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An accessible introduction to quantitative finance by the numbers--for students, professionals, and personal investors
The world of quantitative finance is complex, and sometimes even high-level financial experts have difficulty grasping it. Quantitative Finance For Dummies offers plain-English guidance on making sense of applying mathematics to investing decisions. With this complete guide, you'll gain a solid understanding of futures, options and risk, and become familiar with the most popular equations, methods, formulas, and models (such as the Black-Scholes model) that are applied in quantitative finance.
Also known as mathematical finance, quantitative finance is about applying mathematics and probability to financial markets, and involves using mathematical models to help make investing decisions. It's a highly technical discipline--but almost all investment companies and hedge funds use quantitative methods.
The book breaks down the subject of quantitative finance into easily digestible parts, making it approachable for personal investors, finance students, and professionals working in the financial sector--especially in banking or hedge funds who are interested in what their quant (quantitative finance professional) colleagues are up to. This user-friendly guide will help you even if you have no previous experience of quantitative finance or even of the world of finance itself.
With the help of Quantitative Finance For Dummies, you'll learn the mathematical skills necessary for success with quantitative finance and tips for enhancing your career in quantitative finance.
Get your own copy of this handy reference guide and discover:
An easy-to-follow introduction to the complex world of quantitative finance
The core models, formulas, and methods used in quantitative finance
Exercises to help augment your understanding of QF
How QF methods are used to define the current market value of a derivative security
Real-world examples that relate quantitative finance to your day-to-day job
Mathematics necessary for success in investment and quantitative finance
Portfolio and risk management applications
Basic derivatives pricing
Whether you're an aspiring quant, a top-tier personal investor, or a student, Quantitative Finance For Dummies is your go-to guide for coming to grips with QF/risk management.
Autorentext
Steve Bell is a Quantitative Investment Researcher and Director at Research In Action. A highly experienced mathematical and statistical modeller, he is knowledgeable in energy markets and has a particular interest in systematic quantitative trading strategy development at any frequency.
Klappentext
Learn the tools for investment success
Use portfolio and risk management applications Sharpen your skills with useful exercises Get acquainted with Quantitative Finance Whether you're an aspiring quant or a hands-on high-level investor, this book makes quantitative finance make sense. It demystifies futures, options, and risk; explains the core models, formulas, and methods; and provides essential mathematical tools. Accessible information and practical exercises prepare you for a successful role in finance! Inside....
Inhalt
Introduction 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Where to Go from Here 3
Part 1: Getting Started With Quantitative Finance 5
Chapter 1: Quantitative Finance Unveiled 7
Defining Quantitative Finance 8
Summarising the mathematics 8
Pricing, managing and trading 9
Meeting the market participants 9
Walking like a drunkard 10
Knowing that almost nothing isn't completely nothing 11
Recognising irrational exuberance 14
Wielding Financial Weapons of Mass Destruction 15
Going beyond cash 17
Inventing new contracts 18
Analysing and Describing Market Behaviour 20
Measuring jumpy prices 20
Keeping your head while using lots of data 21
Valuing your options 21
Managing Risk 22
Hedging and speculating 22
Generating income 23
Building portfolios and reducing risk 23
Computing, Algorithms and Markets 24
Seeing the signal in the noise 24
Keeping it simple 25
Looking at the finer details of markets 25
Trading at higher frequency 26
Chapter 2: Understanding Probability and Statistics 27
Figuring Probability by Flipping a Coin 28
Playing a game 31
Flipping more coins 32
Defining Random Variables 33
Using random variables 34
Building distributions with random variables 35
Introducing Some Important Distributions 38
Working with a binomial distribution 39
Recognising the Gaussian, or normal, distribution 40
Describing real distributions 41
Chapter 3: Taking a Look at Random Behaviours 45
Setting Up a Random Walk 45
Stepping in just two directions 47
Getting somewhere on your walk 48
Taking smaller and smaller steps 49
Averaging with the Central Limit Theorem 50
Moving Like the Stock Market 53
Generating Random Numbers on a Computer 54
Getting random with Excel 55
Using the central limit theorem again 58
Simulating Random Walks 58
Moving Up a Gear 60
Working a stochastic differential equation 60
Expanding from the origin 61
Reverting to the Mean 62
Part 2: Tackling Financial Instruments 65
Chapter 4: Sizing Up Interest Rates, Shares and Bonds 67
Explaining Interest 68
Compounding your interest 68
Compounding continuously 69
Sharing in Profits and Growth 71
Taking the Pulse of World Markets 72
Defining Bonds and Bond Jargon 74
Coupon-bearing bonds 75
Zeroing in on yield 76
Cleaning up prices 78
Learning to like LIBOR 79
Plotting the yield curve 80
Swapping between Fixed and Floating Rates 81
Chapter 5: Exploring Options 85
Examining a Variety of Options 86
Starting with plain vanilla options 86
Aiming for a simple, binary option 87
Branching out with more exotic options 87
Reading Financial Data 88
Seeing your strike price 88
Abbreviating trading information 89
Valuing time 89
Getting Paid when Your Option Expires 90
Using Options in Practice 92
Hedging your risk 92
Placing bets on markets 93
Writing options 94
Earning income from options 94
Distinguishing European, American and other options 95
Trading Options On and Off Exchanges 96
Relating the Price of Puts and Calls 96
Chapter 6: Trading Risk with Futures 99
Surveying Future Contracts 99
Trading the futures market 101
Marking to market and margin accounts 101 &...