The idea of writing this bookarosein 2000when the first author wasassigned to teach the required course STATS 240 (Statistical Methods in Finance) in the new M. S. program invfinancial mathematics at Stanford, which is an interdisciplinary program that aims to provide a master’s-level education in applied mathematics, statistics, computing, finance, and economics. Students in the programhad different backgroundsin statistics. Some had only taken a basic course in statistical inference, while others had taken a broad spectrum of M. S. - and Ph. D. -level statistics courses. On the other hand, all of them had already taken required core courses in investment theory and derivative pricing, and STATS 240 was supposed to link the theory and pricing formulas to real-world data and pricing or investment strategies. Besides students in theprogram,thecoursealso attracted many students from other departments in the university, further increasing the heterogeneity of students, as many of them had a strong background in mathematical and statistical modeling from the mathematical, physical, and engineering sciences but no previous experience in finance. To address the diversity in background but common strong interest in the subject and in a potential career as a “quant” in the financial industry, the course material was carefully chosen not only to present basic statistical methods of importance to quantitative finance but also to summarize domain knowledge in finance and show how it can be combined with statistical modeling invfinancial analysis and decision making. The course material evolved over the years, especially after the second author helped as the head TA during the years 2004 and 2005.