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Actuary here. There's a subject called mathematical interest theory that explores time value of money beyond simple and compund interest that you learn in grade
by genedan 5y ago
Actuary here. There's a subject called mathematical interest theory that explores time value of money beyond simple and compund interest that you learn in grade school. It makes use of this notation and is part of the US curriculum for actuaries.
For example, there's a concept of continually compounding interest as the limit of compounding frequency approaches infinity. Other growth patterns such as polynomial growth are theoretically possible. Anyone with basic calculus and algebra can learn it and it's a good subject for enhancing one's financial literacy. I'm surprised it's not taught in general finance.
- hbrav 5y agoDoes polynomial growth actually have applications in finance? I would be surprised to see one, but I like to be surprised :-)
- azalemeth 5y agoI think that is interesting (particularly the polynomial part) and I've never heard of it before. Do you have any good 'easy' introductory references?
- genedan 5y agoYeah, these are some books on the syllabus: https://bookstore.ams.org/text-57 https://bookstore.ams.org/text-57 https://www.goodreads.com/book/show/1715689.Theory_of_Interest https://www.goodreads.com/book/show/1715689.Theory_of_Intere...
- mbg721 5y agoI took a life-contingencies math course in college that used the life table notation. The instructor's background was actually in medical clinical trials, where as with life insurance, you start with a population, some of them die (or get another outcome the trial is testing for), and some withdraw or don't report back.