Blog Posts

Currency overlay is an investment strategy employed by institutional investors to protect their portfolios from currency fluctuations. The currency overlay manager first identifies the currency risk exposure of the portfolio, and then enters into currency hedging transactions to offset that risk. Currency overlay can be used to hedge both: currency risk arising from investments denominated […]

For traders, investors, and market participants, an understanding of various probabilistic, statistical, and analytical techniques is important for making good decisions when the future is unknown. Markets are heavily an applied probability exercise.  Each of these techniques and methods offers unique modeling capabilities and enables finance professionals to tackle specific and complex challenges – assessing […]

Bayesian analysis in finance, trading, and investing is a framework that incorporates probabilistic modeling and decision-making under uncertainty. This approach is based on Bayesian inference, where prior beliefs are updated with new information to form posterior beliefs.   Key Takeaways – Bayesian Methods in Finance Bayesian methods in finance offer a probabilistic framework for incorporating […]

Agent-Based Modeling (ABM) is a very important aspect of financial market analysis and prediction, but is one of the least talked about. It operates under a different paradigm compared to traditional economic and financial models, which often rely on equilibrium theories (e.g., value investing, discounted cash flow) and aggregate market behaviors. In ABM, the market […]

When constructing a portfolio with nominal bonds and inflation-linked bonds, several considerations come into play, particularly concerning the different characteristics and environmental biases of these two types of bonds. We’ll cover these matters in this article.   Key Takeaways – Inflation-Linked Bonds vs. Nominal Bonds Risk and Inflation Protection: Inflation-linked bonds offer some protection against […]

Stochastic Optimal Control represents a mathematical framework used to determine optimal decision-making strategies in situations where outcomes are: partly random, and partly under the control of a decision-maker (e.g., trading, investing, financial decision-making) This concept is rooted in the theory of stochastic processes and optimal control theory. Stochastic Process A stochastic process is a mathematical […]

When comparing Python and C++ for financial algorithms, particularly in quantitative finance and economics, it’s important to consider several factors, including: performance ease of use library support, and the specific requirements of the task at hand We’ll go through each category by category.   Key Takeaways – Python vs. C++ for Financial Algorithms Performance: C++ […]

The financial markets and the economy are inextricably linked together. Understanding these cause-and-effect relationships and what market equilibriums are necessary to achieve is important to have a sense of where markets are likely to go. The financial system is what provides money and credit into the real economy. Money (what payments are settled with) and […]

Python is a cornerstone in finance, offering a various of packages and libraries that cater to various financial analysis needs. This article outlines the most effective Python packages for finance, focusing on their unique features and applications.   Pandas: Data Manipulation and Analysis Pandas are NumPy (covered below) are your bread-and-butter libraries for financial data […]

Monte Carlo simulations are a tool in finance for modeling and understanding the behavior of financial systems under various scenarios. These simulations use randomness to solve problems that might be deterministic in principle. Python, with its rich library ecosystem, offers an efficient platform for conducting Monte Carlo simulations. Here’s a guide on how to implement […]