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- Mathematical finance

Autoregressive conditional duration

In financial econometrics, an autoregressive conditional duration (ACD, Engle and Russell (1998)) model considers irregularly spaced and autocorrelated intertrade durations. ACD is analogous to GARCH.

Regular distribution (economics)

Regularity, sometimes called Myerson's regularity, is a property of probability distributions used in auction theory and revenue management. Examples of distributions that satisfy this condition inclu

Taleb distribution

In economics and finance, a Taleb distribution is the statistical profile of an investment which normally provides a payoff of small positive returns, while carrying a small but significant risk of ca

Inverse demand function

In economics, an inverse demand function is the inverse function of a demand function. The inverse demand function views price as a function of quantity. Quantity demanded, Q, is a function (the deman

Put–call parity

In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a por

Snell envelope

The Snell envelope, used in stochastics and mathematical finance, is the smallest supermartingale dominating a stochastic process. The Snell envelope is named after James Laurie Snell.

Volatility smile

Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter (implied volatility) that is needed to be modified for the Black–Scholes formula to fit mar

Finite difference methods for option pricing

Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo

Girsanov theorem

In probability theory, the Girsanov theorem tells how stochastic processes change under changes in measure. The theorem is especially important in the theory of financial mathematics as it tells how t

Stochastic differential equation

A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process, resulting in a solution which is also a stochastic process. SDEs are used

Heath–Jarrow–Morton framework

The Heath–Jarrow–Morton (HJM) framework is a general framework to model the evolution of interest rate curves – instantaneous forward rate curves in particular (as opposed to simple forward rates). Wh

Johnson binomial tree

No description available.

Volfefe index

The Volfefe Index was a stock market index of volatility in market sentiment for US Treasury bonds caused by tweets by former President Donald Trump. Bloomberg News observed Volfefe was created due to

Fundamental theorem of asset pricing

The fundamental theorems of asset pricing (also: of arbitrage, of finance), in both financial economics and mathematical finance, provide necessary and sufficient conditions for a market to be arbitra

Interest rate

An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depen

Fisher equation

In financial mathematics and economics, the Fisher equation expresses the relationship between nominal interest rates and real interest rates under inflation. Named after Irving Fisher, an American ec

Greeks (finance)

In mathematical finance, the Greeks are the quantities representing the sensitivity of the price of derivatives such as options to a change in underlying parameters on which the value of an instrument

Feynman–Kac formula

The Feynman–Kac formula, named after Richard Feynman and Mark Kac, establishes a link between parabolic partial differential equations (PDEs) and stochastic processes. In 1947, when Kac and Feynman we

Rocket science (finance)

"Rocket science" in finance is a metaphor for activity carried out by specialised quantitative staff to provide detailed output from mathematical modeling and computational simulations to support inve

Continuous-repayment mortgage

Analogous to continuous compounding, a continuous annuity is an ordinary annuity in which the payment interval is narrowed indefinitely. A (theoretical) continuous repayment mortgage is a mortgage loa

Volatility risk premium

In mathematical finance, the volatility risk premium is a measure of the extra amount investors demand in order to hold a volatile security, above what can be computed based on expected returns. It ca

Ohlson O-score

The Ohlson O-score for predicting bankruptcy is a multi-factor financial formula postulated in 1980 by Dr. of the New York University Stern Accounting Department as an alternative to the Altman Z-scor

Implied binomial tree

No description available.

Credit card interest

Credit card interest is a way in which credit card issuers generate revenue. A card issuer is a bank or credit union that gives a consumer (the cardholder) a card or account number that can be used wi

Itô calculus

Itô calculus, named after Kiyosi Itô, extends the methods of calculus to stochastic processes such as Brownian motion (see Wiener process). It has important applications in mathematical finance and st

Computational finance

Computational finance is a branch of applied computer science that deals with problems of practical interest in finance. Some slightly different definitions are the study of data and algorithms curren

Factor theory

In finance, factor theory is a collection of related mathematical models that explain asset returns as driven by distinct economic risks called factors. In less formal usage, a factor is simply an att

Graham number

The Graham number or Benjamin Graham number is a figure used in securities investing that measures a stock's so-called fair value. Named after Benjamin Graham, the founder of value investing, the Grah

Early repayment charge

No description available.

Shadow rate

The shadow rate is an interest rate in some financial models. It is used to measure the economy when nominal interest rates come close to the zero lower bound. It was created by Fischer Black in his f

Master of Financial Engineering

No description available.

Marginal conditional stochastic dominance

In finance, marginal conditional stochastic dominance is a condition under which a portfolio can be improved in the eyes of all risk-averse investors by incrementally moving funds out of one asset (or

Barone-Adesi and Whaley

No description available.

Compound annual growth rate

Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting

No-arbitrage bounds

In financial mathematics, no-arbitrage bounds are mathematical relationships specifying limits on financial portfolio prices. These price bounds are a specific example of good–deal bounds, and are in

Realized kernel

The realized kernel (RK) is an estimator of volatility. The estimator is typically computed with high frequency return data, such as second-by-second returns. Unlike the realized variance, the realize

Realized variance

Realized variance or realised variance (RV, see spelling differences) is the sum of squared returns. For instance the RV can be the sum of squared daily returns for a particular month, which would yie

Certificate in Quantitative Finance

No description available.

High-frequency trading

High-frequency trading (HFT) is a type of algorithmic financial trading characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data a

Mortgage constant

Mortgage constant, also called "mortgage capitalization rate", is the capitalization rate for debt. It is usually computed monthly by dividing the monthly payment by the mortgage principal. An annuali

Weighted average cost of capital

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's c

Rule of 72

In finance, the rule of 72, the rule of 70 and the rule of 69.3 are methods for estimating an investment's doubling time. The rule number (e.g., 72) is divided by the interest percentage per period (u

Bootstrapping (finance)

In finance, bootstrapping is a method for constructing a (zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g. bonds and swaps. A bootstrapped curve, corresp

Optimal stopping

In mathematics, the theory of optimal stopping or early stopping is concerned with the problem of choosing a time to take a particular action, in order to maximise an expected reward or minimise an ex

Binomial options pricing model

In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" (lattice based) model of the

Good–deal bounds

Good–deal bounds are price bounds for a financial portfolio which depends on an individual trader's preferences. Mathematically, if is a set of portfolios with future outcomes which are "acceptable" t

Ruin theory

In actuarial science and applied probability, ruin theory (sometimes risk theory or collective risk theory) uses mathematical models to describe an insurer's vulnerability to insolvency/ruin. In such

Martingale pricing

Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a

Quantum finance

Quantum finance is an interdisciplinary research field, applying theories and methods developed by quantum physicists and economists in order to solve problems in finance. It is a branch of econophysi

Margin at risk

The Margin-at-Risk (short: MaR) is a quantity used to manage short-term liquidity risks due to variation of margin requirements, i.e. it is a financial risk occurring when trading commodities. Similar

Stochastic calculus

Stochastic calculus is a branch of mathematics that operates on stochastic processes. It allows a consistent theory of integration to be defined for integrals of stochastic processes with respect to s

Johansen test

In statistics, the Johansen test, named after Søren Johansen, is a procedure for testing cointegration of several, say k, I(1) time series. This test permits more than one cointegrating relationship s

Liquidity at risk

The Liquidity-at-Risk (short: LaR) is a measure of the liquidity risk exposure of a financial portfolio. It may be defined as the net liquidity drain which can occur in the portfolio in a given risk s

Carr–Madan formula

In financial mathematics, the Carr–Madan formula of Peter Carr and Dilip B. Madan shows that the analytical solution of the European option price can be obtained once the explicit form of the characte

Roll's critique

Roll's critique is a famous analysis of the validity of empirical tests of the capital asset pricing model (CAPM) by Richard Roll. It concerns methods to formally test the statement of the CAPM, the e

Cheyette model

In mathematical finance, the Cheyette Model is a quasi-Gaussian, quadratic volatility model of interest rates intended to overcome certain limitations of the Heath-Jarrow-Morton framework. By imposing

Financial correlation

Financial correlations measure the relationship between the changes of two or more financial variables over time. For example, the prices of equity stocks and fixed interest bonds often move in opposi

Markov switching multifractal

In financial econometrics (the application of statistical methods to economic data), the Markov-switching multifractal (MSM) is a model of asset returns developed by Laurent E. Calvet and Adlai J. Fis

Alpha (finance)

Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a se

Stochastic drift

In probability theory, stochastic drift is the change of the average value of a stochastic (random) process. A related concept is the drift rate, which is the rate at which the average changes. For ex

Black–Scholes equation

In mathematical finance, the Black–Scholes equation is a partial differential equation (PDE) governing the price evolution of a European call or European put under the Black–Scholes model. Broadly spe

Statistical arbitrage

In finance, statistical arbitrage (often abbreviated as Stat Arb or StatArb) is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portf

Beta (finance)

In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful meas

Intertemporal CAPM

Within mathematical finance, the Intertemporal Capital Asset Pricing Model, or ICAPM, is an alternative to the CAPM provided by Robert Merton. It is a linear factor model with wealth as state variable

Maximum Downside Exposure

In financial investment, the Maximum downside exposure (MDE) values the maximum downside to an investment portfolio. In other words, it states the most that the portfolio could lose in the event of a

Numéraire

The numéraire (or numeraire) is a basic standard by which value is computed. In mathematical economics it is a tradable economic entity in terms of whose price the relative prices of all other tradabl

Forward measure

In finance, a T-forward measure is a pricing measure absolutely continuous with respect to a risk-neutral measure, but rather than using the money market as numeraire, it uses a bond with maturity T.

Over-the-counter (finance)

Over-the-counter (OTC) or off-exchange trading or pink sheet trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs

Intertemporal budget constraint

In economics and finance, an intertemporal budget constraint is a constraint faced by a decision maker who is making choices for both the present and the future. The term intertemporal is used to desc

Negative probability

The probability of the outcome of an experiment is never negative, although a quasiprobability distribution allows a negative probability, or quasiprobability for some events. These distributions may

AZFinText

Arizona Financial Text System (AZFinText) is a textual-based quantitative financial prediction system written by Robert P. Schumaker of University of Texas at Tyler and Hsinchun Chen of the University

High frequency data

High frequency data refers to time-series data collected at an extremely fine scale. As a result of advanced computational power in recent decades, high frequency data can be accurately collected at a

SKEW

SKEW is the ticker symbol for the CBOE Skew Index, a measure of the perceived tail risk of the distribution of S&P 500 investment returns over a 30-day horizon.The index values are calculated and publ

Pricing kernel

No description available.

Financial engineering

Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application

Cointegration

Cointegration is a statistical property of a collection (X1, X2, ..., Xk) of time series variables. First, all of the series must be integrated of order d (see Order of integration). Next, if a linear

Index arbitrage

Index arbitrage is a subset of statistical arbitrage focusing on index components. An index (such as S&P 500) is made up of several components (in the case of the S&P 500, 500 large US stocks picked b

Fokker–Planck equation

In statistical mechanics, the Fokker–Planck equation is a partial differential equation that describes the time evolution of the probability density function of the velocity of a particle under the in

Variance swap

A variance swap is an over-the-counter financial derivative that allows one to speculate on or hedge risks associated with the magnitude of movement, i.e. volatility, of some underlying product, like

Affine term structure model

An affine term structure model is a financial model that relates zero-coupon bond prices (i.e. the discount curve) to a spot rate model. It is particularly useful for deriving the yield curve – the pr

Financial modeling

Financial modeling is the task of building an abstract representation (a model) of a real world financial situation. This is a mathematical model designed to represent (a simplified version of) the pe

Volatility (finance)

In finance, volatility (usually denoted by σ) is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility mea

ExMark

ExMark is a term describing the relationship between a fund's return and the market index. The usual designation for this concept is R-squared, but John C. Bogle coined this expression to highlight th

Implied volatility

In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Sch

Bjerksund and Stensland

No description available.

Earnings response coefficient

In financial economics, finance, and accounting, the earnings response coefficient, or ERC, is the estimated relationship between equity returns and the unexpected portion of (i.e., new information in

Stochastic partial differential equation

Stochastic partial differential equations (SPDEs) generalize partial differential equations via random force terms and coefficients, in the same way ordinary stochastic differential equations generali

Modified Dietz method

The modified Dietz method is a measure of the ex post (i.e. historical) performance of an investment portfolio in the presence of external flows. (External flows are movements of value such as transfe

Current yield

The current yield, interest yield, income yield, flat yield, market yield, mark to market yield or running yield is a financial term used in reference to bonds and other fixed-interest securities such

Jamshidian's trick

Jamshidian's trick is a technique for one-factor asset price models, which re-expresses an option on a portfolio of assets as a portfolio of options. It was developed by Farshid Jamshidian in 1989. Th

Margrabe's formula

In mathematical finance, Margrabe's formula is an option pricing formula applicable to an option to exchange one risky asset for another risky asset at maturity. It was derived by William Margrabe (Ph

Volatility tax

The volatility tax is a mathematical finance term, formalized by hedge fund manager Mark Spitznagel, describing the effect of large investment losses (or volatility) on compound returns. It has also b

Returns-based style analysis

Returns-based style analysis is a statistical technique used in finance to deconstruct the returns of investment strategies using a variety of explanatory variables. The model results in a strategy's

Enterprise value

Enterprise value (EV), total enterprise value (TEV), or firm value (FV) is an economic measure reflecting the market value of a business (i.e. as distinct from market price). It is a sum of claims by

Accumulation function

The accumulation function a(t) is a function defined in terms of time t expressing the ratio of the value at time t (future value) and the initial investment (present value). It is used in . Thus a(0)

Stochastic discount factor

The concept of the stochastic discount factor (SDF) is used in financial economics and mathematical finance. The name derives from the price of an asset being computable by "discounting" the future ca

No free lunch with vanishing risk

No free lunch with vanishing risk (NFLVR) is a no-arbitrage argument. We have free lunch with vanishing risk if by utilizing a sequence of time self-financing portfolios, which converge to an arbitrag

Variance risk premium

Variance risk premium is a phenomenon on the variance swap market, of the variance swap strike being greater than the realized variance on average. For most trades, the buyer of variance ends up with

Multi-curve framework

No description available.

Jensen's alpha

In finance, Jensen's alpha (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return. It is

Walk forward optimization

Walk forward optimization is a method used in finance to determine the optimal parameters for a trading strategy. The trading strategy is optimized with in-sample data for a time window in a data seri

Equity value

Equity value is the value of a company available to owners or shareholders. It is the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt

Sonkin enterprise multiple

The Sonkin enterprise multiple (Sonkin ratio) was named after by , a graduate of Columbia Business School. This ratio can be used when Value investing, and can be calculated using the following formul

Volume-weighted average price

In finance, volume-weighted average price (VWAP) is the ratio of the value of a security or financial asset traded to the total volume of transactions during a trading session. It is a measure of the

Value investing

Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment

Implied repo rate

Implied repo rate (IRR) is the rate of return of borrowing money to buy an asset in the spot market and delivering it in the futures market where the notional is used to repay the loan.

Valuation of options

In finance, a price (premium) is paid or received for purchasing or selling options. This article discusses the calculation of this premium in general. For further detail, see: Mathematical finance §

Replicating portfolio

In mathematical finance, a replicating portfolio for a given asset or series of cash flows is a portfolio of assets with the same properties (especially cash flows). This is meant in two distinct sens

Stochastic volatility jump

In mathematical finance, the stochastic volatility jump (SVJ) model is suggested by Bates. This model fits the observed implied volatility surface well. The model is a Heston process for stochastic vo

Time-weighted return

The time-weighted return (TWR) is a method of calculating investment return. To apply the time-weighted return method, combine the returns over sub-periods by compounding them together, resulting in t

Financial Modelers' Manifesto

The Financial Modelers' Manifesto was a proposal for more responsibility in risk management and quantitative finance written by financial engineers Emanuel Derman and Paul Wilmott. The manifesto inclu

Correlation swap

A correlation swap is an over-the-counter financial derivative that allows one to speculate on or hedge risks associated with the observed average correlation, of a collection of underlying products,

Theory of fructification

In economics, the theory of fructification is a theory of the interest rate which was proposed by French economist and finance minister Anne Robert Jacques Turgot. The term theory of fructification is

Forward volatility

Forward volatility is a measure of the implied volatility of a financial instrument over a period in the future, extracted from the term structure of volatility (which refers to how implied volatility

QuantLib

QuantLib is an open-source software library which provides tools for software developers and practitioners interested in financial instrument valuation and related subjects. QuantLib is written in C++

Modigliani risk-adjusted performance

Modigliani risk-adjusted performance (also known as M2, M2, Modigliani–Modigliani measure or RAP) is a measure of the risk-adjusted returns of some investment portfolio. It measures the returns of the

Consumer math

Consumer math comprises practical mathematical techniques used in commerce and everyday life. In the United States, consumer math is typically offered in high schools, some elementary schools, or in s

Convexity (finance)

In mathematical finance, convexity refers to non-linearities in a financial model. In other words, if the price of an underlying variable changes, the price of an output does not change linearly, but

Profit at risk

Profit-at-Risk (PaR) is a risk management quantity most often used for electricity portfolios that contain some mixture of generation assets, trading contracts and end-user consumption. It is used to

Frictionless market

In economic theory a frictionless market is a financial market without transaction costs. Friction is a type of market incompleteness. Every complete market is frictionless, but the converse does not

Quantitative behavioral finance

Quantitative behavioral finance is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. The research can be grouped into t

Stochastic volatility

In statistics, stochastic volatility models are those in which the variance of a stochastic process is itself randomly distributed. They are used in the field of mathematical finance to evaluate deriv

Adjusted current yield

The adjusted current yield is a financial term used in reference to bonds and other fixed-interest securities. It is closely related to the concept of current yield. The adjusted current yield is give

Skewness risk

Skewness risk in financial modeling is the risk that results when observations are not spread symmetrically around an average value, but instead have a skewed distribution. As a result, the mean and t

Lattice model (finance)

In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option,

Alternative beta

Alternative beta is the concept of managing volatile "alternative investments", often through the use of hedge funds. Alternative beta is often also referred to as "alternative risk premia". Researche

Vanna–Volga pricing

The Vanna–Volga method is a mathematical tool used in finance. It is a technique for pricing first-generation exotic options in foreign exchange market (FX) derivatives.

Indifference price

In finance, indifference pricing is a method of pricing financial securities with regard to a utility function. The indifference price is also known as the reservation price or private valuation. In p

Nelson-Siegel

No description available.

Rate of return

In finance, return is a profit on an investment. It comprises any change in value of the investment, and/or cash flows (or securities, or other investments) which the investor receives from that inves

Rate of return on a portfolio

The rate of return on a portfolio is the ratio of the net gain or loss (which is the total of net income, foreign currency appreciation and capital gain, whether realized or not) which a portfolio gen

Financial econometrics

Financial econometrics is the application of statistical methods to financial market data. Financial econometrics is a branch of financial economics, in the field of economics. Areas of study include

Future value

Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest

Smith–Wilson method

The Smith–Wilson method is a method for extrapolating forward rates. It is recommended by EIOPA to extrapolate interest rates. It was introduced in 2000 by A. Smith and T. Wilson for .

Delta neutral

In finance, delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged when small changes occur in the value of the underlying security. Such a

Net present value

The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and

Exotic option

In finance, an exotic option is an option which has features making it more complex than commonly traded vanilla options. Like the more general exotic derivatives they may have several triggers relati

Roll-Geske-Whaley

No description available.

Spoofing (finance)

Spoofing is a disruptive algorithmic trading activity employed by traders to outpace other market participants and to manipulate markets. Spoofers feign interest in trading futures, stocks and other p

Simple Dietz method

The simple Dietz method is a means of measuring historical investment portfolio performance, compensating for external flows into/out of the portfolio during the period. The formula for the simple Die

Scenario optimization

The scenario approach or scenario optimization approach is a technique for obtaining solutions to robust optimization and problems based on a sample of the constraints. It also relates to inductive re

Theoretical Finance

No description available.

Master of Quantitative Finance

A master's degree in quantitative finance concerns the application of mathematical methods to the solution of problems in financial economics. There are several like-titled degrees which may further f

International Association for Quantitative Finance

The International Association for Quantitative Finance (IAQF), formerly the International Association of Financial Engineers (IAFE), is a non-profit professional society dedicated to fostering the fie

Compound interest

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on principal plus interest. It is the result of reinvesting interest, or adding it

Consistent pricing process

A consistent pricing process (CPP) is any representation of (frictionless) "prices" of assets in a market. It is a stochastic process in a filtered probability space such that at time the component ca

Rational pricing

Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will

Trinomial tree

The trinomial tree is a lattice-based computational model used in financial mathematics to price options. It was developed by Phelim Boyle in 1986. It is an extension of the binomial options pricing m

Fugit

In mathematical finance, fugit is the expected (or optimal) date to exercise an American- or Bermudan option. It is useful for hedging purposes here; see Greeks (finance) and Optimal stopping § Option

Edgeworth binomial tree

No description available.

Admissible trading strategy

In finance, an admissible trading strategy or admissible strategy is any trading strategy with wealth almost surely bounded from below. In particular, an admissible trading strategy precludes unhedged

Brace-Gatarek-Musiela model

No description available.

Late fee

A late fee, also known as an overdue fine, late fine, or past due fee, is a charge fined against a client by a company or organization for not paying a bill or returning a rented or borrowed item by i

Credit valuation adjustment

Credit valuation adjustments (CVAs) are accounting adjustments made to reserve a portion of profits on uncollateralized financial derivatives. They are charged by a bank to a risky (capable of default

Holding period return

In finance, holding period return (HPR) is the return on an asset or portfolio over the whole period during which it was held. It is one of the simplest and most important measures of investment perfo

Hawkes process

In probability theory and statistics, a Hawkes process, named after Alan G. Hawkes, is a kind of self-exciting point process. It has arrivals at times where the infinitesimal probability of an arrival

Weighted average return on assets

The weighted average return on assets, or WARA, is the collective rates of return on the various types of tangible and intangible assets of a company. The presumption of a WARA is that each class of a

Korn–Kreer–Lenssen model

The Korn–Kreer–Lenssen model (KKL model) is a discrete trinomial model proposed in 1998 by Ralf Korn, Markus Kreer and Mark Lenssen to model illiquid securities and to value financial derivatives on t

Complete market

In economics, a complete market (aka Arrow-Debreu market or complete system of markets) is a market with two conditions: 1.
* Negligible transaction costs and therefore also perfect information, 2.

Annual percentage rate

The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just

Kurtosis risk

In statistics and decision theory, kurtosis risk is the risk that results when a statistical model assumes the normal distribution, but is applied to observations that have a tendency to occasionally

Self-financing portfolio

In financial mathematics, a self-financing portfolio is a portfolio having the feature that, if there is no exogenous infusion or withdrawal of money, the purchase of a new asset must be financed by t

Absorbing barrier (finance)

No description available.

Econophysics

Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertai

Bid–ask matrix

The bid–ask matrix is a matrix with elements corresponding with exchange rates between the assets. These rates are in physical units (e.g. number of stocks) and not with respect to any numeraire. The

Present value

In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually les

Alpha Profiling

Alpha profiling is an application of machine learning to optimize the execution of large orders in financial markets by means of algorithmic trading. The purpose is to select an execution schedule tha

Crank–Nicolson method

In numerical analysis, the Crank–Nicolson method is a finite difference method used for numerically solving the heat equation and similar partial differential equations. It is a second-order method in

Statistical finance

Statistical finance, is the application of econophysics to financial markets. Instead of the normative roots of finance, it uses a positivist framework. It includes exemplars from statistical physics

Malliavin calculus

In probability theory and related fields, Malliavin calculus is a set of mathematical techniques and ideas that extend the mathematical field of calculus of variations from deterministic functions to

Viscosity solution

In mathematics, the viscosity solution concept was introduced in the early 1980s by Pierre-Louis Lions and Michael G. Crandall as a generalization of the classical concept of what is meant by a 'solut

Rising moving average

The rising moving average is a technical indicator used in stock market trading. Most commonly found visually, the pattern is spotted with a moving average overlay on a stock chart or price series. Wh

Perpetuity

(For the sculpture, see Perpetuity (sculpture).) A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For ex

State price density

No description available.

Short-rate model

A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usu

Heston model

In finance, the Heston model, named after Steven L. Heston, is a mathematical model that describes the evolution of the volatility of an underlying asset. It is a stochastic volatility model: such a m

Undervalued stock

An undervalued stock is defined as a stock that is selling at a price significantly below what is assumed to be its intrinsic value. For example, if a stock is selling for $50, but it is worth $100 ba

Convexity correction

No description available.

Implied trinomial tree

No description available.

Separation property (finance)

A separation property is a crucial element of modern portfolio theory that gives a portfolio manager the ability to separate the process of satisfying investing clients' assets into two separate parts

Range accrual

In finance, a range accrual is a type of derivative product very popular among structured note investors. It is estimated that more than US$160 billion of Range Accrual indexed on interest rates only

XVA

An X-Value Adjustment (XVA, xVA) is an umbrella term referring to a number of different “valuation adjustments” that banks must make when assessing the value of derivative contracts that they have ent

Mathematical finance

Mathematical finance, also known as quantitative finance and financial mathematics, is a field of applied mathematics, concerned with mathematical modeling of financial markets. In general, there exis

Quantitative analysis (finance)

Quantitative analysis is the use of mathematical and statistical methods in finance and investment management. Those working in the field are quantitative analysts (quants). Quants tend to specialize

Low-volatility anomaly

In investing and finance, the low-volatility anomaly is the observation that low-volatility stocks have higher returns than high-volatility stocks in most markets studied. This is an example of a stoc

Efficient frontier

In modern portfolio theory, the efficient frontier (or portfolio frontier) is an investment portfolio which occupies the "efficient" parts of the risk–return spectrum. Formally, it is the set of portf

Counterparty credit risk

No description available.

Modified internal rate of return

The modified internal rate of return (MIRR) is a financial measure of an investment's attractiveness. It is used in capital budgeting to rank alternative investments of equal size. As the name implies

VIX

VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index o

Incomplete markets

In economics, incomplete markets are markets in which there does not exist an Arrow–Debreu security for every possible state of nature. In contrast with complete markets, this shortage of securities w

Discount points

Discount points, also called mortgage points or simply points, are a form of pre-paid interest available in the United States when arranging a mortgage. One point equals one percent of the loan amount

Time consistency (finance)

Time consistency in the context of finance is the property of not having mutually contradictory evaluations of risk at different points in time. This property implies that if investment A is considere

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