Very clear explanation. This helped me in my Advanced Statistical Mechanics course I'm doing in my Masters in Physics!
@mostafaamer30572 жыл бұрын
Genuinely in love with this channel, keep up the good work!
@omelhordomeualgoritmo2 жыл бұрын
have been in love with quant for many years, but man GBM is the cure for insomnia. God help me :) ... Awesome video btw, thank you!
@mounsifgahit3862 жыл бұрын
what does GBM stand for ?
@QuantPy2 жыл бұрын
Geometric brownian motion
@user-oo1bk5dv6c Жыл бұрын
watching this is a year 2 bachelor is a painful yet much rewarding experience. thank you, Jonathon
@kostas69159 ай бұрын
15:20 -> This second order term actually adds to the drift term, OVER TIME. Exactly, this is the essence of the case. Well depicted!
@MDMarketInsights24 күн бұрын
Brilliant Lesson Thank you so much
@user-wr4yl7tx3w Жыл бұрын
This is really a great channel. Wish I knew about it earlier.
@tobiasbergkvist45202 жыл бұрын
Negative stock prices can be avoided by using exp(brownian motion) instead. Still, I don't think a normal distribution is a good fit, since it severely underestimates the probability of bigger price movements; so called "black swan events", which happen all the time. A distribution with fatter tails is more appropriate. I think the pareto distribution probably has a too fat tail for most stocks though - so a semi-fat tail distribution is likely the best fit for modeling most assets.
@War4Skills2 жыл бұрын
Also the interpretation changes when we use an exp(Brownian motion) doesn't it? Which would complicate things.
@drdca82632 жыл бұрын
[note:I don’t know what I’m talking about when it comes to finance.] What about the Martingale assumption? Would that being violated contradict the Efficient Market Hypothesis or something? Or... Well, I guess momentum trading working (iirc?) sorta maybe implies violating the martingale assumption? Hmm... now I’m wondering how one would measure how well a model is doing. I think maybe you could look at like, the surprisal of the observations under the model, minus the entropy of the model? Or, uh, Hm, well, if things at separate intervals are independent (or across different stocks? Or something that would let you take an empirical average), you could maybe take a KL divergence? Of course, the real test in practice would be “does it make you money”, but pretending that wasn’t the goal and you just wanted an “accurate” model for its own sake, how would you measure its “accuracy” (when it is all stochastic like this)
@ingolfura.4327 Жыл бұрын
This is actually true, and priced in the market aswell I highly recommend the video "the volatility smile" by professor patrick boyle here on youtube, he talks about how this is dealt with as the volatility is actually changing all the time
@recsoncanton9965 Жыл бұрын
Best video ive seen so far...
@user-hi3yc3lq6r Жыл бұрын
Nice lecture. The explanation is quite clear and informative.
@thanarttangtanakoon29932 жыл бұрын
Really love this sorted of content
@TheIllerX2 жыл бұрын
I can really recommend that second volume book of Shreve. That is where I learnt from when I was new to the subject. It explains things cleary, but don't go into allt the more technical and subtle details to prove everything rigourosly.. This is a good start to understand what is happening. After that I recommend a more detailed book. Shreves other book together with Karatzas "Brownian motion and stochastic calculus" is one such option. This is not a light read, but also a good book.
@codyfintech Жыл бұрын
Fully agreed, Martin Baxter's Financial Calculus book is also good for developing an intuitive grasp on these concepts.
@luyombojonathan6688 Жыл бұрын
Great channel !!! Thanks for the work
@joemcdanel37082 жыл бұрын
Great video! I do have a question. In the first 30ish seconds you mention that stocks can’t go negative. Why is this so? WTI crude went negative in the year 2020.
@iceman53212 жыл бұрын
Crude oil are futures and not stocks. The residual claim right of stocks on earnings just stops at $0 because the company is limited and does not need to come up for additional capital if it files for bankruptcy because it is legally limited. For the future crude oil however the future contracts expired, which means the oil barrels are delivered and because of the storage problem at the time, you did not pay for the oil, but you where paid to store the oil. As you can see very different issues, and barely comparable.
@QuantPy2 жыл бұрын
Unlike the equity market, commodity markets have quite inelastic demand. The extreme example of this is in the power market where instantaneous power cannot (on a large scale) be stored. In commodity markets it is essential to have negative price signals. As in the comment above, companies are entities that have limited liabilities.
@user-wr4yl7tx3w Жыл бұрын
idea. can you consider doing a video on cases where the underlying is interest rate product, such as an interest rate swap?
@soumyajitroy68292 жыл бұрын
Great video with so simple language.
@user-oc8le2ln7o11 ай бұрын
Pretty good strategy for every beginner trader
@kdpr0072 жыл бұрын
Thank you for the fantastic video. Can you please upload a video on Partial averaging in conditional expectation using fairly basic language. Thank you once again for your videos.
@FoobsTon9 ай бұрын
What a brilliant explanation. Well done.
@Gerard919992 жыл бұрын
For quantitative finance which could be better? CFA or MBa?
@QuantPy2 жыл бұрын
Just my opinion neither, financial math would be a good choice 👍 CFA & MBA are programs not specific to quantitative finance in terms of derivative pricing theory ect. Great if you want a job as an analyst in the financial industry though.
@Gerard919992 жыл бұрын
@@QuantPy The next year I’ll finished my bach in Financial Engineering and now I'm looking for the CFA or Quantitative Finance MSc in Glasgow. Which MSc could be better for the Quant path? Or in your opinion, what could be the next step?
@siddharthchaudhary12662 жыл бұрын
@@Gerard91999 Don't worry about CFA or finance at all. If you are serious about Quantitative Finance then do MSc either in Quantitative Finance or Mathematics (better if focused in PDE or probability theory) and do lot of good quality computer science projects either in Python, C++ or JAVA. With good skills in Computer Science and Math you could easily crack it.
@Gerard919992 жыл бұрын
@@siddharthchaudhary1266 thank you m8!!!
@sueton17972 жыл бұрын
Neither. But the CFA is cheap compared to the MBA, so if you can, take that. For a quant career, the best is a PHD, where it doesn't matter what you choose to study. Whether phyisics, mathematics or computer science. It depends on your focus and your research interests.
@fernandojackson72077 ай бұрын
Excellent Lecture. In 21:30, we know Ln(St) is Normal. How about St itself, is it Normal too? Not sure what the distribution of e^X is when X is Normal.
@johnhudson9248 Жыл бұрын
Nice lecture, but in the intro for Wiener stochastic processes, though I'm not a professional quant, I always thought that the stochastic variable was the log of the asset value rather than the asset value itself. This is what it says in Wikipedia too, and using the log has two effects (1) the variable can't go negative and (2) the statistics look similar whatever the lever of the asset, whether its $1 or $1000.
@QuantPy Жыл бұрын
Thanks John, this lecture starts with the Wiener process and progresses to the Geometric Brownian Process where assets prices have the log of asset price as you’ve mentioned
@riccardoformenti43322 жыл бұрын
keep up this type of content
@ghostwhowalks5623 Жыл бұрын
Great video! What is the context behind the mean square limit....why do we need that particular concept for the stochastic integral? Thanks!
@kdpr0072 жыл бұрын
Thank you for the fantastic video. Can anyone please help me understand one basic concept. Why do we have break the [0,t] into smaller intervals. What do we miss by not doing so? Does it eliminate any unnecessary /overlapping factors? Thank you
@csaracho2009 Жыл бұрын
That is why it is called infinitesimal...
@shahbajsingh42282 жыл бұрын
I fucking love this channel
@xRedNationx2 жыл бұрын
So why is it an adaptive process into the filtration? Why can’t it be static?
@davidlenir7517 Жыл бұрын
Can I read volume 2 without volume 1? I have a high energy theoretical physics background.
@emmanuelameyaw97352 жыл бұрын
Is there a software to do this? Or this is just theory stuff for intuition?
@STheBlackDragonS2 жыл бұрын
u can be perfectly a teacher xd
@AminaAmina-by4oh5 ай бұрын
سلام عليكم شرحك رائع هل يمكنني السؤال؟
@2late4coffee2 жыл бұрын
I am an undergrad and taking intro to stochastic modelling class, how can I go deeper to understand these topics, what should I begin with?
@QuantPy2 жыл бұрын
I suggest buying Stochastic Calculus for Finance II by Steven Shreve
@patbateman694202 жыл бұрын
Try out Stochastic Calculus by Calin. It should be simple for you based on what you say your knowledge is, but it should prepare you for further study.
@leonmozambique5332 жыл бұрын
What was your undergraduate degree in?
@QuantPy2 жыл бұрын
Chemical Engineering
@leonmozambique5332 жыл бұрын
@@QuantPy did you get a masters? How was the transition from chemE to something more math heavy?
@joslis192 жыл бұрын
@@QuantPy Hi, I´m a chemical engineer too. Bur I´ve got interested in finance. Good to know that I can follow your path
@confidential3032 жыл бұрын
What are you studying?
@ricosolanki1407 Жыл бұрын
@@QuantPyim currently doing my undergrad in chemical engineering. How did you get into the quant space from this, I want to follow suit 🥺
@haddenindustries2922 Жыл бұрын
Guday to you😉
@Arnoldismouldy10 ай бұрын
watching this for High School.... everyone else here is in college and some are doing masters...... IBDP is HELL
@MrEo89Ай бұрын
References a textbook, but doesn’t show it. Nice.
@eprzepiora Жыл бұрын
13:13 should be k>2 not k>3
@georgechristou79825 ай бұрын
true, cause Dw*Dw=Dt
@jakubb4784 Жыл бұрын
Wienner and Riemann are pronouced with short "i" like prison!
@StanleyNwanekezieАй бұрын
A bit too abstracted
@miccapcapo8376 Жыл бұрын
Pessima traduzione dei sottotitoli
@Adryangar11 ай бұрын
that's a cute girl on the video cover
@siddharthjain21272 жыл бұрын
Dude,,, calculus is boaring part of mathematics 😏 😏
@QuantPy2 жыл бұрын
Too bad it's the largest part of Mathematics in Quantitative Finance :p