FNAN 436 Master Syllabus

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FNAN 436: Probability Methods for Finance Master Syllabus

Course Instructor:
Office Number:
Office Hours:
Email:
Course Meeting Times:
Required Course Materials: 

  • Severini, Thomas A., Introduction to Statistical Methods for Financial Models, New York: CRC Press, 2018. 

Course Website: 

  • Canvas
  • At this site, you can access course materials (e.g., lecture slides) and course assignments. 

School of Business Learning Goals

  1. Our students will demonstrate an understanding of the social, global, ethical, and legal contexts of business and will be able to reflect on the role of the individual in business. 

  2. Our students will demonstrate an understanding of and the ability to apply knowledge of professional skills necessary for success in business including effective business writing. 

  3. Our students will demonstrate technical and analytic skills appropriate for success in business. 

  4. Our students will demonstrate an understanding of and the ability to apply knowledge of core business disciplines including accounting, finance, information systems, management, marketing, and operations management.  

  5. Our students will demonstrate knowledge and skills appropriate for specialization in their majors. 

  6. Our students will demonstrate an understanding of how research in the business disciplines contributes to knowledge and how such research is conducted.

Course Objectives and Central Theme

At the end of the course, you will be able to apply probability and statistical concepts and methods to model and analyze financial data. 

The central theme of this course is that by modeling the returns on financial assets as random variables, and using basic concepts of probability and statistics, we may build a methodology for analyzing and interpreting financial data.  

Course Plan

The course may be viewed in three sections. In the first section, we will review basic concepts of finance, focusing on the properties of returns on an asset. We will then cover aspects of portfolio theory, starting with the basic ideas of the theory and then concentrating on the mathematical treatment of efficient portfolios and the estimation of the parameters needed to implement the theory. In the remainder of the course, we will examine several models for financial data, along with the implications of those models for portfolio theory and for understanding the properties of return data. 

We will emphasize homework as a means of reinforcing your understanding that material presented in lectures and in the textbook. You may work in small work groups on homework assignments, if you desire to do so. However, you must submit your own homework solutions. All homework will be done using R computing environment and submitted as an RMarkdowngenerated (or RNotebook-generated) Word or pdf document containing your code and output. You may include your RMD file, as a supplement to your hardcopy submission.  Submit your completed assignment in the assignment drop-box.  

Student Responsibilities

It’s your responsibility to be prepared for class, do your homework, and participate in class discussions. You will submit your homework and exam responses in an RMarkdown or RNotebook-generated Word or PDF document. (R Markdown and RNotebook tutorials are on our Canvas site.)  

Class Policy

Your weekly homework assignments are due by midnight on Sunday of the assigned week. Late submissions will not be accepted. I will make exceptions, but only for extraordinary circumstances, e.g., birth of your child, military deployments, severe illness, death of an immediate family member.  Please note that I won’t accept claims of conflicts from other course requirements or excessive workloads from your employer as justification for an extension. 

Grading Standards

Your grades will be awarded based on your homework and exams. 

Grading criteria for your homework and exams:

  • Percent of correct solutions.

Final Grade Weights

Graded Material or Activity Weight
Homework 60%
Exam 1 20%
Exam 2 20%

Grading Scheme for Final Grade

Grade Range
A+ >=97.5%
A 92.5% – 97.4%
A- 89.5% – 92.4%
B+ 86.5% – 89.4%
B 82.5% – 86.4%
B- 79.5% – 82.4%
C+ 76.5% – 79.4% 
C 69.5% – 76.4%
D 59.5% - 69.4%
F <59.5%

Please note that grades of C-, D+, and D- are not given. 

The professor reserves the right to change the grading policy for the course.

School of Business Standards of Behavior

The mission of the School of Business at George Mason University is to create and deliver highquality educational programs and research. Students, faculty, staff, and alumni who participate in these educational programs contribute to the well-being of society. High-quality educational programs require an environment of trust and mutual respect, free expression and inquiry, and a commitment to truth, excellence, and lifelong learning. Students, program participants, faculty, staff, and alumni accept these principles when they join the School of Business community. In doing so, they agree to abide by the following standards of behavior:

  • Respect for the rights, differences, and dignity of others 
  • Honesty and integrity in dealing with all members of the community 
  • Accountability for personal behavior

Integrity is an essential ingredient of a successful learning community. Ethical standards of behavior help promote a safe and productive community environment, and ensure every member the opportunity to pursue excellence. School of Business can and should be a living model of these behavioral standards. To this end, community members have a personal responsibility to integrate these standards into every aspect of their experience at the School of Business. Through our personal commitment to these Community Standards of Behavior, we can create an environment in which all can achieve their full potential. 

Honor Code Statement

Honor System and Code: The Honor System and Code adopted by George Mason University will be enforced for this class.

In your work on all written assignments, keep in mind that you may not present as your own the words, the work, or the opinions of someone else without proper acknowledgement. You also may not borrow the sequence of ideas, the arrangement of material, or the pattern of thought of someone else without proper acknowledgement. Please note: Faculty are obligated to submit any Honor Code violations or suspected violations to the Honor Committee without exception. 

School of Business Recommendations for Honor Code Violations 

Approved May 2016

UG-Non Freshman Students (including transfer students)
Type of Violation First Offense Second Offense

Plagiarism

  1. Failure to cite/attribute sources
  2. Representing someone else’s work as the student’s own (e.g., copying and pasting) 
 An F in the class; referral to Writing Center; and Academic Integrity Seminar completion  An F in the class; referral to the Writing Center; Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion  

Cheating

  1. On a minor assignment (e.g., homework, quizzes)  
  2. Cheating on a major assignment or exam, submitting course work from another course as original work 

An F in the class; and Academic Integrity Seminar completion  

An F in the class; and Academic Integrity Seminar completion, and at least one semester suspension

 An F in the class, Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion 
Lying (e.g., providing fraudulent excuse documents, falsifying data) An F in the class; and Academic Integrity Seminar completion, and at least one semester suspension An F in the class; Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion 
Egregious Violation (e.g., stealing an exam; submitting coursework from another class as original work across multiple courses; lying to an employer about academic performance, false identification or posing as another, in person or online)  An F in the class, Academic Integrity Seminar completion; termination from the School of Business; and at least one year suspension  An F in the class; Academic Integrity Seminar completion; termination from the School of Business; and expulsion 

Business Library Liaison Information

Jo Ann J. Henson, MLIS Business and Economics Liaison Librarian 
Fenwick Library Fairfax Campus

Disability

If you have a disability and you need academic accommodations, please see me and contact the Office of Disability Services (ODS) at (703) 993-2474. All academic accommodations must be arranged through the ODS. Please take care of this during the first two weeks of the semester. 

Religion

Students who will miss class for religious reasons should inform me of their anticipated absences as soon as possible. 

Counseling Center

George Mason University has a counseling center that can provide assistance if you find yourself overwhelmed by life, want training in academic or life skills, or the like.

Inclement Weather and Campus Emergencies

Information regarding weather related changes in the University’s schedule (e.g., closing or late opening) will be provided on the George Mason website and via MasonAlert. Students sign up for the Mason Alert system to provide emergency information of various sorts.

If the Fairfax campus closes, I will post on Canvas a video version of the regularly scheduled class lecture later in the day. I will alert you by e-mail once the video is available for viewing. (This approach will eliminate the need for a make-up class session later in the semester.) 

An emergency poster exists in each classroom explaining what to do in the event of crises and that further information about emergency procedures exists.

Course Calendar (Sample)

Week Dates Topic Homework Due
1 Aug. 24 – Aug. 30 R and RStudio Tutorials “Basic Basics” Tutorials 1 through 3 
2 Aug. 31 – Sept. 6 Severini, Chap. 2: Returns Prob. 2.1, 2.4, 2.5, 2.13, 2.15, and 2.18 
3 Sept. 7 – Sept. 13 Severini, Chap. 3: Random Walk Hypothesis Prob. 3.13, 3.12, 3.13, and 3.14 
4 Sept. 14 – Sept. 20 Severini, Chap. 4: Portfolios  Prob. 4.1, 4.2, 4.4, 4.7, and 4.11 
5 Sept. 21 – Sept. 27 Severini, Chap. 5: Efficient Portfolio Theory Prob. 5.1, 5.2, 5.5, 5.11, and 5.12 
6 Sept. 28 – Oct. 4 Severini, Chap. 6: Estimation None
7 Oct. 5 – Oct. 11 Estimation (continued) 
Note: substitute ATT for TWX in Prob. 6.6 and all subsequent homework problems using TWX stock returns. 		 Prob. 6.1, 6.2, 6.6, 6.10, 6.11 
8 Oct. 12 – Oct. 18 Severini, Chap. 7: Capital Asset Pricing Model  Prob. 7.1, 7.3, 7.8, 7.13, and 7.14 
9 Oct. 19 – Oct. 25 Exam 1 (Chap. 1 through 6): Oct. 26. Severini, Chap. 8: The Market Model None
10 Oct. 26 – Nov. 1 The Market Model (continued)  
Note: substitute ATT for TWX in Prob. 8.3. 		 Prob. 8.3, 8.6, 8.11, 8.14, and 8. 15
11 Nov. 2 – Nov. 8 Severini, Chap. 9: The Single-Index Model  None
12 Nov. 9 – Nov. 15 The Single-Index Model (continued)  Prob. 9.2, 9.4, 9.6, 9.8, and 9.10 
13 Nov. 16 – Nov. 22 Severini, Chap. 10: Factor Models  None
14 Nov. 23 – Nov. 29 Factor Models (continued)  None
15 Nov. 30 – Dec. 6 Course Wrap-Up Prob. 10.2, 10.4, 10.8, 10.10, and 10.11 

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