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Normal probability distribution Posted by: bionicturtledotcom
Video duration: 560 seconds Review of the normal density function and its key properties Related: excel, finance, quant |
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Intro to logarithms Posted by: bionicturtledotcom
Video duration: 594 seconds The inverse of a logarithmic function is an exponential functions. And if we use a base of natural e, we can compute continuously compounded returns Related: finance, quant |
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Binomial distribution Posted by: bionicturtledotcom
Video duration: 597 seconds The binomial is one of the basic distributions, yet surprisingly common in risk and quant finance. Here I take a look at its key properties and compare the formula to Excel's built in =BINOMDIST() Related: excel, finance, quant |
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Regression #1: Sample regression function (SRF) Posted by: bionicturtledotcom
Video duration: 450 seconds The population is unobserved. We draw samples and make inferences based on the samples. Each sample has a sample regression function (SRF). Related: econometrics, finance, quant, regression, statistics |
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Coefficient of determination (r-squared) Posted by: bionicturtledotcom
Video duration: 590 seconds In a linear regression, you often see the R-squared quoted. To explain the R-squared (coefficient of determination), I compare it to the standard error of estimate (a measure of the line's accuracy) and the correlation (the square root of the coefficient of determination). All three, loosely speaking, are measures of the line's fit to the data Related: excel, finance, quant |
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Regression #2: Ordinary Least Squares (OLS) Posted by: bionicturtledotcom
Video duration: 568 seconds OLS minimizes the residual sum of squares (RSS). RSS is the sum of each squared residual (residual = the observed Y minus the predicted "on the line" Y). Also, about the OLS: the average residual is always zero, and the line passes through the point (average X, average Y) Related: econometrics, finance, quant, regression, statistics |
![Bayes\](http://img.youtube.com/vi/pPTLK5hFGnQ/2.jpg "Bayes\") |
Bayes' Formula Posted by: bionicturtledotcom
Video duration: 397 seconds Bayes' Theorem formulas an intuitive idea: we adjust our perspective (the probability set) given new, relevant information. Formally, Bayes' Theorem helps us move from an unconditional probability (what are the odds the economy will grow?) to a conditional probability (given new evidence, what are the odds the economy will grow?) Related: finance, quant |
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Collateralized debt obligation (Balance Sheet CDO) Posted by: bionicturtledotcom
Video duration: 456 seconds A balance sheet CDO transfers credit risk from the bank (originator) to investors. A key aspect of a CDO is that investors have different (tranched) securities. Related: excel, finance, quant |
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Central limit theorem Posted by: bionicturtledotcom
Video duration: 529 seconds The CLT says the sample mean will be normally distributed regardless of the population distribution; it's power is uncanny. Related: financel, quant |
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Confidence interval Posted by: bionicturtledotcom
Video duration: 496 seconds I illustrate the confidence interval construction with an example: the P/E ratio of 28 companies. The point is to say with confidence (e.g., 95%) that the "true" population lies within an interval. Related: excel, finance, probability, quant, statistics |
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Intro to Quant Finance: Volatility Posted by: bionicturtledotcom
Video duration: 644 seconds Volatility is the standard deviation of period returns Related: excel, finance, quant, quantitative |
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Regression #4: ANOVA table in regression Posted by: bionicturtledotcom
Video duration: 554 seconds The ANOVA table explains the sources of variation. Related: excel, finance, quant, regression, statistics |
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Combinations and permutation Posted by: bionicturtledotcom
Video duration: 428 seconds Both count the ways that (r) objects can be taken from a group of (n) objects, but permutations are arrangements (sequence matters), while combinations are selections (order does not matter). For example, how many ways can you seat people at a table? That's permutation. How many poker hands are available in five-card draw? That's a combination Related: excel, finance, quant |
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Intro to Linear Regression Posted by: bionicturtledotcom
Video duration: 314 seconds A really brief introduction to the "best fit" line through X:Y data. Related: finance, quant |
![Student\](http://img.youtube.com/vi/pqtG1vXg_f8/2.jpg "Student\") |
Student's t distribution Posted by: bionicturtledotcom
Video duration: 512 seconds The small sample is a 10-day series of Google's daily periodic returns. The question is, with 95% confidence, what is the true (population) average return? This is the essence of statistics, based on sample statistics (sample mean, sample variance) we are trying to infer population parameters (population mean). Related: excel, finance, quant |
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Synthetic collateralized debt obligation (synthetic CDO) Posted by: bionicturtledotcom
Video duration: 479 seconds The key difference between a cash and synthetic CDO is: instead of selling the reference portfolio (loans), the originator (bank) purchases credit protection with credit default swaps (CDS) Related: finance, quant |
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Basket credit default swap (CDS) Posted by: bionicturtledotcom
Video duration: 421 seconds Like a CDS, but the reference is a BASKET of several obligations. A 1st-to-default means that the basket is triggered when the first obligation defaults. Related: excel, finance, quant |
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Using Excel to calculate Black-Scholes-Merton option price Posted by: bionicturtledotcom
Video duration: 500 seconds This is Black-Scholes for a European-style call option. You can download the XLS at my site @ www.bionicturtle.com Related: derivatives, finance, options, stock |
![What\](http://img.youtube.com/vi/S4r3J-nXlOA/2.jpg "What\") |
What's a random variable Posted by: bionicturtledotcom
Video duration: 454 seconds Random variables describe key things like asset returns. We then use distribution functions to characterize the random variables Related: finance, quant |
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GARCH(1,1) to estimate volatility Posted by: bionicturtledotcom
Video duration: 471 seconds GARCH(1,1) estimates volatility in a similar way to EWMA (i.e., by conditioning on new information) EXCEPT it adds a term for mean reversion: it says the series is "sticky" or somewhat persistent to a long-run average Related: excel, finance, quant |
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Monte carlo simulation: Brownian motion Posted by: bionicturtledotcom
Video duration: 568 seconds This is a classic building block for Monte Carlos simulation: Brownian motion to model a stock price. The periodic return (note the return is expressed in continuous compounding) is a function of two components: 1. constant drift, and 2. random shock; i.e., volatility multiplied by a randomized critical z value Related: at, carlo, finance, monte, risk, simulation, value |
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Intro to Quant Finance: Periodic Rate of Return Posted by: bionicturtledotcom
Video duration: 579 seconds Periodic rate of return Related: excel, finance, quant, quantitative |
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Calculate forward given spot rate Posted by: bionicturtledotcom
Video duration: 462 seconds Given a 2.0 year spot and a 1.5 year spot, we want to solve for the six month forward staring in 1.5 years. That's the forward rate denoted by 1f3 or 0.5f1.5. Related: excel, finance, math, quant |
