Quantitative finance is about using the best quantitative techniques for analyzing the financial market and strategizing for the future. If you feel challenged by any such technique as portfolio optimization or derivatives pricing, you have two paths ahead of you. One path is self-learning where you might spend hours on end researching and building your knowledge to finally come to a conclusion that satisfies your needs. The other path is consultation. It’s quicker and easier, as you get one-on-one sessions with an expert who guides you precisely according to your situation. You can, of course, go either way. But the latter is often more convenient in terms of time and money.

When you talk about the best returns for the risk you take in the financial market, you need a portfolio that’s designed to help you guarantee said returns at lower risks. But coming up with an ROI-centric portfolio isn’t a piece of cake. You need to measure a ton of things including your assets, risks, potential returns, and various other external factors. Only after that, you can come up with an investment plan that doesn’t gamble away your hard-earned savings. This is why need to optimize your portfolio to match those expectations.

You can use a variety of tools and techniques to calculate derivative pricing. The Black-Scholes model and Monte Carlo simulations are good examples of this. Plus, you can also fall back on regression and time series analyses to enhance your approach further. For advanced calculations, we recommend specialized software like FinPricing, Bloomberg, Reuters, or G-Square Derivator.

VaR is a statistical technique used to measure the risk of loss on a portfolio. It estimates the maximum loss over a given time frame within a certain confidence level.

There’s more to Stress Testing than meets the eye. But to summarize, you would test your portfolio against unfavorable circumstances to see how well it behaves against unforeseen odds. You may set up a base risk level and severely advanced scenarios.  The number of your scenarios will depend upon the Stress Test playbook needs that you are trying to build.  The KPI metrics will solely relate to measuring your banking/financial company losses. There are standard variables provided by rating agencies like Moody or SMP. This helps to identify the gaps in your strategy that you may not have accounted for. As a result, you come up with an improved portfolio that’s more suitable for tackling all kinds of extreme financial market conditions.