13

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

There are "perpetual" bonds and preferred shares that are traded in the corporate credit markets that exactly match your conditions above. They are recorded in the 10-K at notional value $X$. The "close-out" feature is an embedded call. You should assume your favorite stochastic interest rate (and/or credit) model and run a PDE solver, tree, or other grid ...


8

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

I know this is probably a naive answer, but when I started doing data analysis for personal trading I looked for something much faster than SQL. I program in C++ and I found that HDF5 was the answer to all my problems http://www.hdfgroup.org/HDF5/ It's not accounting oriented, but the nice thing about it is that you can do almost anything with it and it is ...


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 ...


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

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

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

This is the framework for what you need to do, depending on whether you'll be following IFRS, GAAP, or some bogus Groupon accounting method will decide what rules/methods you'll have to follow. What you want to create are contra accounts for each. This works similar to a "bad debt expense" in accounts receivable. You need to estimate the probability that ...


3

I have to think that there are a lot of very fast, very optimized special-purpose accounting engines out there filling this role. Yes and no. I do not think you are high volume at all - you just have a corporate-level server for the database, not a cheap low-end hosting. I do about 2000 transactions per second on a SQL Server with a mid-range database. ...


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 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

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 ...


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

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'...


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 ...


1

Here the depreciation & amortization expenses are not just displayed as separate items. Rather, they are probably in this case included in Selling, general and administrative expenses, as well as Cost of goods sold -items. One of the possible reasons for not displaying depreciation as a separate item could be that it is natural to allocate the ...


1

Surely you have to keep $150 in your account against the short sale, all of which you lose on the close out.


1

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


1

Your accounting identity: " issued shares = outstanding shares + treasury shares" is correct, however you are forgetting that treasury shares are registered with a negative sign on balance sheet. So that's why issued shares are lower than outstanding shares.


1

Apart from the answer above, which gives you the historic context, the usual way accountants think about it: The fundamental accounting equation is: Assets = Liabilities + Equity Or equivalently Assets = Liabilities + Retained Earnings + Net Income Assets = Liabilities + RE + Income/Sales/Revenue – Expenses You increase LHS with debits and RHS with credits....


1

Just found this: https://www.quandl.com/data/SF0/documentation/about BOOMSHAKALA! Includes R (amongst a lot of others) and a full db csv download option. https://www.quandl.com/tools/full-list


1

You can pull Financial Statement (Income Statement, Balance Sheet, and Statement of Cash Flows) data from Google Finance with the getFinancials function in the quantmod R package. > library(quantmod) > getFinancials('IBM') > head(viewFin(IBM.f, type = 'IS')) Annual Income Statement for IBM 2014-12-31 2013-12-...


1

A quant may find accounting useful occasionally but it is really tangential knowledge. I would not consider typical financial or managerial accounting as pre requisites for a Quant Fin program. That said, certain quants in fixed income or credit do end up dealing with intricacy of cash flows. Accounting background will help in those scenarios.


Only top voted, non community-wiki answers of a minimum length are eligible