Category Archives: Blog
The guts of a statistical factor model
Specifics of statistical factor models and of a particular implementation of them. Previously Posts that are background for this one include: Three things factor models do Factor models of variance in finance The BurStFin R package The quality of variance matrix estimation The problem Someone asked me some questions about the statistical factor model in … Continue reading
An easy mistake with returns
When aggregating over both time and assets, the order of aggregation matters. Task We have the weights for a portfolio and we want to use those and a matrix of returns over time to compute the (long-term) portfolio return. “A tale of two returns” tells us that aggregation over time is easiest to do in … Continue reading
Posted in Quant finance, R language
Tagged log return, log return vs simple return, simple return
3 Comments
Volatility from daily or monthly: garch evidence
Should you use daily or monthly returns to estimate volatility? Does garch explain why volatility estimated with daily data tends to be bigger than if it is estimated with monthly data? Previously There are a number of previous posts — with the variance compression tag — that discuss the phenomenon of volatility estimated with daily … Continue reading
Posted in Quant finance, R language
Tagged garch simulation, variance compression, volatility
6 Comments
The basics of Value at Risk and Expected Shortfall
Value at Risk and Expected Shortfall are common risk measures. Here is a quick explanation. Ingredients The first two ingredients are each a number: The time horizon — how many days do we look ahead? The probability level — how far in the tail are we looking? Ingredient number 3 is a prediction distribution of … Continue reading
Posted in R language, Risk
Tagged Conditional Value at Risk, Expected Shortfall, Value at Risk
8 Comments
Introduction to “Tao Te Programming”
The author is Patrick Burns. Genesis While I was in the early planning stages of a programming class (the one highlighted here), I became dissatisfied. Many elements of programming — especially good programming — are not usually discussed in programming classes. The typical class focuses on how to slot the screwdriver into the screw and … Continue reading
Review of “R For Dummies”
The authors are Andrie de Vries and Joris Meys. Executive summary Pretty much all I’d hoped for — and I had high hopes. Significance The “Dummies” series is popular for introducing specific topics in an inviting way. R For Dummies is a worthy addition to the pack. There is a competitor by the name of … Continue reading
Posted in Book review, R language
5 Comments
Annotations for “R For Dummies”
Here are detailed comments on the book. Elsewhere there is a review of the book. How to read R For Dummies In order to learn R you need to do something with it. After you have read a little of the book, find something to do. Mix reading and doing your project. You cannot win … Continue reading
Posted in Book review, R language
1 Comment
S&P 500 sector strengths
Which sectors are coherent, and which aren’t? Previously The post “S&P 500 correlations up to date” looked at rolling mean correlations among stocks. In particular it looked at rolling mean correlations of stocks within sectors. Of importance to this post is that the sectors used are taken from Wikipedia. Relative correlations The thought is that … Continue reading
Upcoming events
Featured I’ll be leading two courses in the near future: Value-at-Risk versus Expected Shortfall 2012 October 30-31, London. 30th: “Addressing the critical challenges and issues raised by the Basel proposal to replace VaR with Expected Shortfall” 31st: “Variability in Value-at-Risk and Expected Shortfall” led by Patrick Burns Details at CFP Events. Finance with R Workshop … Continue reading
Posted in Events, R language
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