25
votes
Accepted
Shape and geometry of the yield curve
You can't make any concrete statements about the monotonicity, convexity or even sign of the yield curve.
Yields are almost always positive, and in the past (2007 and earlier) you could find people ...
- 5,808
19
votes
Quantifying climate change risk
Here are some resources that I found useful when learning about this subject, in which I'm very interested. (Some may be more general ESG than just just climate.)
Citigroup. Environmental and Social ...
- 11.7k
17
votes
Accepted
How much can be said about the Greeks without picking a model?
Find the topic of model-independent properties of option prices very interesting as well. Here are some results that I am aware of and the respective references in the literature. Some are already ...
- 5,949
16
votes
Accepted
Local vol, stochastic vol, implied vol
Along with Gatheral's book, I'd recommend reading Lorenzo Bergomi's "Stochastic Volatility Modelling". The first 2 chapters are available for download on his website. That being said, let me try to ...
- 14.5k
11
votes
Self study references for a Mathematician
In general, quantitative finance requires mathematics, finance, and numerical programming. The mix of the three and the areas of focus within the three will depend on the particular area you intend ...
- 191
11
votes
Asset pricing textbooks
I discuss the books I mentioned in the comments. They all deal with standard (theoretical) asset pricing (starting with one period utility maximisation and then branch off). Other books like Björk, ...
- 15.1k
10
votes
Book/ Articles recommendation for Volatility models
I have also currently started to learn about the subject. This is some of the material I have encountered:
Many people recommend the book "The Volatility Surface: A Practitioner's Guide" by ...
- 661
8
votes
Accepted
Why is GARCH more often applied in risk analysis than stochastics?
Stochastics are usually applied in the field of derivatives pricing. In this setting the task is to price a derivative such that it fits into the landscape of tradable instruments (no-arbitrage). We ...
- 13.6k
7
votes
Accepted
Why is volatility said to be persistent?
Two theoretical explanations regarding the long memory are given by:
The mixture of distributions hypothesis of Tauchen and Pitts (1983). Essentially this hypothesis states that trading volume and ...
- 2,542
7
votes
Statistics for quantitative finance
Tsay's Analysis of Financial Time Series should be what you're looking for.
- 106
7
votes
Something fundamentally different about cryptocurrencies?
Status of this answer: latest update July 7, 2022.
There is a new paper out which is quite interesting and which basically says that cryptocurrencies are indeed a new asset class, potentially useful ...
- 27.3k
7
votes
Most significant research articles for practical investors with research perspectives
A lot has happened since Markowitz and Sharpe. While their work is still considered foundational, the empirical/practical relevance of their models has been questioned by later work.
Here are a few ...
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6
votes
Statistics for quantitative finance
I think that "An Introduction to Statistical Learning: with Applications in R (Springer Texts in Statistics)" suggested by KarolisR could be useful but too much machine learning oriented. Moreover, ...
- 363
6
votes
Accepted
How do you check your option calculations?
1: Follow the calculations in The Complete Guide to Option Pricing Formulas. The book has many formulas, sample values and outputs. Highly recommended for validating your results. Apparently, this is ...
- 2,255
6
votes
Accepted
Expectation of two correlated processes?
Note that, as in this question, for $s\ge t\ge 0$,
\begin{align*}
n_s = e^{-a_n(s-t)}n_t + \int_t^s \theta_n(u)e^{-a_n(s-u)} du + \int_t^s \sigma_n e^{-a_n(s-u)} dW^n_u,
\end{align*}
and
\begin{align*...
- 21k
6
votes
Accepted
What are the books in which to study the basics of the derivative financial instruments?
As mentioned by @Adam, Stochastic Calculus for Finance by Shreve is a good start if you have a reasonably strong mathematical background. Volume I is simpler, as it presents derivative pricing methods ...
- 7,855
6
votes
Accepted
Does the rise in passive investing make the markets less efficient?
On more than a few occasions, I have attempted to extrapolate the current trend towards passive allocation to its logical conclusion: more passive allocation means more inefficiency.
I am not aware ...
- 2,985
6
votes
Reference books for interest rates modeling?
To understand the fundamentals of rates trading, I would begin by understanding the fundamentals of derivatives markets. Usually, it is easiest to understand the concepts through simple equity ...
- 704
6
votes
Asset pricing textbooks
I would recommend Cochrane as well.
Pros
Deals with both theoretical and empirical asset pricing.
Nice mix of intuition and math.
Cochrane has videos from his class on Asset Pricing on Youtube, so ...
- 186
6
votes
Good references on PNL explain?
I'm not aware of any great reference. However Peter Nash Effective product control: controlling for trading desks. Wiley (2018) chapter 10 Review of Mark-to-Market P&L is a good start. Andrew ...
- 11.7k
6
votes
Proof of Feller condition for CIR square root process. Any reference?
It is covered very nicely in Iain Clark's Foreign Exchange Option Pricing, A Practitioner’s Guide (pages 98-104). The book also contains references to the relevant literature including Feller's ...
- 6,174
6
votes
Accepted
CAPM yields very poor fit (low R-squared). Is that normal?
Question 1
There may be at least two reasons for this (aside from possible programming errors or poor data):
The model is actually a very poor approximation of reality, as Matthew Gunn indicates in ...
- 2,632
5
votes
FX Modeling references
Personally, I prefer the book Foreign Exchange Option Pricing by Iain Clark and the book FX Options and Smile Risk by Antonio Castagna. The book FX Options and Structured Products by Uwe Wystup is ...
- 21k
5
votes
Accepted
Algorithmic Execution Literature/References
You now have four reference books for algo trading
Market Microstructure in Practice (L and Laruelle) for an introduction and microstructure related aspects
The Financial Mathematics of Market ...
- 11.4k
5
votes
What are some classical papers to read for a mathematician looking to get into quant finance?
The field is in flux right now. Since you are at the master's level I think you should focus on more general works in mathematics. If you were my student and we were ignoring specific things such as ...
- 4,299
5
votes
Local vol, stochastic vol, implied vol
Gatheral's book is one of the best reference around so it's worth bearing with it, especially as he covers the relationship between implied, local, and stochastic volatility:
local volatility ...
- 5,622
5
votes
Accepted
Basics of trading strategy development
It is good for beginner to start with fundamentals. It can be a book "Systematic Trading: a unique new method for..." by Robert Carver (2015). Then it is good to read/listen to Ernest P. Chan, really ...
- 366
5
votes
References for Stochastic Control for finance
Peter Forsyth of UWaterloo is my favourite author on this topic (one of my top three in MathFin!)
Personal Homepage with Lots of Papers
Optimal allocation under wealth goals, optimal decumulation ...
5
votes
Accepted
Why do we use the letter $q$ for dividends?
It seems it didn't take long before the case of continuous dividends was considered in the literature. Robert Merton's 1973 paper "Theory of Rational Option Pricing" considers the case of ...
- 8,436
4
votes
What are the canonical global-macro investing books?
A good starting point
Macroeconomics by Blanchard
http://www.amazon.co.uk/Macroeconomics-MyEconLab-Pearson-Access-Package/dp/0133103064/ref=dp_ob_title_bk
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