Background The idea of interest rate is something that we all have been introduced at a very early age of our life. Back in school we were taught ideas like simple interest, compound interest etc. Subsequently, at undergraduate / post graduate levels many of us had the opportunity to learn advanced…

Background Probability theory and related concepts are one of the key building blocks for a variety of concepts in quant finance. Most of us had the chance to learn probability concepts at different levels during our academic years and also on projects on the job. I am of the view that…

Background Most of us have learnt probability theory at a certain stage of time in our lives — be it in school, undergraduate or postgraduate level or on the job. While understanding most concepts in probability may come naturally, there are a few ideas based on the probability theory that appear…

Background In many quantitative finance applications, we frequently generate random walks to build the path of a certain asset that follows a stochastic process. By far the most popular model for simulation of a stochastic process is the geometric Brownian motion (GBM) for simulating the path of a single equity stock…

Background Numerical Methods by definition mean the application of a certain analytical technique to solve a certain problem. From quantitative modelling point of view, there are many problems for which we do not have a ready formula (i.e., a closed form solution). For such instances, we have to resort to some…

Background Most of us have solved set of linear equations at a certain point of time in our lives — be it in school, undergraduate or postgraduate level. These type of problems were commonly referred to a set of simultaneous equations. …

Background: Foreign Exchange (“FX”) as an asset class is a key component of the global financial markets. The size of the FX market is humongous given the level of trading activity witnessed in this market. The interesting part about FX is — it’s a market that is open throughout the trading…

Overview of Risk existing in the market Risk is the uncertainty in any transaction. Risk may manifest itself in multiple forms including market risk, credit risk, operational risk, compliance risk etc. Over the years, banks and financial institutions have become risk aware which is evident from the increased investment towards strengthening of their overall risk management infrastructure…

Background: Capital is the fuel for any business be it banking or otherwise. An organization requires capital for a variety of purposes including: 1. Exploring new business opportunities 2. Maintaining a strong balance sheet position 3. Regulatory requirements 4. Overcoming market stresses to continue as a going concern The above mentioned…