Relating SDE & PDE under the Risk-Neutral Pricing (Feynman-Kac theorems) 320+26 pages
In the last post, we introduced factor modelling in portfolio management.
We shared code on the BARRA factor models which are used by `quantamental’ portfolio managers to understand their style exposures and factor attributions.
In the previous posts, we introduce discussion on risk-neutrality - this week we resume the continuous time treatments and cover a central result known as the Feynman-Kac theorems.
In the coming posts, we take a look at another alpha report - we then play around with some solvers, which are the basis for solving quadratic optimization problems that are common in finance. This will become very useful as we advance the discussions towards more practical models with cost constraints.
We will continue to jump back and forth between discussions on portfolio management, coding, alpha report and stochastic calculus. Happy trading!
Market Notes (346 Pages):