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Accounting is a vital skill if you end up in a managerial position, and unless your career goal is to always be a cog in someone else's clockwork, then you will eventually find yourself in a managerial/senior partnership position even through quant research. I still play a critical role in my firm's quant strategies team, but here's a few things I've had to ...


9

It seems logical to me to have a Financial accounting course in a quant program. Quants can have a lot of different occupations, from derivative pricing to quant analyst in a "research" (i.e. analysis) dept. of a broker, a risk dept., a fund (as an analyst or as a potfolio manager), or quant execution trader (the list is far longer). In the case of being ...


4

There are various kinds of "quants". If you are an equity quant building quantitative stock selection models using fundamentals such as price/earnings, EBITDA/EV, or especially accruals, then you should be knowledegable about accounting. If you become a fixed income derivatives quant, accounting is less important. Education should not be expected to prepare ...


4

An increase in working capital figure (current assets are greater than current liabilities) requires additional cash to be tied up in operations because an increase in current assets is a net outflow. In contrast, a decrease in working capital position means the firm has more cash available that can be used for other projects since an increase in current ...


4

Great question, this detail is often overlooked but keep in mind that the correct formula is: EPS = Net Income/Weighted average no. of shares So we have to consider the weight of each new issue of shares. The the additional issue period of (July 1 to Dec 31) has a weight of 6/12. I created a table in the link below to help visualize the problem. Hope it ...


4

Short answer: That is a common approach in empirical finance. The exclusion of financial firms is due to their business model, which is highly different from other companies. Fama/French (1992), p. 429 state: We exclude financial firms because the high leverage that is normal for these firms probably does not have the same meaning as for non-financial ...


3

Please look at the 16 December 2010 publication of the Basel III regulatory frameworks for capital and liquidity and the 13 January 2011 press release on the loss absorbency of capital at the point of non-viability and related FAQs "Basel III definition of capital - Frequently asked questions" like bcbs 211.


3

Deferred Revenue arises when the contract between you and your customer requires the customer to pay in advance of your delivering your products or services. i.e. you've been paid, now you owe the customer the work! Accrued Expenses represent expenses for which you will be reimbursed in the future. i.e. you are or will be owed money.


3

I hope this helps - the Core US Fundamentals database on Quandl (https://www.quandl.com/data/SF1) covers 6,500+ companies, point-in-time, inc/exc restatements, active/delisted, up to 11 years history, 101 indicators, expanding coverage, daily updates. There's data for balance sheets, income statements, cash flow etc.


2

Certain structural models of credit risk/default require some background in accounting, but not much. That these credit models are getting baked into the Basel regulations for CVA, CoCo bonds, and so on, makes it marginally more important to know. There's also an entire industry based on convertible bond and capital structure arbitrage where knowing ...


2

There are two reasons for a quant to know accounting. The first is that a fair number of "quant" problems are, or at least can be cast as, accounting problems. This includes time series or "non-parametric" analysis of accounting numbers. The second reason is that accounting numbers are sometimes faked, meaning that a quant has to be able to deconstruct ...


2

In the late middle ages when Accounting was invented in Italy (approx mid 1300s), they did not have the modern notation for negative numbers (which was introduced about 1481). They represented positive quantities by entering them on the left side of a T account (a process called a debit) and negative by entering them (without a negative sign, which I repeat ...


2

In general any OTC trade (in your case total return swap) between two parties (i.e. buyer - Party A and dealer - Party B) shall and would be driven off a legal document which sets out transaction details. In most of the cases such legal document would be ISDA Master agreement and it's annexes (if any). There should be a notion/definition of a "Calculation ...


2

A TRS is very rarely between Hedge fund 1 and Hedge fund 2 (how would they find each other?). Much more likely that it is between Hedge Fund 1 and a Dealer. In the latter case, one of the counterparties must act as Calculation Agent, and it is almost always the Dealer. The Calculation Agent has the responsibility of marking to market the asset, for the ...


2

I am not sure if all companies you are looking for will be listed there but SEC-filing entities must file their reports to EDGAR (Electronic Data Gathering, Analysis, and Retrieval system). This system is available for use by the general public. https://www.sec.gov/edgar/searchedgar/webusers.htm


2

Basically everything seems to be flawed including revenues and expenses. I have no idea what accounting standards you are following here, but I'd recommend you try and understand what you are actually calculating instead of throwing together more complex single items. Revenues: everything, that a business receives for its normal business activity; ...


2

Lots of ways to do this. Below is a pretty simple example: Side Position (Shares) Entry Price Current Price Open PnL Long 1000 100 90 -10,000 Short -1000 100 90 10,000 You don't need the Side and Position if you are going to use -ve values for Short positions. I just put ...


2

For acquisitions, NWC is current operating assets (excluding cash because it is a non operating asset) less current operating liabilities (excluding debt and debt like liabilities - which are non operating liabilities). In other words it's calculated on a cash free, debt free basis (common practice at Big 4 accounting firms). This calculation will give you ...


2

Vincent's answers summarizes everything. Although, why should accounting standards pose such a restriction on EPS calculation? New shares issued are weighted with the period outstanding till the end of the fiscal year. This modification is used, instead of the outstanding shares at the last day of the year, to reflect the real capital used to generate firm'...


2

This is a typical situation the credit card providers face so I will answer with their approach. Their billing cycle is usually monthly, so at the point of billing they would calculate the minimum repayment amount, which would be the monthly interest times the current balance plus a proportion of the current outstanding balance with some floor. In the ...


2

Annual Accounting Profit = Revenues -costs - depreciation Revenues =13000 Costs= 10000 Annual depreciation = 30000/10yrs = 3000 Therefore annual accounting profit =0 If you believe that the property market value will indeed depreciate like this, it doesn’t seem like a good investment.


2

I'm a UK Chartered Accountant and not a CPA but I will try add some colour to this. I just took a look at GS's Balance Sheet (https://www.goldmansachs.com/investor-relations/financials/current/10k/2019-10-k.pdf) and they do indeed report their liabilities with different maturities (deposits which are overnight borrowings are top as they are the shortest in ...


2

I'll try to give some views on this, I hope it helps bringing some closure to your question. You seem to relate consensus to "theoretical prices". I think this is a bit misleading. I view consensus as nothing more than the average view across the street for market factors, e.g. the correlation between the Korean KOSPI and the Spanish IBEX, the ...


2

Lucky for us, the method you’re describing is unnecessarily complicated. M&M state that distributions have no impact on firm value, so why would it in your model? Check out Valuation Models: An Issue of Accounting Theory by Stephen Penman. In it, he shows how the Free Cashflow model is only valid insofar as it matches the Dividend Discount model via ...


2

Ok so let’s say we have an asset on the balance sheet which is the market value of an unmargined derivative. A common procedure by banks is to assume this is financed by unsecured borrowing. Why ? I suppose there are two cases (a) the derivative has been hedged with a margined contract going in the opposite direction. In this case the margined contract is ...


2

From a pure accounting perspective under IFRS 9, there is no requirement like this for putting it on the balance sheet. Every derivative, regardless of margined or unmargined, gets posted to the balancesheet to its Fair Value. For uncollateralised derivatives, this means $FV = MtM("riskless") - XVA$, while for collateralised derivatives, it is best practice ...


1

HM Revenue & Customs has some lists of importers exporters that you can download... https://www.uktradeinfo.com/Statistics/Pages/DataDownloads.aspx But I am not sure if they have any easy way to browse them apart from downloading the files.


1

In the US, Prime Brokers will generally follow either Reg T rules or Portfolio Margining rules. For Portfolio Margining accounts, assuming the account is somewhat diversified (not everything in one stock), they will generally allow 4 times gross leverage on the overall portfolio ($\sum_i |w_i|<=4$). This is negotiable and you may be able to get a higher ...


1

The after-tax charge will most likely be a one-off charge of which the after-tax value is $6.2b, for example through an impairment.


1

Don't look at the structure as consisting of 3 parts (i.e. a forward plus a cap plus a floor) look at it as 2 options one bought with the Floor as Strike1 and one sold with the Cap as Strike2. That way the time value changes of bought and sold option should offset - which by the way they will already do right now even wit the forward since that does not have ...


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