The Lee Kong Chian School of Business

Academic Year 2011 /12

Term 2

QF 203 Real Analysis

Instructor Name : Tan Chong Hui
Title : Assistant Professor of Quantitative Finance (Practice)
Tel : 6828-0819
Email : chonghuitan@smu.edu.sg
Office : LKCSB #5037

COURSE DESCRIPTION
This course covers foundational mathematical concepts and the basics of differential and integral calculus.
Specifically, the notions of numbers, sets, functions, sequences, limits and continuity are explained. These
notions then form the bases for the lectures on the differential and integral calculus.

LEARNING OBJECTIVES
At the end of the course, students will be able to:
 Use techniques and theorems from calculus to solve basic problems, such as optimization and
functional approximation, in quantitative finance.
 Use the concepts taught to read, appreciate and understand foundational quantitative finance
literature.
 Use the concepts taught for the connecting course QF303 Stochastic Calculus and Finance
Theory.

Pre-requisite/ CO-REQUISITE/ MUTUALLY EXCLUSIVE cOURSE(S)

Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites / co-requisites
for this particular course.

Do note that if this course has a co-requisite, it means that the course has to be taken together with
another course. Dropping one course during BOSS bidding would result in both courses being dropped at
the same time.

Assessment Methods
Students will be assessed through two take-home term-tests (2x25%) and a final exam (40%). Class
participation counts for 10%.

Academic Integrity
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation
of acts of academic dishonesty by others, unauthorized possession of exam questions, or tampering with
the academic work of other students) are serious offences.

All work presented in class must be the student’s own work. Any student caught violating this policy may
result in the student receiving zero marks for the component assessment or a fail grade for the
course. This policy applies to all works (whether oral or written) submitted for purposes of assessment.

1
Where in doubt, students are encouraged to consult the instructors of the course. Details on the SMU
Code of Academic Integrity may be accessed at http://www.smuscd.org/resources.html.

INSTRUCTIONAL Methods and expectations

Lectures
Students are explained the basic concepts of real analysis and the rigorous treatment of the notions of the
derivative and the integral. Aspects of real analysis that are relevant to application to QF are stressed: e.g.
Taylor series, multivariate calculus.

Exercises
Exercises that accompany each lecture give students opportunities to practise on the concepts taught in
class.

Term-Tests
Through two take-home term-tests, students can assess for themselves if they have learnt the concepts
well.

Examination
There will be a final exam which will focus on the materials covered in class. No make-up exams will be
allowed without prior permission.

CONSULTATIONS
Two hours of office consultation are available each week. Email questions are welcomed at any time.

CLASS TIMINGS
This course will be taught in one 3-hour session.

Recommended Text and Readings

Any good advanced calculus or real analysis textbook will be useful as supplementary reading.

2
WEEKLY LESSON PLANS

Week Specific Learning Objectives Topics Covered Instructional

Assessment of Learning
No. for the Lesson Strategies
21 Introduction to Quantitative Finance Exercises that accompany Lectures, questions
22 Sets each lecture, two mid-term and discussions
Basic Mathematics Functions tests, one final examination during class, email
Real Numbers and designated office
23 Sequences Properties hours consultation
Sequences and Limits Convergence and Limits
Monotone Convergence Theorem
24 Notion of the Limit
L’Hopital’s Rule
Limit and Continuity of Functions
Extreme Value Theorem and Intermediate
Value Theorem
25 Definition of Derivatives and Partial
Definition of Derivatives Derivatives
Existence of Non-Differentiable Functions
26 The Chain Rule
Basic Facts about Differentiation Applications to Optimization Problems
The Lagrange Multiplier Method
27 Basics of Vectors
Vector Calculus Directional Derivatives
Gradient Vectors
28 Mid-Term Break
29 Taylor Polynomial
Taylor Series
Taylor Series
Lagrange Remainder Theorem
Multivariate Version of the Taylor Series
30 Rigorous Definition of the Integral
Definition of Integrals Improper Integrals
Integration in Two Dimensions
31 The Fundamental Theorem of Calculus
Basic Facts about Integration
Integration Techniques
32 Double Integrals vs Iterated Integrals
Double Integrals
Fubini’s Theorem

3
33 The Intuition Behind and How to Apply the
Change-of-Variables Formula
Change-of-Variables Formula
34 Pre-Examination Week
35 Final Examination