• Class Number 8570
• Term Code 3060
• Class Info
• Unit Value 6 units
• Mode of Delivery In Person
• COURSE CONVENER
• AsPr Pierre Portal
• LECTURER
• Natalie Azzopardi
• Class Dates
• Class Start Date 27/07/2020
• Class End Date 30/10/2020
• Census Date 31/08/2020
• Last Date to Enrol 03/08/2020
SELT Survey Results

Stochastic Analysis with Financial Applications (MATH3015)

This course gives a rigorous mathematical introduction to stochastic processes, stochastic differential equations, and their applications in finance. The first half of the course covers martingales, Poisson processes, Brownian motion, Ito integration, and stochastic differential equations driven by a Brownian motion. The second half of the course covers a range of more advanced topics to be selected by the students. This includes option pricing and investment optimisation, basics of Malliavin’s stochastic calculus of variations, Black-Scholes formula and hedging, as well as aspects of the relationship between stochastic analysis and partial differential equations.

Stochastic Analysis with Financial Applications provides an accessible but mathematically rigorous introduction to financial mathematics and quantitative finance. The course provides a sound foundation for progress to honours and post-graduate courses in these or related areas.

Note: This is an Honours Pathway Course. It continues the development of sophisticated mathematical techniques and their application begun in MATH3029 or MATH3320.

## Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

1. Explain the core mathematical tools and fundamental concepts of modern financial mathematics;
2. Use stochastic calculus in mathematical and financial problems, including option pricing;
3. Demonstrate capabilities for advanced mathematical reasoning, analysis and modeling linked to the theory of stochastic processes.

## Research-Led Teaching

The first part of the course is a classic undergraduate course, emphasising depth of understanding, and going through the construction of Brownian motion and Ito integration, and through the resolution of stochastic differential equations, in full detail, before applying the theory to option pricing. The second part of the course, however, operates as a research seminar, emphasising breadth, and covering a large amount of advanced material in mathematics and/or finance through short presentations.

“Stochastic Calculus and Financial Applications” by J. Michael Steele

## Staff Feedback

Students are given feedback in this course in a variety of ways, matching the variety of assessment methods. This includes:

1. Oral feedback from the lecturer to the whole class regarding assignments and exams.
2. Written and oral feedback from the demonstrator on assignments.
3. Oral personal feedback from the lecturer through appointments.
4. Direct feedback on oral presentations just after the student’s talks.
5. Written feedback by the lecturer on the essay.

## Student Feedback

ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.

## Class Schedule

Week/Session Summary of Activities Assessment
1 Conditional expectation
2 Discrete time martingales
4 Brownian motion and continuous time martingales
5 Ito integration
6 Ito integration 2 Assignment 2
7 Ito's formula and chain rule
8 Stochastic differential equations
9 Option pricing
10 Practice and exam preparation exam
11 seminar oral presentation
12 seminar oral presentation

## Assessment Summary

Assessment task Value Due Date Return of assessment Learning Outcomes
Assignment 1 12 % 14/08/2020 21/08/2020 2,3
Assignment 2 12 % 04/09/2020 25/09/2020 2,3
Exam (take-home) 25 % 15/10/2020 22/10/2020 2,3
Oral presentation 25 % 22/10/2020 29/10/2020 1,2,3
Essay 25 % 13/11/2020 20/11/2020 1,2,3

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

## Policies

ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:

## Assessment Requirements

The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website Students may choose not to submit assessment items through Turnitin. In this instance you will be required to submit, alongside the assessment item itself, hard copies of all references included in the assessment item.

## Moderation of Assessment

Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.

Value: 12 %
Due Date: 14/08/2020
Return of Assessment: 21/08/2020
Learning Outcomes: 2,3

Assignment 1

Prove several statements similar to the statements discussed in lectures and workshops. Hand in a complete typed or scanned personal solution.

Value: 12.5%

Value: 12 %
Due Date: 04/09/2020
Return of Assessment: 25/09/2020
Learning Outcomes: 2,3

Assignment 2

Prove several statements similar to the statements discussed in lectures and workshops. Hand in a complete typed or scanned personal solution.

Value: 12.5%

Value: 25 %
Due Date: 15/10/2020
Return of Assessment: 22/10/2020
Learning Outcomes: 2,3

Exam (take-home)

In 3 hours, prove several statements similar to the statements discussed in lectures and workshops. Hand in a complete scanned personal solution.

Value: 25 %
Due Date: 22/10/2020
Return of Assessment: 29/10/2020
Learning Outcomes: 1,2,3

Oral presentation

Produce a 4-7 minute video summarising a chapter (to be agreed upon with the lecturer) of an advanced textbook. The goal of the presentation is to maximise the learning of the audience (the rest of the class).

Value: 25 %
Due Date: 13/11/2020
Return of Assessment: 20/11/2020
Learning Outcomes: 1,2,3

Essay

Write a 5 page summary of the material used for your oral presentation. The goal of this task is to demonstrate your understanding of the material to the lecturer.

## Online Submission

The ANU uses Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. While the use of Turnitin is not mandatory, the ANU highly recommends Turnitin is used by both teaching staff and students. For additional information regarding Turnitin please visit the ANU Online website.

## Hardcopy Submission

For some forms of assessment (hand written assignments, art works, laboratory notes, etc.) hard copy submission is appropriate when approved by the Associate Dean (Education). Hard copy submissions must utilise the Assignment Cover Sheet. Please keep a copy of tasks completed for your records.

## Late Submission

Late submission of assessment tasks without an extension are penalised at the rate of 5% of the possible marks available per working day or part thereof. Late submission of assessment tasks is not accepted after 10 working days after the due date, or on or after the date specified in the course outline for the return of the assessment item.

## Referencing Requirements

Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.

## Returning Assignments

Marked pieces of assessment are returned to the student via the Wattle site.

## Extensions and Penalties

Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure The Course Convener may grant extensions for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.

## Resubmission of Assignments

Resubmission of assignments is possible up to the submission deadline, but not after.

## Privacy Notice

Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes. Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.

## Support for students

The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).

## Convener

 AsPr Pierre Portal 61253384 Pierre.Portal@anu.edu.au

### Research Interests

Harmonic, stochastic, and functional analysis. Deterministic and stochastic PDE.

### AsPr Pierre Portal

 By Appointment

## Instructor

 Natalie Azzopardi 61253384 pierre.portal@anu.edu.au

### Natalie Azzopardi

 By Appointment