Quants Flashcards
What is the total probability formula?
P(A) = P(AB) + P(ABc)
Bc is complement to B
How to calc degrees of freedom?
Df = 1 - n
How to find confidence interval?
1) Find Df
2) Find confidence range from t-distribution and Df
3) Use formula:
Mean +/- t-stat x dev/root n
How to calc market determined interest rate?
Mkt Det int = Risk free + inflation premium + risk premiums
How to calc z-score? Also called standardizing
Z = (observation - mean) / StD
Also called standardizing
How to calc Standard deviation?
root(variance)
Parametric vs. non-parametric
Para = assumes defined parameters
What is Chebyshev’s inequality?
Chebyshev’s = % in k StDs = 1 - (1 / k^2)
How to calc holding period return?
HPR = (P1 - P2 + D1) / P0
normal return
Calc odds for Z
OddsZ = P(Z) / 1 - P(Z)
Calc portfolio StD
Portfolio StD = [ (Wa^2)(StDa^2)(Ra) + (Wb^2)(StDb^2)(Rb) + 2(Wa)(Wb)(Covar) ] ^0.5
How to calc geometric mean return?
Geometric = nRoot (1 + Rn) - 1
Which way is a lognormal distribution skewed?
Right (positively/hump to the left)
How to calc Safety First Ratio?
SFRatio = (Expected Return - Threshold Return) / StD
What is the Money weighted return also known as?
IRR
What’s Bayes Formula?
P(A | B) = [P(B | A) x P(A)] / P(B)
How to calc standard error?
Standard error = PopStD / nRoot
How to calc Bank Discount Yield?
BDY = (D/F) x (360/t)
What is a type 1 error? Type 2?
Type 1 = rejecting a true hypothesis
Type 2 = Failing to reject a false
What is the covariance formula?
How to find on calc?
Covar = JointProbA (Ra - ERa)(Rb - ERb) + JointProbB (Rb - ERa)(Ra - ERb)
Or
Covar = (Correlation)(StDa)(StDb)
CAN FIND ON CALC
Data function
Sigma = StD
Correlation = r
What does a wider confidence interval mean?
More confidence
How to calc Sharpe Ratio?
Sharpe = (mean return portfolio - mean return Rf) / Portfolio StD