Quants

Question 1

What is the total probability formula?

Answer 1

P(A) = P(AB) + P(ABc)

Bc is complement to B

Question 2

How to calc degrees of freedom?

Answer 2

Df = 1 - n

Question 3

How to find confidence interval?

Answer 3

1) Find Df
2) Find confidence range from t-distribution and Df
3) Use formula:
Mean +/- t-stat x dev/root n

Question 4

How to calc market determined interest rate?

Answer 4

Mkt Det int = Risk free + inflation premium + risk premiums

Question 5

How to calc z-score? Also called standardizing

Answer 5

Z = (observation - mean) / StD

Also called standardizing

Question 6

How to calc Standard deviation?

Answer 6

root(variance)

Question 7

Parametric vs. non-parametric

Answer 7

Para = assumes defined parameters

Question 8

What is Chebyshev’s inequality?

Answer 8

Chebyshev’s = % in k StDs = 1 - (1 / k^2)

Question 9

How to calc holding period return?

Answer 9

HPR = (P1 - P2 + D1) / P0

normal return

Question 10

Calc odds for Z

Answer 10

OddsZ = P(Z) / 1 - P(Z)

Question 11

Calc portfolio StD

Answer 11

Portfolio StD = [ (Wa^2)(StDa^2)(Ra) + (Wb^2)(StDb^2)(Rb) + 2(Wa)(Wb)(Covar) ] ^0.5

Question 12

How to calc geometric mean return?

Answer 12

Geometric = nRoot (1 + Rn) - 1

Question 13

Which way is a lognormal distribution skewed?

Answer 13

Right (positively/hump to the left)

Question 14

How to calc Safety First Ratio?

Answer 14

SFRatio = (Expected Return - Threshold Return) / StD

Question 15

What is the Money weighted return also known as?

Answer 15

IRR

Question 16

What’s Bayes Formula?

Answer 16

P(A | B) = [P(B | A) x P(A)] / P(B)

Question 17

How to calc standard error?

Answer 17

Standard error = PopStD / nRoot

Question 18

How to calc Bank Discount Yield?

Answer 18

BDY = (D/F) x (360/t)

Question 19

What is a type 1 error? Type 2?

Answer 19

Type 1 = rejecting a true hypothesis

Type 2 = Failing to reject a false

Question 20

What is the covariance formula?

How to find on calc?

Answer 20

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

Question 21

What does a wider confidence interval mean?

Answer 21

More confidence

Question 22

How to calc Sharpe Ratio?

Answer 22

Sharpe = (mean return portfolio - mean return Rf) / Portfolio StD