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  • Book Overview & Buying Learning Quantitative Finance with R
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Learning Quantitative Finance with R

Learning Quantitative Finance with R

By : Jeet, PRASHANT VATS
3.7 (3)
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Learning Quantitative Finance with R

Learning Quantitative Finance with R

3.7 (3)
By: 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 (10 chapters)
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Capital asset pricing model


The capital asset pricing model (CAPM) model helps to gauge risk contributed by security or portfolio to its benchmark and is measured by beta (). Using the CAPM model, we can estimate the expected excess return of an individual security or portfolio which is proportional to its beta:

Here:

  • E(Ri): Expected return of security

  • E(Rm): Expected return of market

  • Ri: Rate of return of security

  • Rf: Risk Free rate of return

  • Rm: Benchmark or market return

  • : Beta of the security

CVX is regressed against DJI using linear model as per equation 5.4.

Here I used zero as risk-free return in the following command:

>rf<- rep(0,length(dji))
>model <- lm((ret_cvx  -rf) ~ (ret_dji -rf) )
> model
Call:
lm(formula = (ret_cvx - rf) ~ (ret_dji - rf))
Coefficients:
(Intercept)  ret_dji
-0.0002013    1.1034521 

You can see the intercept term in the above result is alpha (-0.0002013) and coefficient for ret_dji is beta (1.1034521). However, you can also use the PerformanceAnalytics...

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Learning Quantitative Finance with R
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