Students

ACST3006 – Quantitative Asset and Liability Modelling 1

2022 – Session 1, In person/Online-scheduled-weekday, North Ryde

General Information

Download as PDF
Unit convenor and teaching staff Unit convenor and teaching staff Unit Convenor
Colin Zhang
Jiwook Jang
Colin Zhang
Credit points Credit points
10
Prerequisites Prerequisites
(ACST202 or ACST2002) and (STAT272 or STAT2372)
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description

This unit examines: rational expectations theory, rational choice theory, behavioural economics, properties of risk measures, risk and insurance companies, stochastic interest rate models, mean-variance portfolio theory, asset pricing models, single and multifactor returns models, binomial lattice models for option pricing and methods for calculating outstanding claims provisions in general insurance. Students gaining a credit average in both ACST3006 and ACST3007 (minimum mark of 60 on both units) will satisfy the requirements for exemption from the professional subject CM2 of the Actuaries Institute.

Important Academic Dates

Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates

Learning Outcomes

On successful completion of this unit, you will be able to:

  • ULO1: Apply decision making via utility functions, and describe rational expectations theory, rational choice theory, behavioural economics and three different forms of market efficiency.
  • ULO2: Employ the use of Capital Asset Pricing Model (CAPM), single/multi index models and Arbitrage Pricing Theory (APT) Model in asset pricing and analyse investment risk using various risk measures.
  • ULO3: Apply the binomial option pricing models to value European and American type options.
  • ULO4: Apply a stochastic approach to the theory of interest on the mean and variance of the accumulation of a sequence of payments to solve practical problems.
  • ULO5: Use various methods of run-off triangles for valuation and reserving of liabilities.

General Assessment Information

Assessment criteria for all assessment tasks will be provided on the unit iLearn site.

It is the responsibility of students to view their marks for each within-session-assessment on iLearn within 20 days of posting. If there are any discrepancies, students must contact the unit convenor immediately. Failure to do so will mean that queries received after the release of final results regarding assessment tasks (not including the final exam mark) will not be addressed.

Late submissions of assessments Unless a Special Consideration request has been submitted and approved, no extensions will be granted. There will be a deduction of 10% of the total available assessment-task marks made from the total awarded mark for each 24-hour period or part thereof that the submission is late. Late submissions will only be accepted up to 96 hours after the due date and time.

No late submissions will be accepted for timed assessments – e.g., quizzes, online tests.

Table 1: Penalty calculation based on submission time

Submission time after the due date (including weekends)

Penalty (% of available assessment task mark)

Example: for a non-timed assessment task marked out of 30

< 24 hours

10%

10% x 30 marks = 3-mark deduction

24-48 hours

20%

20% x 30 marks = 6-mark deduction

48-72 hours

30%

30% x 30 marks = 9-mark deduction

72-96 hours

40%

40% x 30 marks = 12-mark deduction

> 96 hours

100%

Assignment won’t be accepted

Special Consideration

To request an extension on the due date/time for a timed or non-timed assessment task, you must submit a Special Consideration application. An application for Special Consideration does not guarantee approval.

The approved extension date for a student becomes the new due date for that student. The late submission penalties above then apply as of the new due date.

Assessment Tasks

Name Weighting Hurdle Due
Assignment 20% No 30/3/2022
Class Test 20% No 17/5/2022
Final Exam 60% No Final exam period

Assignment

Assessment Type 1: Quantitative analysis task
Indicative Time on Task 2: 20 hours
Due: 30/3/2022
Weighting: 20%

 

This is an individual assignment which focuses on problem solving using Excel spreadsheet.

 


On successful completion you will be able to:
  • Apply decision making via utility functions, and describe rational expectations theory, rational choice theory, behavioural economics and three different forms of market efficiency.
  • Employ the use of Capital Asset Pricing Model (CAPM), single/multi index models and Arbitrage Pricing Theory (APT) Model in asset pricing and analyse investment risk using various risk measures.

Class Test

Assessment Type 1: Quiz/Test
Indicative Time on Task 2: 10 hours
Due: 17/5/2022
Weighting: 20%

 

The test will be approximately 90 minutes, to be held during class time.

 


On successful completion you will be able to:
  • Apply decision making via utility functions, and describe rational expectations theory, rational choice theory, behavioural economics and three different forms of market efficiency.
  • Employ the use of Capital Asset Pricing Model (CAPM), single/multi index models and Arbitrage Pricing Theory (APT) Model in asset pricing and analyse investment risk using various risk measures.
  • Apply the binomial option pricing models to value European and American type options.
  • Apply a stochastic approach to the theory of interest on the mean and variance of the accumulation of a sequence of payments to solve practical problems.

Final Exam

Assessment Type 1: Examination
Indicative Time on Task 2: 28 hours
Due: Final exam period
Weighting: 60%

 

The final examination will be a three-hour written exam with ten minutes reading time, to be held during the University Examination period.

 


On successful completion you will be able to:
  • Apply decision making via utility functions, and describe rational expectations theory, rational choice theory, behavioural economics and three different forms of market efficiency.
  • Employ the use of Capital Asset Pricing Model (CAPM), single/multi index models and Arbitrage Pricing Theory (APT) Model in asset pricing and analyse investment risk using various risk measures.
  • Apply the binomial option pricing models to value European and American type options.
  • Apply a stochastic approach to the theory of interest on the mean and variance of the accumulation of a sequence of payments to solve practical problems.
  • Use various methods of run-off triangles for valuation and reserving of liabilities.

1 If you need help with your assignment, please contact:

  • the academic teaching staff in your unit for guidance in understanding or completing this type of assessment
  • the Writing Centre for academic skills support.

2 Indicative time-on-task is an estimate of the time required for completion of the assessment task and is subject to individual variation

Delivery and Resources

CLASSES

It is intended that learning in this session will be a combination of face to face and pre-recorded lectures. Students can register to either face to face or online tutorials. Tutorials will commence in week 2.

REQUIRED and RECOMMENDED TEXTS and/or Materials

Required texts

Lecture materials are available for downloading from ACST3006 teaching website.

Recommended textbooks

• Investment Science; David Luenberger

• Choices, Values, and Frames;  Amos Tversky and Daniel Kahneman

• Modern Portfolio Theory and Investment Analysis; Edwin J. Elton, Martin J. Gruber, Stephen J. Brown and William N. Goetzmann

• Investment Mathematics and Statistics; Andrew Adams, Della Bloomfield, Philip Booth and Peter England

• Options, Futures and Other Derivatives; John Hull

Optional ActEd material

• The ActEd CM2, that can be purchased directly from ActEd.

 

Unit Schedule

Week               Lecture Topics

1.                     Utility Theory, Decision making via utility functions

2.                     Stochastic dominance, Behavioural finance

3.                     Mean-Variance portfolio theory

4.                     The CAPM

5.                     Single/Multi index models, Arbitrage pricing theory (APT)

6.                     Measurements of investment risk

                        (Assignment due - Wednesday 30 March 12:00noon)

7.                     Options

Semester Break

8.                     Single/Multi period Binomial option pricing model

9.                     American option pricing via Binomial model

10.                   Runoff triangle

11.                   Class Test (Tuesday 17 May 9:00am-11:00am)

12.                   Stochastic interest rate models / Efficient market hypothesis

13.                   Revision

Policies and Procedures

Macquarie University policies and procedures are accessible from Policy Central (https://policies.mq.edu.au). Students should be aware of the following policies in particular with regard to Learning and Teaching:

Students seeking more policy resources can visit Student Policies (https://students.mq.edu.au/support/study/policies). It is your one-stop-shop for the key policies you need to know about throughout your undergraduate student journey.

To find other policies relating to Teaching and Learning, visit Policy Central (https://policies.mq.edu.au) and use the search tool.

Student Code of Conduct

Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/admin/other-resources/student-conduct

Results

Results published on platform other than eStudent, (eg. iLearn, Coursera etc.) or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit ask.mq.edu.au or if you are a Global MBA student contact globalmba.support@mq.edu.au

Academic Integrity

At Macquarie, we believe academic integrity – honesty, respect, trust, responsibility, fairness and courage – is at the core of learning, teaching and research. We recognise that meeting the expectations required to complete your assessments can be challenging. So, we offer you a range of resources and services to help you reach your potential, including free online writing and maths support, academic skills development and wellbeing consultations.

Student Support

Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/

The Writing Centre

The Writing Centre provides resources to develop your English language proficiency, academic writing, and communication skills.

The Library provides online and face to face support to help you find and use relevant information resources. 

Student Services and Support

Macquarie University offers a range of Student Support Services including:

Student Enquiries

Got a question? Ask us via AskMQ, or contact Service Connect.

IT Help

For help with University computer systems and technology, visit http://www.mq.edu.au/about_us/offices_and_units/information_technology/help/

When using the University's IT, you must adhere to the Acceptable Use of IT Resources Policy. The policy applies to all who connect to the MQ network including students.


Unit information based on version 2022.04 of the Handbook