Quant Curious

Discussion in 'Trading' started by Xuanxue, Jul 13, 2008.

  1. Xuanxue


    "We live in a society exquisitely dependent on science and technology, in which hardly anyone knows anything about science and technology."

    Carl Sagan

    I'm content in my non-professional trading capacity, but I've been stricken by the fundamental love bug. Three very concrete constants that limit me, however, are: 1) I'll never set foot in an university, not even to utilize the lavatory; 2) I know not which course of finance-specific mathematical self-study to persue to understand and formulate risk-neutral and statistical, probabilistic pricing and evaluation models; 2a) My exposure to formulaic math is minimal. We're talking probably retaking algebra 1 is essential, & I stopped there in school, admittedly.

    Help plot a course of study for me wont you?
  2. Xuanxue


    You'll tire of seeing me bump this. I'll wear you down. Believe it.
  3. What's the problem with university classes? Are you in the US?

    One thing I like here is that pretty much anyone can have a go at some classes - even if you did miserably in high school -- i.e. community college to brush up on basics.

    If you want free materials, How about MIT OpenCourseware?


    18.05 Introduction to Probability and Statistics
    18.098 / 6.099 Street-Fighting Mathematics
  4. You don't need to have a degree, tho plan to take just as long or longer to be successful.

    I suggest starting with the best market teacher that I know of. http://youtube.com/user/SnP500Trader
    Subscribe and watch his videos - go back and watch them all! Ask him questions and he will answer.

    He is a pro who helps beginners and experienced alike.

    Consider this your first step.

    Best to you!

  5. Xuanxue


    I'd rather compile a list of university textbooks and inquire google when or if I find my back to the wall than amass mounds of debt being forced to study subjects I care not a jot about and be around products of a failed liberal education experiment. What consitutes as "well-rounded" these days I'll be honest churns my stomach.

    Yes, I'm a Yank.

    Excellent. Thank you. One quick question though: Since statistics requires at least a modicum of exposure to calculus, which I haven't been, what's the bare-bones minimum course of study to grasp calculus? The whole gammut? I'd rather skip geometry and hit algebra 1&2, time series analysis and trig if I can help it. But would you recommend doing so?
  6. Xuanxue


    I trade for a living, and do well. I want to invest now. Rather, I want to learn how to invest now and do so when or if there's a reason to. lol

    Many thanks for your consideration, though. I'll listen in on the channel maybe.
  7. I'm not a math guru but I've taken a couple of semesters of calc. There is a teeny bit of theory in early calc but most of it is just a bag of tricks that teach you how to take derivatives and integrals of various functions. I think you can get a pretty good understanding of stats without calc. In fact, many math departments don't even teach any stats to math majors.

    You can understand what a linear regression is and what the values mean if you run one in excel (what the R-squared value means, the X coefficient, etc). You can understand what a probability distribution is. A rough idea relating these things to trading:
    - A stock has a Beta, which is generally how the stock moves with the overall market. For example, A stock with a Beta of 0.5 would generally go up half of what the overall market does, this is the X coefficient of a regression run with the market (S&P500?) as independent variable and the stock as dependent variable
    - Beta can also refer to how one stock is related with another stock, which is used to make a cross-hedge Beta
    - If you know how a stock's prices are distributed, you can generate a bunch of random numbers that mimic that distribution and <gasp> you've made a Monte-Carlo Simulation. This sounds really impressive but is fairly simple..

    You can apply stuff like that to pairs trading etc.

    Or let's say you want to buy/sell a stock but you want to cancel out how the overall market moves influence your position. You can calculate the cross-hedge Beta of a stock with it's sector ETF or a broader market ETF. This gives you the proportion of how much of the ETF to buy/sell given how much of the stock you buy/sell.

    The hedges aren't perfect, but hopefully the R-squared value or other diagnostics give you an idea of how good the linear regression fits.