covariance-and-risk-modelsEstimate a covariance matrix an optimizer can actually invert, and report how much variance it hides. TRIGGER - covariance matrix estimation, sample covariance singular, "matrix is not positive definite", np.cov more assets than observations, N > T, condition number, Ledoit-Wolf shrinkage, sklearn L
credit-risk-modelsEstimate a default probability and price credit, and keep the two probabilities apart - the risk-neutral one that prices and the physical one that forecasts. TRIGGER - Merton model, structural credit model, KMV, distance to default, asset value and asset volatility from equity, N(-d2), solve the two
factor-and-timeseries-researchJudge whether a cross-sectional factor predicts returns, and forecast financial series. TRIGGER - information coefficient, IC, quantile returns, factor decay, turnover, alphalens; Fama-French, Fama-MacBeth, PanelOLS, linearmodels, cross-sectional asset pricing; event study, abnormal returns, CAR, BH
factor-modelsBuild long-short factor portfolios from a characteristic panel and test the alpha with standard errors that survive serial correlation. TRIGGER - factor model, Fama-French, Fama-MacBeth, cross-sectional regression, decile or quintile long-short sort, 2x3 sort, SMB and HML, value- weight vs equal-wei
implied-vol-surfaceBuild a volatility surface that is not silently arbitrageable - invert prices to implied vols, fit a smile, check butterfly and calendar arbitrage, and interpolate between maturities. TRIGGER - implied volatility solver, Newton diverges, bisection bracket, "implied vol returns 0.001", "no implied vo
option-pricing-modelsImplement an option pricing model correctly - closed form, tree, characteristic function, Monte Carlo - and the four places each silently returns a plausible wrong number. TRIGGER - Black-Scholes-Merton with dividend yield, binomial tree, CRR, Cox-Ross-Rubinstein, American early exercise, Richardson
portfolio-optimizersTurn expected returns and a covariance matrix into weights, and measure what the optimizer did to your estimation error on the way. TRIGGER - portfolio optimization, mean-variance, Markowitz, efficient frontier, tangency or max-Sharpe portfolio, minimum-variance portfolio, long-only and budget const
risk-measures-var-cvarCompute Value-at-Risk and Expected Shortfall by the four estimators that disagree in the tail, and backtest them properly. TRIGGER - VaR, value at risk, CVaR, expected shortfall, ES, tail risk, 99% VaR, 95% VaR, historical simulation VaR, parametric normal VaR, Cornish-Fisher expansion, EVT, peaks o
stat-arb-cointegrationScreen, test and trade a cointegrated pair without counting the trials wrong, applying the single-series ADF table to a fitted residual, or estimating the hedge ratio on the window you score it in. TRIGGER - cointegration, Engle-Granger, statsmodels coint, coint_johansen, Johansen, trace statistic,
state-space-and-kalmanEstimate a time-varying hedge ratio or beta with a Kalman filter, and know which of its three state series you are allowed to trade - the smoothed one has read the whole sample. TRIGGER - Kalman filter, Kalman smoother, RTS smoother, state space model, local level, local linear trend, time-varying b
term-structure-modelsBuild and fit a yield curve, and price a zero-coupon bond in a short-rate model, without the convention and identification traps. TRIGGER - bootstrap a zero curve, par rates to zero rates, discount factors to zero rates, par bond reprice, curve stripping; day count ACT/365 ACT/360 30/360, annual vs
time-series-forecasting-modelsScore a forecast against the baseline it has to beat - naive, seasonal-naive, drift, mean - with MASE, rolling-origin evaluation and a Diebold-Mariano test, instead of an R^2 on a price level. TRIGGER - forecasting, ARIMA, SARIMA, SARIMAX, auto_arima, ETS, Holt-Winters, exponential smoothing, statsm
volatility-modelsFit and forecast volatility - GARCH, range-based realized variance, HAR-RV - without the two errors that silently move the answer: the units `arch` expects, and a range estimator used on bars that gap. TRIGGER - GARCH, GARCH(1,1), EGARCH, GJR-GARCH, arch_model, conditional_volatility, DataScaleWarni