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A short course of lectures
«Frequently Asked Questions in Quantitative Finance»





What is GARCH?How Do I Dynamically Hedge?What is a Free-Boundary Problem and What is the Optimal-Stopping Time for an American Option?Heath, Jarrow & MortonFour switches and a lightbulbThe Same Old Same OldBe prepared Cash flows Things to Look Out For in Exotic ContractsScience in Finance IV: The Feedback EffectMatching birthdays Floor What is CrashMetrics?What is Put-Call Parity?What is Modern Portfolio Theory?Lognormal What is a Wiener Process/Brownian Motion and What are its Uses in Finance?What is the Kelly Criterion?Delta What are Copulas and How are they Used in Quantitative Finance?Cox, Ross and Rubinstein Another one about birthdays Longstaff & Schwartz It Is and It Isn'tTreynor ratio Barrier option Credit Default Swap (CDS) Bermudan swaption Basis swap American option ManifestoWhat is Extreme Value Theory?Asymptotic analysis Be true to yourself Muddy faces Embedded decisions Gamma Focus What is Asymptotic Analysis and How is it Used in Financial Modelling?Preface to the First EditionWhat People Get WrongBrainteasers Spot rate modelsRange note Duration The Most Popular Probability Distributions and Their Uses in Finance Lesson 2: Supply and DemandNormal or Gaussian What are the Forward and Backward Equations?EssaysWhat are the Stupidest Things People have Said about Risk Neutrality?Convexity Expected loss Aircraft armourEconometric models What is Meant by 'Complete' and 'Incomplete' Markets?Good clothes FAQs Hedging is continuous Passport option Sharpe ratio Coherent measures Barrier option Matching birthdaysWhat is the Central Limit Theorem and What are its Implications for Finance?Paul Wilmott on Quantitative Finance, Second Edition by Paul WilmottHYPER option Vega What is the Efficient Markets Hypothesis?Beta Reverse repo Airforce OneCap Callable Finding banks What is the Capital Asset Pricing Model?Science in Finance VII: Risk Management — What is the Point?What is Arbitrage Pricing Theory?Magicians and MathematiciansCorrelation markets CDS VOLATILITY WILL INCREASE ENORMOUSLY AT TIMES FOR NO ECONOMIC REASON The Commonest Mistakes in Quantitative Finance: A Dozen Basic Lessons in Commonsense for Quants and Risk Managers and the Traders Who Rely on ThemDefault probability Taylor SeriesLesson 12: Too Much ComplexityOption Valuation under Stochastic Volatility by Alan LewisSnowflakeWhat are the Greeks?Poisson processes Lookback option What is the correct delta? Hedging and the Partial Differential EquationCall option Digital Linear or non-linear Coupe option Two headsRussian rouletteMonte Carlo PDF s Sobol', Faure, Hammersley, Haselgrove and Halton... Series solutions Forward-start option kg of berriesMonte Carlo methodsWhat is Option Adjusted Spread?Decision features Margin hedging Buzzwords Multi-dimensional lognormal random walksExponential Collateralized Debt Obligation (ECDO) How? Ants on a circleEconomics Makes My Brain HurtOutperformance option Number of dimensions Option pricesMortgage Backed Security (MBS) Logistic /2 modelJump diffusionThe doorsCompensation The Oracle at DelphiGamma hedging Green's functions Four switches and a lightbulb What is the Difference Between the Equilibrium Approach and the No-Arbitrage Approach to Modelling?Pricing derivatives Boundary/final conditions Superhedging Correlation Can I use Real Probabilities to Price Derivatives?Quants' salariesQuizTurnover What is Volatility?Paul & Dominic's Guide to Getting a Quant JobCDO Deterministic models Family membersWhat is the Difference between a Quant and an Actuary?Its Knock-in/out option Modigliani-Modigliani measure Forward Structural modelsThe Black-Scholes Formulae and the GreeksSwap AppearanceShow some market insight Einftein'f brainteaserLesson 7: FeedbackCovering letter Lesson 10: CalibrationDelta Market maker The spot rate and forward rates Collateralized Debt Obligation (CDO) Chi square CQF Markowitz Lesson 6: Reliance on Continuous Hedging (Arguments)BookwormShow you can do things What is Monte Carlo Simulation?Gumbel Stochastic volatilityBreak/Cancellable forward Schonbucher's stochastic implied volatility What is Bootstrapping using Discount Factors?Constant Maturity Swap (CMS) Forward Rate Agreement (FRA) What is Maximum Likelihood Estimation?The V term A Diffusion EquationSABRRainbow optionStochastic volatility MORE HEDGE FUNDS WILL COLLAPSE Inverse normal Read your CV Asian option Dupire, Rubinstein, Derman and Kani Science in Finance VI: True Sensitivities, CDOs and CorrelationsMuddy facesPDE Interests and hobbies The Quantitative Finance TimelineBalloon option Preface to the Second EditionLIBOR Number of dimensions Colours Regression Inverse floater Delta hedging EsotericaHagan, Kumar, Lesniewski and Woodward Balls in a bag And Now a Brief Unofficial History!Functional form of coefficients Name Two thirds of the average CONVEXITY WILL BE MISSED Collateralized Mortgage Obligation (CMO) Perfume and aftershave Time dependence ExamplesThis is No Longer FunnyCFA Merton, again There are no arbitrage opportunities Can I optimize my hedging when there are transaction costs? Stochastic Barbarians Einstein's brainteaser What is the LIBOR Market Model and its Principal Applications in Finance?Poisson* Two heads The Financial Modellers' ManifestoSwaptions Implied The AnswersTHERE WILL BE MORE ROQUE TRADERS Asset swap What is Jensen's Inequality and What is its Role in Finance?Convertible bond Hanging a pictureWhy? What are the Bastard Greeks?What you need to proveWhat is the Volatility Smile?Hull & White Ones and zeros Common ContractsParisian option Future The doors Ratchet CompensationPaul Wilmott Introduces Quantitative Finance, Second Edition by Paul WilmottMean reversion Options, Futures, and Other Derivatives by John HullColour Vanna Reduced formVasicek Variance swap There are no transaction costs What is a Jump-Diffusion Model and How does it Affect Option Values?Bookworm Find out more about the job Skew Pirate puzzle PrefaceLinear or non-linear Results and Ideas: Two Classical PutdownsYield curve The Complete Guide to Option Pricing Formulas by Espen Gaarder HaugContingent premium option Speed The Monty Hall problemMake sure you can be contacted Static hedging Science in Finance IX: In Defence of Black, Scholes and MertonFrustrationGARCH-diffusion Bond options Can I optimize my hedge? SABR Finite difference Cox, Injersoll & Ross Intuition Last job first STRIPS How big is my hedging error? Programme of studyHow Good is the Assumption of Normal Distributions for Financial Returns?SABR RISK MANAGEMENT WILL FAIL Utility TheoryAircraft armour Vega hedging What is a Coherent Risk Measure and What are its Properties?Black 1976Calibration Functional form of coefficients Biased coins Diff (erential) swap Brennan & Schwartz Crash (Platinum) hedging Pass through What is the Black—Scholes Equation?Brown Name and Shame in Our New Blame Game!Black & Karasinski Sortino ratio Chooser option Jewellery Normal distribution CreditAccrual Risk neutral What is Arbitrage?Quantlib Lesson 8: Reliance on Closed-Form SolutionsLevy Ants on a circle Ponzi Schemes, Auditors, Regulators, Credit Ratings, and Other ScamsWhat are the Different Types of Mathematics Found in Quantitative Finance?Term independent of V Bonus Lesson 13: The Binomial Method is RubbishMobile phone interviews Caps and floors Base correlation Minimum and maximum correlationTheta Questions for the interviewerHow Robust is the Black-Scholes Model?Asian option Lesson 1: Lack of DiversificationExtendible option/swap What is a Poisson Process and What are its Uses in Finance?Programme of studyPrinciples of Financial Engineering by Salih NeftciRead the job specification What is Value at Risk and How is it Used?Be honest Brace, Gatarek & MusielaHeath, Jarrow and Morton Volatility ArbitrageConvexity Bachelier Discrimination methods Annual returns Asking questions Black, Scholes and Merton The backward equationWhat are the Most Useful Performance Measures?Biased coinss Cheyette, Barrett, Moore and Wilmott POLITICIANS AND GOVERNMENTS WILL REMAIN COMPLETELY IN THE DARK Asset swap The yield to maturity (YTM) or internal rate of return (IRR) Interview overlap Hit-and-run taxi CAPMProgramme of studyLaplace Risk TOO MUCH MONEY WILL GO INTO TOO FEW PRODUCTS Do not sound as if you work for Accenture Other terms? CORRELATION PRODUCTS WILL BLOW UP DRAMATICALLY What is Ito's Lemma?Compound option Cliquet option Brace, Gatarek and Musiela The QuestionsOnes and zeros-81 Harrison, Kreps and Pliska Why is the Lognormal Distribution Important?Strangle LIBOR-in-arrears swap Pirate puzzleThe underlying is lognormally distributed Hedge Make-up Ages of three childrenEquity, FX and commodity markets Wiener Finite-difference methodsRepo Transactions costs Avellaneda and Paras EfficiencyHo & Lee There are no costs associated with borrowing stock for going short The Monty Hall problem What is the Market Price of Risk?Bermudan option Einstein Li GOOD SALESMEN WILL HOODWINK SMART PEOPLE Change of NumeraireMinimum and maximum correlation Equity, Foreign Exchange and CommoditiesHit-and-run taxiPaul & Dominic Dimensionality Sums of uniform random variablesDeterministic First-derivative terms Sums of uniform random variables Attribution Exotic Why do Quants like Closed-Form Solutions?Shadow greeks Discrete/Continuous The Concepts and Practice of Mathematical Finance by Mark JoshiHanging a picture Fixed-income markets TurnoverSquare-root model/Heston (1993) Another one about birthdaysContinuous-Time Limit of the Binomial ModelPareto What is Serial Autocorrelation and Does it Have a Role in Derivatives?ExponentialDice game What? Airforce One What is Calibration?BrainteasersIndex amortizing rate swap Cap Find the volatilitySwaption Hybrid Arbitrage Volatility is constant Exploring portfolio statistics Dice gameGet it checked What are Low-Discrepancy Numbers?Sobol' Show that you can do things Structured products Volatility Credit markets Binary option Make eye contact The Oracle at Delphi Local TimeUnberstanb the process What is Meant by the 'Value' of a Contract?Be punctual Heard on the Street by Timothy CrackFama What is the Finite-Difference Method?Can I Reverse Engineer a Partial Differential Equation to get at the Model and Contract?What is the Best-Kept Secret in Quantitative Finance?Lesson 3:Jensen's Inequality ArbitrajeBlack—Scholes for AccountantsInterest rate swap MBS C++ Design Patterns and Derivatives Pricing by Mark JoshiVomma or Volga Lesson 11: Too Much PrecisionTwo-factor modelsMiss Moneypenny Be polite Basket August 2007 quantitative finance in disrepute Mellin TransformWhat is Cointegration?Two thirds of the averageSecond-derivative terms MartingalesHull & White The order of an option What is a Utility Function and How is it Used?Kissing frogs Uniform Other DerivationsThe forward equationWhat is Dispersion Trading?Ages of three children Cauchy Fong & Vasicek Popular Quant BooksFonts and layout The market price of risk as a random factor Parameters as VariablesHimalayan option Apply for the right job Lesson 5: CorrelationAnnual returnsDecision features Models and EquationsTotal Return Swap (TRS) Smile Science in Finance II: '... ists'Put option Variance swap Miss MoneypennyVasicek Basket option Collateralized Debt Obligation squared (CDO2) Science in Finance I Revisited: Supply and Demand, and Spoon BendingStraddle Information ratio Prices as expectationsNeatness is good Dates Copula Floating Rate Note (FRN) Hawai'ian option Be confident Advanced Modelling in finance Using Excel and VBA by Mary Jackson and Mike StauntonCloser to the edge or the centre?Uncertain volatility Boyle Ho and Lee Approximations The lognormal random walkFast drift and high volatility in stochastic volatility models Urban planning Why is calibration unstable?Returns are normally distributed Why Does Risk-Neutral Valuation Work?Getting the message across What is Marking to Market and How Does it Affect Risk Management in Derivatives Trading?Gamma What is Girsanov's Theorem, and Why is it Important in Finance?Why Hedge?Swaptions InterviewsGender ratio Ornstein-Uhlenbeck process CMS Probabilistic Urban planningDispersion Writing a CVHull & White (1987) kgof berries Balls in a bagSwap Quanto Monte Carlo Methods in Finance by Peter JackelCovering a chessboard with dominoesWhich Numerical Method should I Use and When?Fixed IncomeUltras Rho How is Risk Defined in Mathematical Terms?Richardson Convertible Lesson9: Valuation is Not LinearZeroth law of holes Multiple CVs Covering a chessboard with dominoes s Samuelson Digital option Making a difference Sleep regularly, sleep often Thorp Student's t Closer to the edge or the centre? American option Set traps Simulations Twelve Different Ways to Derive Black-ScholesGender ratioAsymptotic analysis Russian rouletteEfficiencyEfficiencyGARCH Duration Numerical integrationHow much will transaction costs reduce my profit? Sharpe, Lintner and Mossin Gamma The Most Popular Search Words and Phrases on Wilmott.comWeibull Credit Derivatives Pricing Models by Philipp SchonbucherSnowflake Quanto Path dependence Boundary/final conditions Lesson 4: Sensitivity to Parameters
 
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