Course Syllabus

CRN 54714

 

Random Walk

 

We will understand some basic aspects of stochastic calculus, particularly as it applied to financial engineering.

 

List of Topics
Pairs Trading
Gaussian random variables
Central Limit Theorem
Brownian Motion
Returns and Log Returns
Information
Brownian Quadratic Variation
Ito Integration
Ito formula

 

Assessments

 

Component Date/Frequency Percentage
Midterms 2025-02-12 and 2025-03-12 50%
Individual Theory Assignments Links to an external site. Each module (roughly weekly) 25%
Group Coding Assignments Links to an external site. Each module (roughly weekly) 25%

 

  • Group Coding Assignments:
    • We will use Google Drive and Google Colab Links to an external site. (Python Jupyter notebooks) for teaching and the Group Coding Assignments.  You can access these through Google Apps @ Illinois; you need to have Account Status “On” for Google Apps at https://cloud-dashboard.illinois.edu/cbdash/ and then log in via g.illinois.edu
    • Groups will be randomly set by canvas.  Groups will be re-randomized several times. 
    • Submissions will be via URL to your Google Colab Links to an external site. file.  Make sure to set the permissions to "Google Apps @ Illinois". 
      • Best practices seems to be to set permissions to "Google Apps @ Illinois".  That means that the TA and I can automatically access your notebook.  The actual URL is long and random enough that others probably can't guess it.
      • Access for data files should be "Anyone with the link"; that ensures that colab notebooks can access it.  See lecture notebooks for examples.
    • The equivalent of one Group Coding Assignment will be for "longitudinal team effort".   You will get full credit for this unless there is a pattern of not contributing to groups.
  • Midterm Exams: These will be held in DCL 1310 Links to an external site..
  • Extra Credit: You will get up to 2% extra credit for attendance.   Attendance will be taken randomly at any time during the class.
  • Late work:  10% per day will be deducted for late homework.  No exceptions.
  • Late Enrollment:  Email me if you join the class after the first 2 weeks.  I will excuse your assignments due on or before the second day after you join the class.

 

Strategy for Learning the Material

My (PDF) lecture notes (available in advance of each lecture) and verbal lectures are designed to satisfy slightly different constraints.  The lecture notes are constrained by space, and the desire to, as much as possible, have complete ideas on each slide.  Verbal lectures often explain motivations, connections, and interpretations.  Perhaps the best way to learn the material is to

  1. Quickly skim through the lecture notes in advance of the class.  By doing so, you get an idea of where the verbal lecture will be heading
  2. During the verbal lecture, annotate (either on a printed out copy or on a tablet) the lecture notes.  The goal is to jot down ideas, connections, and interpretations so that you can remember them after the lecture.
  3. Review the material after the lecture to solidify your understanding of both details and big-picture ideas. 

 

Miscellanea