Book Image

Learning Quantitative Finance with R

By : Dr. Param Jeet, PRASHANT VATS
Book Image

Learning Quantitative Finance with R

By: Dr. Param Jeet, PRASHANT VATS

Overview of this book

The role of a quantitative analyst is very challenging, yet lucrative, so there is a lot of competition for the role in top-tier organizations and investment banks. This book is your go-to resource if you want to equip yourself with the skills required to tackle any real-world problem in quantitative finance using the popular R programming language. You'll start by getting an understanding of the basics of R and its relevance in the field of quantitative finance. Once you've built this foundation, we'll dive into the practicalities of building financial models in R. This will help you have a fair understanding of the topics as well as their implementation, as the authors have presented some use cases along with examples that are easy to understand and correlate. We'll also look at risk management and optimization techniques for algorithmic trading. Finally, the book will explain some advanced concepts, such as trading using machine learning, optimizations, exotic options, and hedging. By the end of this book, you will have a firm grasp of the techniques required to implement basic quantitative finance models in R.
Table of Contents (16 chapters)
Learning Quantitative Finance with R
Credits
About the Authors
About the Reviewer
www.PacktPub.com
Customer Feedback
Preface

Hedging


Hedging is basically taking a position in the market to reduce the risk. It is a strategy built to reduce the risk in investment using call/put options/futures short selling. The idea of hedging is to reduce the volatility of a portfolio by reducing the potential risk to loss. Hedging especially protects small businesses against catastrophic or extreme risk by protecting the cost at the time of distress. The tax laws also benefit those who do hedging. For firms who do hedging, it works like insurance and they have more independence to make their financial decisions without thinking about the risks.

Now, let us consider some scenarios of hedging:

  • Currency risk: Also known as exchange-rate risk, it happens due to fluctuations in the prices of one currency with respect to another. Investors or companies who operate across the world are exposed to currency risk, which may lead to profit and losses. This risk can be reduced by hedging, which can prevent losses happening due to price fluctuation...