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Power Series in Financial Mathematics

Financial Mathematics discusses power series expansions that can be used to relate interest rates, discount rates, and yield rates. While power series have rarely been tested on recent exams, the document reviews some common power series expansions from calculus as a refresher, noting that the expansion of ln(1+x) starts with x rather than 1 and has alternating signs that require careful handling.

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Ghulam Nabi
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6 views8 pages

Power Series in Financial Mathematics

Financial Mathematics discusses power series expansions that can be used to relate interest rates, discount rates, and yield rates. While power series have rarely been tested on recent exams, the document reviews some common power series expansions from calculus as a refresher, noting that the expansion of ln(1+x) starts with x rather than 1 and has alternating signs that require careful handling.

Uploaded by

Ghulam Nabi
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Financial Mathemati cs

By
Ghulam Nabi
§1f. Power Series
• Using the relationships between i, d, and δ, any
of these rates can be expressed as a power
series in any of the others.
• However, there have been very few (if any)
questions on the FM/2 exam in recent years
that depend on your knowledge of series
expansions.
• But just in case, let’s review a few of these
power series.
• You probably remember the following series
expansions from calculus:

• Please be very careful with the second series.


Note that the expansion of ln(1+ x)
(i) starts with x, not 1
(ii) has alternating signs

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