VIII. Quant Interview Questions · 14. November 2023
In the context of stochastic calculus, considering the term 'dX' known as a Wiener process, what does the relationship 'dX^2 equals dt' when 'dt' tends toward 0 signify? A) A summation of squared values B) The convergence of a sequence C) The limit of a function D) The behavior of a Wiener process Unveil the hidden connection with your choice! __________ The correct answer is: D) The behavior of a Wiener process Explanation: In the context of stochastic calculus and the Wiener process, dX^2 =...
I. Stochastic Models and Processes · 12. October 2023
The Poisson process is integral to quant finance, modeling rare yet crucial events with its rate parameter λ, which sets the average event rate. The process calculates the probability of 'k' events in time 't', enhancing stock and option pricing models by accounting for sudden market jumps alongside regular movements. It's a mathematical bridge between predictable trends and unexpected occurrences, making it indispensable for comprehensive financial predictions.
I. Stochastic Models and Processes · 02. October 2023
Gaussian Process Regression demystified: a statistical tool predicting outcomes by learning patterns from data. Imagine a wise elder foreseeing future events based on past experiences, ensuring precision. Ideal for forecasting trends! #DataScience #Statistics #Prediction
I. Stochastic Models and Processes · 27. May 2023
By using a Lévy process-based model like Variance Gamma, you can better capture the stock's jump behavior, which is essential for pricing options accurately in situations where such jumps are common.
I. Stochastic Models and Processes · 06. May 2023
Navigating the stock market is like playing a game where your pieces can shift between categories like "Tech" and "Energy." But, there's a twist! When stocks move into the "Consumer Goods" category, they tend to stay there, much like landing in a cozy inn in a board game where you're inclined to settle. This behavior is explained by the "absorbing Markov chain," a model highlighting the probability of such transitions. It's a useful tool to predict where stocks might settle in the long run.