Marking To Market and its impact on Risk in Trading: All You Need to Know
The Whispering Void What is Marking to Market? Marking to market involves valuing an instrument based on its current market price. If you buy an option because you believe it is cheap, the…
Hedging in Quantitative Finance: All You Need to Know
What is Hedging? In its broadest definition, ‘hedging’ involves reducing risk by leveraging correlations or lack thereof between hazardous investments. Hedging aims to optimise risk/return ratios. The standard Modern Portfolio…
Cointegration in Finance: All You Need To Know
What is Cointegration? Cointegration of two time series refers to a linear combination with a constant mean and standard deviation. The two series remain consistent. Cointegration is an effective tool…
Capital Asset Pricing Model: All You Need To Know
What is Capital Asset Pricing Model? The Capital Asset Pricing Model (CAPM) compares the returns on individual assets or portfolios to the market as a whole. It introduces the ideas…
What is a Coherent Risk Measure: All You Need To Know
Introduction to Coherent Risk Measure A risk measure is called a coherent risk measure if it meets simple mathematical requirements. Some prominent metrics lack sub-additivity, which means that combining two…
CrashMetrics In Finance: The Ultimate Tutorial You Should Know
What is CrashMetrics? CrashMetrics is a stress-testing methodology that evaluates portfolio performance during significant market swings. Similar to Capital Asset Pricing Model (CAPM), it only applies to significant changes in…
Value At Risk in Finance: All You Need To Know
What is Value At Risk Value at Risk (VaR) measures the potential loss from a position, portfolio, desk, or bank. VaR refers to the greatest loss an investment can incur…
What is Risk in Finance? All You Need To Know
Simple Definition of Risk Simply put, risk is the potential for injury or loss. In the context of finance, risk alludes to the potential for financial loss on investments. A…
Arbitrage in Quantitative Finance: All You Need To Know
What is Arbitrage? Arbitrage is making a sure profit in excess of the risk-free rate of return. Quantitative finance terminology defines an arbitrage opportunity as a portfolio with zero value…