VI. Miscellaneous Quant Topics

VI. Miscellaneous Quant Topics · 02. juin 2024

Funding valuation adjustment reflects the funding cost of uncollateralised derivatives above the risk-free rate of return, which is typically €STR or OIS* in Europe. To illustrate FVA, let’s consider an uncollateralized swap between a bank and a client. In this swap agreement, the bank and the client exchange cash flows based on different interest rates. Importantly, no collateral is posted by either party to secure the future obligations of the swap. A bank enters into a swap with a...

VI. Miscellaneous Quant Topics · 21. février 2024

In trading, the "Observer Effect," akin to Heisenberg's Uncertainty Principle, reflects how traders' analyses influence market prices. This metaphorical concept shows that collective actions, like buying based on beliefs or technical analysis, can create self-fulfilling prophecies, driving prices and shaping market trends. #TradingPsychology #MarketAnalysis #FinancialMarkets #ObserverEffect #QuantumMetaphor

VI. Miscellaneous Quant Topics · 13. novembre 2023

Discretization translates continuous financial models into numerically solvable steps, crucial for derivative pricing and risk management. It simplifies complex models, enabling simulations like Monte Carlo for exotic options while introducing some approximation error. #QuantitativeFinance #DerivativesPricing #NumericalMethods

VI. Miscellaneous Quant Topics · 03. octobre 2023

Log returns, derived from natural logarithms of price ratios, offer precision and are additive over time, unlike arithmetic returns. Owing to the Central Limit Theorem, they tend to be normally distributed, aiding in robust financial modeling and risk management. They also prevent negative asset price implications. #Finance #RiskManagement