Mathematics in finance and economics: importance of teaching higher order mathematical thinking skills in finance

Abstract

This paper shows the critical importance of mathematicians in business and finance schools of tertiary institutions of Australia. The paper also shows the need for mathematically trained personnel to develop programs and teach the financial and econometrical related courses in the schools. The extensive qualitative, historical and quantitative analyses show the ingrained nature of mathematics in finance. The nature of thinking and reasoning required for advancement financial or economic studies involves the use of higher order thinking and creativity skills (HOTS) taught routinely in mathematics classes. Higher order thinking is at the heart of mathematical thinking and reasoning and while this is true in all disciplines, HOTS are routinely practiced daily in mathematics courses and ingrained in the undergraduate and graduate degree programs; thus allowing mathematicians to be more proficient in using them over years of practice. The paper shows how various skills needed in finance are related to the mathematical way of thinking and reasoning and as such they should be taught by those with a high level of mathematics training; namely, mathematicians who have undergone years of routine and complex problem solving studies. The 2007 global crisis has made researchers pay critical attention to financial thinking generally and mathematics teaching in finance in particular; since math has been blamed by finance personnel. This allows the opportunity for student learning and teaching to be reshaped in business schools to include well designed financial mathematics courses that are compulsory yearly, in degree programs. The author believes this can be taught within departments but it is proposed the teaching be conducted by mathematicians. The mathematical reasoning patterns, thinking, explanations, simplifications required in transfer of knowledge to students is effectively taught if experts in the field are explicating or presenting proofs. The essence of the conceptual development of models and their assumptions and solutions requires training beyond those of the non-mathematics personnel, mainly due to their lack of years of time spent on such mathematically work. If the methodology described is adhered to our future business and finance students will be well exposed to mathematical thinking and reasoning as well as higher order thinking and creative skills in their courses and degree programs.