Loading
Authoritative definitions, mathematical formulations, intuitive breakdowns, and cross-references for quantitative research and algorithmic trading concepts.
The measure of a portfolio's return in excess of a benchmark's expected return for a given level of market risk.
The correlation of a time series with a lagged version of itself.
A unit root test for stationarity that augments the Dickey-Fuller equation with lagged differences.
The daily ratio of absolute return to dollar volume, used to proxy price impact per dollar traded.
A metric that measures the sensitivity or systematic risk of an asset relative to the overall market.
The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).
The landmark partial differential equation formula for pricing European options.
A discrete-time lattice model that values options by backward induction from terminal payoffs.
The average loss that occurs in scenarios where losses exceed the Value at Risk threshold.
A statistical property where a linear combination of two non-stationary price series forms a stationary, mean-reverting series.
Annualized return divided by the absolute value of maximum drawdown.
A backtesting protocol that generates multiple out-of-sample paths through C(N, k) combinations of purged folds.
An asset pricing model that adds a momentum factor to the Fama-French three-factor model.
The rate of change of an option's Delta for a $1 movement in underlying price.
A class of volatility models where conditional variance follows an ARMA process driven by past squared returns and past variances.
The volatility value backed out of an option's market price using an option pricing model.
Active return (alpha) divided by tracking error against a benchmark.
The difference between the paper return at the decision-time price and the realized return on the executed order.
The rank correlation between a forecast (signal) and the realized outcome across a cross-section of assets.
An electronic record of outstanding buy and sell limit orders organized by price level and timestamp.
The inadvertent use of information in a historical backtest that was not actually available at the simulated point in time.
A volatility surface model where instantaneous volatility is a deterministic function of spot price and time.
The maximum observed peak-to-trough decline in a portfolio's equity curve.
The financial theory suggesting asset prices and historical returns eventually return toward their long-term average.
The study of exchange mechanics, order books, matching algorithms, latency, and liquidity formation.
The statistical error of fitting a quantitative model to historical noise rather than true underlying relationships.
The probability-weighted ratio of gains above a threshold to losses below it.
The ratio of expected return in excess of the risk-free rate divided by return volatility.
A variation of the Sharpe Ratio that penalizes only downside volatility rather than total volatility.
Quantitative trading strategies exploiting statistical mispricings between cointegrated assets while maintaining market neutrality.
The difference between the expected price of a trade and the actual executed price.
The error of conducting historical research on a dataset containing only assets that survived to the present.
A stochastic volatility model that captures the joint dynamics of forward rate and its volatility with explicit correlation.
A time series property where the joint distribution does not change when shifted in time.
The daily time decay of an option's value as it approaches expiration.
The standard deviation of the difference between a portfolio's returns and its benchmark's returns.
The arithmetic mean of prices over a defined execution window.
A labeling scheme for financial ML that defines a sample's label by whichever of three barriers is hit first: take-profit, stop-loss, or a vertical time barrier.
A statistical estimate of the maximum loss expected over a given time horizon at a specified confidence level.
The statistical measure of dispersion of asset returns over a given period.
The change in option price for a 1% change in implied volatility.
The U-shaped pattern of implied volatility as a function of option strike price for a given maturity.
The asymmetric pattern of implied volatility where downside strikes trade at higher IV than upside strikes.
The ratio of cumulative notional traded to cumulative volume over a defined execution window.