Episode 413 - Understanding Quantitative Finance and Strategies

This source introduces the field of quantitative finance, explaining how professionals known as quants employ mathematics, data, and artificial intelligence to make investment decisions and generate profits regardless of market direction. It outlines core concepts like returns (percentage change in price), risk (standard deviation), and correlation, illustrating how they are used to model stock price movements and create a visual representation using normal distributions (bell curves). The explanation progresses to demonstrating strategies like pair trading and portfolio construction through mean-variance optimisation, highlighting the use of vectors and matrices to represent data and the role of objective functions and constraints. Finally, it touches upon modern quantitative techniques such as using alternative data and high-frequency trading to identify patterns and execute profitable trades.


Source :

Socratica

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