This is a summary of links featured on Quantocracy on Saturday, 07/28/2018. To see our most recent links, visit the Quant Mashup. Read on readers!
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Understanding Stock Price Range Forecasts [Jonathan Kinlay]Range forecasts are produced by estimating the parameters of a Geometric Brownian Motion process from historical data and using the model to project a large number of sample paths for the stock price over the coming month and year. For example, this is a range forecast for Netflix, Inc. (NFLX) as at 7/27/2018 when the price of the stock stood at $355.21: $NFLX As you can see, the great majority of
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The dangerous disregard for fat tails in quantitative finance [SR SV]The statistical term fat tails refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme observations on expected future risk. Alas, they are a plausible and common feature of financial markets. A summary article by Nassim Taleb reminds practitioners that fat tails typically invalidate methods and conventions