We can Define Immense with these words...
Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments. Basically, finance represents money management and the process of acquiring needed funds. Finance also encompasses the oversight, creation, and study of money, banking, credit, investments, assets, and liabilities that make up financial systems.
In statistics, a power law is a functional relationship between two quantities, where a relative change in one quantity results in a proportional relative change in the other quantity, independent of the initial size of those quantities: one quantity varies as a power of another. For instance, considering the area of a square in terms of the length of its side, if the length is doubled, the area is multiplied by a factor of four.
Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics. Econophysics is closely related to social physics.
It is the science and engineering of making intelligent machines, especially intelligent computer programs. It is related to the similar task of using computers to understand human intelligence, but AI does not have to confine itself to methods that are biologically observable.
Elliot Wave Theory
The Elliott Wave theory is a theory in technical analysis used to describe price movements in the financial market. The theory was developed by Ralph Nelson Elliott after he observed and identified recurring, fractal wave patterns. Waves can be identified in stock price movements and in consumer behavior. Investors trying to profit from a market- trend could be described as riding a wave. A large, strong movement by homeowners to replace their existing mortgages with new ones that have better terms is called a refinancing wave.
Statistical mechanics is the branch of the theory of physics, studying the use of probability theory and also the average or mean behavior of a mechanical system wherein the state of the system is said to be uncertain. The common use of this machine is in the thermodynamic accomplishment of large systems. The statistical thermodynamics or statistical mechanics are the branches of statistical mechanics.
The genetic algorithm is a method for solving both constrained and unconstrained optimization problems that is based on natural selection, the process that drives biological evolution. The genetic algorithm repeatedly modifies a population of individual solutions. At each step, the genetic algorithm selects individuals at random from the current population to be parents and uses them to produce the children for the next generation.
A log-normal distribution is a continuous distribution of random variables whose logarithms are distributed normally. In other words, the lognormal distribution is generated by the function of ex, where x (random variable) is supposed to be normally distributed. In the natural logarithm of ex is the x, the logarithms of lognormally distributed random variables are normally distributed.
Top-down analysis starts by analyzing macroeconomic indicators, then performing a more specific sector analysis. Only after that does it dive into the fundamental analysis of a specific firm. It is the opposite of bottom-up analysis, which focuses on looking at fundamentals or key performance indicators before anything else.
Bottom-up forecasting is a method of estimating a company’s future performance by starting with low-level company data and working “up” to revenue. This approach starts with detailed customer or product information and then broadens up to revenue. This guide will provide examples of how it works and explain why it’s commonly used in financial modeling and valuation.
Machine learning is a branch of artificial intelligence and computer science which focuses on the use of data and algorithms to imitate the way that humans learn, gradually improving its accuracy.
Deep learning is a subset of machine learning, which is essentially a neural network with three or more layers. These neural networks attempt to simulate the behavior of the human brain—albeit far from matching its ability—allowing it to “learn” from large amounts of data. While a neural network with a single layer can still make approximate predictions, additional hidden layers can help to optimize and refine for accuracy.
Reinforcement learning is an area of Machine Learning. It is about taking suitable action to maximize reward in a particular situation. It is employed by various software and machines to find the best possible behavior or path it should take in a specific situation.
LSTM stands for long short term memory. It is a model or architecture that extends the memory of recurrent neural networks. Typically, recurrent neural networks have ‘short term memory’ in that they use persistent previous information to be used in the current neural network. Essentially, the previous information is used in the present task. That means we do not have a list of all of the previous information available for the neural node.
The risk-free rate of return is the interest rate an investor can expect to earn on an investment that carries zero risk. In practice, the risk-free rate is commonly considered to equal to the interest paid on a 3-month government Treasury bill, generally the safest investment an investor can make. The risk-free rate is a theoretical number since technically all investments carry some form of risk, as explained here. Nonetheless, it is common practice to refer to the T-bill rate as the risk-free rate. While it is possible for the government to default on its securities, the probability of this happening is very low.
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth. An investment always concerns the outlay of some capital today—time, effort, money, or an asset—in hopes of a greater payoff in the future than what was originally put in.
Money management refers to the processes of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group. The term can also refer more narrowly to investment management and portfolio management. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans.
A time series is a sequence of data points that occur in successive order over some period of time. This can be contrasted with cross sectional data which captures a point-in-time. In investing, a time series tracks the movement of the chosen data points, such as a security’s price, over a specified period of time with data points recorded at regular intervals. There is no minimum or maximum amount of time that must be included, allowing the data to be gathered in a way that provides the information being sought by the investor or analyst examining the activity.
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index. In the securities markets, volatility is often associated with big swings in either direction.
In simple words, Quantitative finance provides the knowledge required to analyze financial markets and securities. This analysis is basically done by using mathematical models and huge datasets, hence, the specialists in this field are known as , Quantitative analysts or quants. Also, a Quant specializes in designing, developing and implementing the algorithm for solving complex financial problems. Let us now move ahead and find out why quantitative finance is important.
Risk management is focused on anticipating what might not go to plan and putting in place actions to reduce uncertainty to a tolerable level. The project risk management process reflects the dynamic nature of project work, capturing and managing emerging risks and reflecting new knowledge in existing risk analyses.
Data science is a multidisciplinary approach to extracting actionable insights from the large and ever-increasing volumes of data collected and created by today’s organizations. Data science encompasses preparing data for analysis and processing, performing advanced data analysis, and presenting the results to reveal patterns and enable stakeholders to draw informed conclusions.
Artificial Neural Network
Neural networks, also known as artificial neural networks (ANNs) or simulated neural networks (SNNs), are a subset of machine learning and are at the heart of deep learning algorithms. Their name and structure are inspired by the human brain, mimicking the way that biological neurons signal to one another.
The Fibonacci sequence is a type series where each number is the sum of the two that precede it. It starts from 0 and 1 usually. The Fibonacci sequence is given by 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on. The numbers in the Fibonacci sequence are also called Fibonacci numbers. In Maths, the sequence is defined as an ordered list of numbers that follow a specific pattern.
Algorithmic trading strategies involve making trading decisions based on pre-set rules that are programmed into a computer. A trader or investor writes code that executes trades on behalf of the trader or investor when certain conditions are met.
Whilst traditional ‘data science’ involves the analysis of historical datasets and existing information, Agent-Based Modelling (ABM) takes a quite different approach.ABM is inherently forward looking, and does not require large volumes of high-quality historical data.
Behavioral finance, a subfield of behavioral economics, proposes that psychological influences and biases affect the financial behaviors of investors and financial practitioners. Moreover, influences and biases can be the source for explanation of all types of market anomalies and specifically market anomalies in the stock market, such as severe rises or falls in stock price.
High tech is an abbreviation of "high technology," which is a generic term referring to a broad range of industrial classifications and innovation. A study funded by the Workforce Information Council identified the high-tech sector to be that which includes a high concentration of workers in what is referred to as STEM (science, technology, engineering and mathematics).
The Internet is awash with mnemonics (“something (such as a word, a sentence, or a song) that helps people remember something“) designed to assist those who have trouble distinguishing between two similar words. A fair share of these turn out to be for the words stationery and stationary. The most commonly suggested method is to remember that you buy papER at a stationERy store.
Financial management is an essential action for any organization to manage financial resources. A financial manager conducts some activity like financial planning, organizing, directing and controlling organizational funds. Financial management is what financial manager do to achieve organizational goals and objectives.
Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories.
The Ichimoku cloud involves five different indicators and is designed to give insight into the trend of the market. The Ichimoku cloud may at first seem intimidating and make the chart look closer to a piece of abstract art, but is relatively straightforward once acquainted with its interpretation.
Definition of 'Stop Loss'. Definition: Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in a trade. The concept can be used for short-term as well as long-term trading.
A Take Profit (TP) is an instruction to close a trade at a specific rate, if the price is going in your favour, to ensure the profit is realised and goes to your available balance. If the market reaches your requested rate and you have gained the predetermined amount, the Take Profit will trigger and automatically close your position.
Leverage results from using borrowed capital as a funding source when investing to expand the firm's asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.
A fractal is a never-ending pattern. Fractals are infinitely complex patterns that are self-similar across different scales. They are created by repeating a simple process over and over in an ongoing feedback loop. Driven by recursion, fractals are images of dynamic systems – the pictures of Chaos. Geometrically, they exist in between our familiar dimensions.
A diagonal spread is a modified calendar speed involving different strike prices. It is an options strategy established by simultaneously entering into a long and short position in two options of the same type—two call options or two put options—but with different strike prices and different expiration dates.
Available funds to trade on an account. These funds are not being used as collateral in trades on the forex financial markets. These funds can be used in any operation, including their withdrawal or to open a new position. The formula to calculate Free Margin is Free Margin = Equity – Margin.
is a method where a trader focuses on company-specific events to determine which stock to buy and when to buy it. Trading on fundamentals is more closely associated with a buy-and-hold strategy rather than short-term trading. There are, however, specific instances where trading on fundamentals can generate substantial profits in a short period.
A moving average is a technical indicator that market analysts and investors may use to determine the direction of a trend. It sums up the data points of a financial security over a specific time period and divides the total by the number of data points to arrive at an average. It is called a “moving” average because it is continually recalculated based on the latest price data.
A lot in the financial markets is the number of units of a financial instrument bought on an exchange. The number of units is determined by the lot size. For example, in the stock market, a round lot is 100 shares. However, investors do not have to buy round lots, where a lot can be any number of shares.
A contract for difference (CFD) is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time. CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets. The value of a CFD contract does not consider the asset's underlying value: only the price change between the trade entry and exit.