Quant Insider on LinkedIn: Quant Trader Interview Experience at a Proprietary Trading firm in Chicago… | 14 comments (2024)

This paper proposes a new method to analyze the corporate bond market using synthetic options created from credit default swap (CDS) options called CDX swaptions.Here's a breakdown of the key points:The Problem:The corporate bond market lacks actively traded options, making it difficult to understand its dynamics.The Solution:This paper creates synthetic options on a corporate bond index by exploiting CDX swaptions.Extracting Market Insights:Volatility Measure: The Corporate Bond VIX (CBVIX):Similar to the VIX for the stock market, the CBVIX is a volatility measure derived from the prices of synthetic corporate bond options. It reflects the market's expectation of future volatility in the corporate bond market.Variance Risk Premium:This metric reveals the extra compensation investors demand for taking on volatility risk in the corporate bond market. The paper finds that this premium is often positive and can even predict future bond and equity returns.Higher-Order Moments:By analyzing synthetic options, the study goes beyond just volatility. It estimates higher-order moments like skewness (lopsidedness) and kurtosis (fat tails) of the corporate bond index distribution. These moments provide a more nuanced picture of potential risks and returns.Credit Risk Model Validation:The paper highlights how the information extracted from synthetic options can be used to assess the accuracy of credit risk models. These models attempt to simulate the behavior of corporate bonds and equity issued by the same company. By comparing the relationship between the CBVIX and the equity VIX with predictions from a credit risk model, researchers can evaluate the model's validity.Overall, this paper offers a new approach to understanding the corporate bond market by leveraging synthetic options derived from CDX swaptions. Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Kickstart your Quant Interview PrepCheck out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte, Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projectsbased on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)Quant Insider Career Catalyst is your guide to all interview prep tips, preparation roadmap and job application strategies (https://lnkd.in/gVhA4tNG)Checkout our Course on Machine Learning for Finance -https://lnkd.in/eyXnPRwzUse Coupon code - "EARLYBIRD20" for 20%off on the MLFin courseFor more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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Quant Resume Book 2024 - NYU (FREE Quant Resume Samples)It will give you insights into making a perfect Quant Resume by throwing light on following key aspects :- Experience and Skillsets required- Coursework and certifications- Project ideas and complexity- Structuring of Content (Layout, Design)- Action Verbs for ResumeWant more such Resume Books?Here's the link to Princeton MFE Resume Book 2023 : https://lnkd.in/gZGtxaxwDo share within your network!Kickstart your Quant Interview Prep with Quant Insider.Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services.Check out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle of Interview Byte, Quantopia Library, and Quant Insider Project Handbook with Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbook has 10 industry-oriented projects based on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)For more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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Aren't Quantum walks better than widely accepted Random walks, in capturing market price behaviour? 1. Random Walks vs. Quantum Walks:Random Walk: Represented by a Markov chain with a state space (positions) and a transition matrix (P). P(x, y) denotes the probability of transitioning from state x to state y in one step. The probability distribution after n steps can be calculated as s^(n+1) = P * s^n, where s is the initial state vector, leading to a Gaussian distribution for large nQuantum Walk: Defined in a Hilbert space, which combines the position and spin state of the particle. The state of the particle is a complex vector (ket vector) representing a superposition of all possible positions.Coin Operator (C): A unitary operator acting on the spin state, determining the "direction" (up/down) for the conditional shift. The Hadamard gate (H) is a common choice for a fair coin.Conditional Shift Operator (S): Another unitary operator that performs a shift in position (+1 for up spin, -1 for down spin) based on the particle's spin state.2. Mathematical Framework:The evolution of a quantum walk after one step can be described by a unitary operator U = S(C ⊗ I), where:U: Overall unitary operator for the quantum walk step.S: Conditional shift operator.C: Coin operator.⊗: Tensor product (combines spin and position states).I: Identity operator (acts trivially on the position state).3. Impact of Interference:Due to superposition, the probability of finding the particle in a specific position is obtained by calculating the squared absolute value of the corresponding element in the state vector after applying U multiple times. This can lead to interference effects:Constructive Interference: When amplitudes from different paths add up, enhancing the probability of finding the particle in specific positions. Destructive Interference: When amplitudes from different paths cancel each other out, reducing the probability of finding the particle in specific positions.These interference effects cause the probability distribution of a quantum walk to deviate significantly from the Gaussian distribution of a classical random walk.4. Faster Spreading: Exhibit ballistic spreading, meaning the expected distance from the origin grows quadratically with the number of steps (∝ N) compared to the classical walk's square root dependence (∝ √N). This faster spreading arises due to the ability of the particle to explore multiple paths simultaneously through superposition.Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Check out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte(500+ questions), Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.Quantopia Library for building your domain knowledge and technical skills- (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projects(https://lnkd.in/gWBEn78U)

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It's all good, till you are creating alpha with high Sharp strategies Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Kickstart your Quant Interview PrepCheck out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte, Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projectsbased on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)Quant Insider Career Catalyst is your guide to all interview prep tips, preparation roadmap and job application strategies (https://lnkd.in/gVhA4tNG)Checkout our Course on Machine Learning for Finance -https://lnkd.in/eyXnPRwzUse Coupon code - "EARLYBIRD20" for 20%off on the MLFin courseFor more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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Quantitative Strategies Notes by Goldman Sachs - Trading and Hedging Local VolatilityThese note outline a methodology for hedging and trading index volatilities.Topics Covered :- Implied and Local Volatilities- Analogy Between Local Volatilities and Forward Rates- Gadgets for Interest Rates- Hedging Against Forward Rate Changes- Hedging Local Volatilities- An Example Using Finite Volatility GadgetsHoli Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Kickstart your Quant Interview PrepCheck out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte, Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projectsbased on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)Quant Insider Career Catalyst is your guide to all interview prep tips, preparation roadmap and job application strategies (https://lnkd.in/gVhA4tNG)Checkout our Course on Machine Learning for Finance -https://lnkd.in/eyXnPRwzUse Coupon code - "EARLYBIRD20" for 20%off on the MLFin courseFor more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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Yes bro, I'm going on a paid vacation by my company to Disneyland Tokyo.How do you know I work at Citadel? 😬 Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Kickstart your Quant Interview PrepCheck out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte, Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projectsbased on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)Quant Insider Career Catalyst is your guide to all interview prep tips, preparation roadmap and job application strategies (https://lnkd.in/gVhA4tNG)Checkout our Course on Machine Learning for Finance -https://lnkd.in/eyXnPRwzUse Coupon code - "EARLYBIRD20" for 20%off on the MLFin courseFor more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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"Should I choose Mathematical Finance or Computational Finance?" One of our mentees asked.He was confused which Masters program to opt. "What is the difference between the two?".Here's a clear explanation of the difference between Mathematical Finance and Computational Finance.Mathematical finance leans more towards the theoretical side. It's about developing and analyzing mathematical models to understand financial markets and instruments. This involves applying concepts from probability, statistics, calculus, and more to derive formulas and theorems that explain financial phenomena.Whereas, Computational finance takes those models from mathematical finance and puts them into action. It focuses on using computers and algorithms to implement these models and solve practical problems. This involves techniques like simulations, numerical methods, and coding to build software tools that can price financial products, manage risk, and make investment decisions.Think of it this way, Mathematical finance is the architect who designs the blueprint for a financial model. While, computational finance is the engineer who builds and tests the actual structure. However, there's a lot of overlap between the two.Let's understand better through an example from the field of Quant Finance.➡️ Application of Mathematical Finance: Algorithmic trading strategies rely on mathematical models to identify trading opportunities in the market. These models might involve statistical analysis of historical data, technical indicators, or even machine learning algorithms to find patterns and predict price movements.➡️ Application of Computational Finance: The mathematical models and trading strategies are programmed into trading algorithms. These algorithms can then be used to automate the trading process, making high-frequency trades based on real-time market data and pre-defined rules.Another simple analogy is, Model Development = Mathematical Finance and Model Implementation = Computational Finance.Holi Sale - Use Coupon Code "QIHOLI30" to get 30% off on all our Products and services,Kickstart your Quant Interview PrepCheck out Quant Insider Stack -https://lnkd.in/gcfdUEfgA Bundle ofInterview Byte, Quantopia Library, and Quant Insider Project Handbookwith Bonus Resources.‘Interview Byte’ contains 1000+ Interview questions (https://lnkd.in/gkqcrrKf)Quantopia Library is the goldmine for building your domain knowledge and technical skills. (https://lnkd.in/geThBB4d)Quant Insider Project Handbookhas10 industry-oriented projectsbased on challenges conducted by Top HFTs and Hedge Funds.(https://lnkd.in/gWBEn78U)Quant Insider Career Catalyst is your guide to all interview prep tips, preparation roadmap and job application strategies (https://lnkd.in/gVhA4tNG)For more quant finance memes follow us on Instagram - Quant Insider (https://lnkd.in/gfjc4hBu)

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