Mathematical FinanceSTA2503, Fall 2026Wednesday 2:00 pm - 5:00 pm, LOCATION: Room 9016; Office Hours: Tuesday 1:00 pm - 2:00 pmTA Session: Monday 4:00 pm - 6:00 pm Instructor: Xiaofei Shi, xf.shi[at]utoronto(dot)ca TA: Radu Alexe Padina, radu.alexepadina[at]mail(dot)utoronto(dot)ca Course Description: By the end of this course, students will have a strong understanding of stochastic analysis as it pertains to finance, with particular emphasis on derivative pricing and hedging. Topics include, but are not limited to, Discrete-Time Models, Continuous-Time Models, Options, the Greeks and Replicating Portfolios, Interest Rate Derivatives, Foreign Exchange Models, and Stochastic Volatility Models. This course is delivered in person and attendance is expected. Video recordings will NOT be available. Any change in the mode of delivery will be announced on Quercus. Enrollment and Auditing: Students must be formally enrolled in the course in order to attend. Students who are not enrolled may not attend or audit lectures or tutorials without prior written permission from the instructor. Course Prerequisites: Statistics, calculus-based Probability, Stochastic Calculus, ODE, PDE. Textbook:
Quizzes (30%): There will be 2 quizzes of 60 minutes each, approximately evenly spaced throughout the semester. Each quiz will be completed in person at the start of the Monday tutorial session. The specific content being assessed will be announced ahead of time, but will generally consist of material from the previous three lectures. Projects (10%): There will be 2 individual projects. Students will be expected to understand the relevant theory, formulate an approach to the problem, implement numerical work in Matlab, R, or Python, interpret the results, and submit a formal report within 9 pages (excluding references and the contribution sheet). Reports should be written in proper academic English and should contain an abstract, introduction, model setup, methodology/theory, and discussion/interpretation of results. The quality of presentation, including figures and tables, will form part of the assessment. Midterm Exam (20%): There will be a single 3-hour in-class closed-book midterm exam, tentatively scheduled on Oct 14, 2026. Final Exam (40%): There will be a single 4-hour in-class closed-book final exam, tentatively scheduled on Dec 9, 2026. The final exam will cover the whole course. Tentative Schedule
Academic Integrity: Academic integrity is fundamental to learning and scholarship at the University of Toronto. Suspected cases of academic dishonesty will be investigated following the University's Code of Behaviour on Academic Matters. Policy on Late Project Reports: Late homework and/or project reports will be penalized 10% (in absolute terms) of the maximum grade for every part of a 24-hour period that the submission is late. Policy on Missing Quizzes/Exams: If you miss a quiz or exam for a legitimate reason, you must contact the instructor within 24 hours of the missed assessment, and preferably in advance. If the absence is deemed legitimate, the instructor may arrange a verbal makeup exam of no more than one hour. The makeup will assess the same material, but the questions will differ from those used in the original assessment. Policy on Regrading: The regrading policy exists to correct marking or calculation errors. Requests must clearly identify the specific issue and must be sent by email to both the instructor and the TA within 48 hours after the work is returned. If a remark is requested, the entire submission may be re-marked, and the final grade may increase, decrease, or remain unchanged. Policy on Collaboration: You are encouraged to discuss homework with classmates, but submitted work must be written independently. You may not copy another student's solution, use solutions from previous years, or rely on solutions obtained from external sources. Copyright Notice: All course materials, including notes, examples, and assessment questions, are the property of their respective authors. Materials may be downloaded for personal academic use, but may not be redistributed without explicit permission. |