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1991-Thoddi_Kotiah-Difference and differential equations in the mathematics of finance

Author(s): Thoddi Kotiah

NA

Keywords: finance savings growth fund interest mortgage annuity depreciation

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Abstract

Resource Image Many problems arising in the mathematics of finance involve identical money flows at regular time intervals and are typically solved by appropriate valuation at a focal date or by setting up an equation of value.

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Kotiah, Thoddi C. T.  1991. Difference and differential equations in the mathematics of finance. International Journal of Mathematical Education in Science and Technology, 22(5): 783-789.

See https://www.tandfonline.com/doi/abs/10.1080/0020739910220510 . Accessed 24 March 2023.

All article from this journal are FREEly available to members of the Mathematical Association of America through the member portal at www.maa.org .

Abstract: Many problems arising in the mathematics of finance involve identical money flows at regular time intervals and are typically solved by appropriate valuation at a focal date or by setting up an equation of value. It is shown here that such problems can be viewed as special cases of a certain class of first-order difference equations. Problems relating to continuous money flows can be viewed analogously as special cases of a certain class of ordinary first-order differential equations. Students should thus be encouraged to view the concepts and techniques of the mathematics of finance as not being inherently different from those prevalent in more traditional applied mathematics.

Keywords: growth fund, interest, savings, mortgage, annuity, continuous, discrete, difference equation, differential equation, model, depreciation, finance

 

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Author(s): Thoddi Kotiah

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