What is the risk-neutral measure?

Here is a short list of the most common 'big-concept' questions that I was asked throughout my years as a quant (whether coming from people on the trading floor, in control functions, or from newcomers to the team), in no particular order: What is the risk-neutral measure? What is arbitrage-free pricing? What is a change … Continue reading What is the risk-neutral measure?

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Experimentation in Art & non-deterministic grammars

One of my favourite abstract painters is Richard Diebenkorn. Click here to see an Art Blog which has a post on his most famous Ocean Park Series. Click here for a link to a blog showing one of the Dibenkorn's canvases in an NY apartment. In these sorts of works it is fascinating how you can see … Continue reading Experimentation in Art & non-deterministic grammars

Ito’s product and quotient rules as described by a trader

Ito's product and quotient rules are a corollary of the Ito lemma, and are one of the  most important parts of the stochastic-calculus toolkit. When I first started working as a quant I managed to find an alternative form for the rules which sits well in a Black-Scholes type of world and corresponds more closely … Continue reading Ito’s product and quotient rules as described by a trader

The power of notation in problem solving

It's trivial when you think about it: good mathematical notation is one way of making a problem easier to solve. In my introduction to advanced probability theory I put emphasis on how probability theory has developed a clever and natural way to describe the processes we deal with. If you think about it some more, … Continue reading The power of notation in problem solving