination of topics involving options, futures and swaps, including trading strategies,
pricing fundamentals and models, risk management and other applications. Prerequisite:
BFIN 4227. Offered: Fall, Spring. 3 credits
BFIN 4250 Fixed Income Analysis
Analysis and valuation of fixed-income securities and markets, including pricing, yields,
volatility and the impact of interest rate movements. The course covers traditional bonds
and term structure concepts as well as fixed-income derivatives and interest rate
modeling. Prerequisite: BFIN 4227. Offered: Fall, Spring. 3 credits
BFIN 4255 Financial Modeling
A practical perspective on the major finance models using Microsoft Excel, with a focus
on the development and use of spreadsheet-based financial models, implementation of a
concise and sound methodology, and utilization of financial theory over a wide range of
applications used in the financial industry. Examples of implemented theories include:
portfolio selection and risk assessment, DCF valuation, bond pricing and duration, option
pricing and applications, portfolio insurance and Value-at-Risk. Prerequisite: BFIN 3211,
BFIN 4227. Offered: Fall, Spring. 3 credits