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

Credit default swaps


In brief, a credit default swap (CDS) is used to transfer the credit risk of a reference entity (corporate or sovereign) from one party to another. In a standard CDS contract, one party purchases credit protection from another party, to cover the loss of the face value of an asset following a credit event. A credit event is a legally defined event that typically includes bankruptcy, failure-to-pay, and restructuring. The protection lasts until some specified maturity date. To pay for this protection, the protection buyer makes a regular stream of payments, known as the premium leg, to the protection seller. This size of these premium payments is calculated from a quoted default swap spread, which is paid on the face value of the protection. These payments are made until a credit event occurs or until maturity, whichever occurs first. The issuer of the CDS derivative has to price it before selling. We will be using the credule package for this.

These two codes are used...