Finansiel matematik: Begreber og låneberegninger

Explain shortly what mathematics of finance is. Use relevant concepts.

Math of finance is when its necessary to apply mathematics in order to solve financial problems. Math of finance is also known as quantitative finance, and is a concept that’s been under development for years upon years. The sophisticated mathematical models and strategies were damaged heavily, credibility wise, when the financial crisis hit (2007-2010)

Great and well known mathematician Nassim Taleb, deemed the then, national as well as global financial models completely irrelevant at best and at worst, dangerously misleading This was blamed on the models being too simple and therefore, not accounting for all factors necessary.

Means of payment – The way the buyer chooses (or rather agrees with the seller) to compensate the seller. This could be via credit card, checks, online payment services like PayPal, or probably the most common, cash.

Interest rate – A percentage that the loaning party of a transaction pays, in order to loan the money. This makes it worth the loaning party’s while, as they´re paid for lending their money out.

Compounded rate – This is when the rate from previous periods is taken into account in the present rate increase. You could call it “getting interest rates, off of your interest rates”.