Questions tagged [terminology]

For questions about words, phrases and definitions that are specific to quantitative finance.

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1answer
97 views

Which portfolio is more “diversified”: the $\frac{1}{N}$, the MDP or the max decorrelation?

Equally-weighted portfolio: weights each asset the same $w_i = 1/N$ Maximum diversification portfolio: maximizes the ratio, $\frac{w' \sigma}{\sqrt{w' \Sigma w}}$ Maximum decorrelation portfolio: ...
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3answers
284 views

Backtesting of Risk models

I am wondering if there is any difference between 2 terms call model backtesting and model validation from the perspective of <...
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1answer
116 views

Does this volatility-like measure have a name?

So, basically I'm looking at {=SQRT(AVERAGE((R1:R100)^2))}, or in words: the square root of the average of squared daily returns. Is there a nice simple term/name ...
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0answers
35 views

Slope of Term Structure of Interest Rates

I am trying to understand the terms "flat", "upward-sloping", and "downward-sloping" term structure of interest rates. My understanding is as follows: Consider zero-coupon bondts of differing ...
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0answers
14 views

Term for manipulating revenue allocation?

I am trying to remember the term for when revenue allocation is essentially manipulated. Example: An organization receives a grant that restricts its use. The organization allocates this fund for ...
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0answers
145 views

First principles in Finance

Every so often I hear people referring to the term "first principles". It seems to me that this term does not necessarily have a universally accepted connotation in Finance. Here is the general ...
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3answers
989 views

Definition of the field YAS_RISK for bonds on Bloomberg terminal

The Bloomberg terminal has the following definition for the field YAS_RISK (SP190): "Indicates the price sensitivity given shifts in interest rates." It does not specify, however, what currency is ...
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1answer
86 views

Basic CDS terminology

new to CDS. Few basic questions on terminology and conventions: If I look at a Sovereign 5-year Chinese CDS then the graph shows a CDS value of 42.520. (Source). Is this 42.52 basis points? Is it ...
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1answer
90 views

What do I call the combination of two or more prices when doing arbitrage?

Suppose that I’m doing forex arbitrage between multiple currencies. A possible arbitrage strategy is to combine the currency prices in pairs and then evaluate if there is a chance to make a profit. ...
2
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1answer
112 views

Mathematical definition of a hedge?

For two given portfolios/trading strategies I want to know what criteria need to fulfilled in order to call the one portfolio a hedge to the other. In other words; what is the mathematical definition ...
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3answers
111 views

Does it make sense to refer to a forex pair as a 'financial asset'

I am working with the AUD/USD forex pair for my master's thesis (not in finance, hence I'm asking such a simple question). I am wondering if it's proper usage of the word 'financial asset' to refer to ...
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1answer
58 views

Why does Bjork use the term “hedging” to denote a replicating portfolio? [closed]

Reading Bjork's Arbitrage Theory in Continuous Time, he keeps using the word "hedging" and "hedging portfolio" when he's talking about replicating a derivative. Why? Is this other definition of the ...
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2answers
134 views

What do you call a group consisting of stocks, etfs, and futures?

In the command line interface to my program, the user can create a basket of stocks, etfs, or futures by saying: basket = stocks basket = etfs basket = futures basket = options But I ...
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2answers
1k views

What are flickering orders?

I am reading a paper for my bachelor thesis, Queuing Uncertainty in Limit Order Market by Bart Zhou Yueshen who is the new AP at INSEAD. In the abstract, the author said: "Flickering orders manifest ...
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2answers
302 views

What does it mean to 'receive outright'?

What does the following statement mean: "after accounting for levels of market volatility, we favor receiving outright in 6-month forward-starting 2-year swaps."? Specifically, what does "receiving ...
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1answer
129 views

Standard term for the components of a distribution waterfall?

I'm writing software for calculating distribution waterfalls. When displaying the results of a particular calculation, I want to show amounts that correspond to specific provisions in the relevant LPA....
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3answers
275 views

What noun is used to describe whether an option is call or put?

I'm not sure if this should be asked elsewhere, but it seems like a good place as any. Options have a strike price, they have an underlying instrument, and they have an expiry. They are also either ...
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1answer
211 views

A basic question about market jargon

What does it mean by DBR 4s of Jan4, 2037? I know the Jan4, 2037 is the maturity. How about DBR and 4s?
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2answers
287 views

Risk theory is a part of financial mathematics

In my program on Financial mathematics we studied such topics as pricing, portfolio management, risk theory (probability of ruin of an insurance company) etc. However, now I often see a line between "...
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3answers
33k views

What does the prefix PX stand for on a Bloomberg Terminal?

Regarding PX_LAST, PX_VOLUME etc... What does the "PX" prefix stand for?
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3answers
6k views

How to distinguish between different types of algorithmic trading

Algorithmic trading involves the use of algorithms to optimally execute trading instructions. Then there are algorithms which initiate trades, based on various quantitative strategies (e.g. pairs ...
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4answers
9k views

What is a stationary process?

How do you explain what a stationary process is? In the first place, what is meant by process, and then what does the process have to be like so it can be called stationary?
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4answers
1k views

Who has introduced the term 'vega' and why?

The sensitivity of the option value $V$ to volatility $\sigma$ (a.k.a. vega) is different from the other greeks. It is a derivative with respect to a parameter and not a variable. To quote from Paul ...