Fall 2016 Computer Science 458 Lecture 8: 9/28/2016
Per piazza posting, Jieung Kim office hours: Monday and
Wednesdays, 5:30 pm to 7:30pm. AKW 311.
Wizards of Odds Discussion of blackjack odds. May give you some insight
into the problem in hw1.
We have the following guest speakers:
- Monday, September 26. Dr. John Niccolai, Citadel.
Citadel recruiter: Liz Conway (Liz.Conway@citadel.com).
- Wednesday, September 28. Kayo Teramoto, Palantir. Dinner 7PM!
Kayo Teramoto is a software engineer at Palantir Technologies
currently working on a commercial project in Energy. She graduated
magna cum laude from Yale in 2015 with a B.S. in Electrical
Engineering and Computer Science. Originally from a Washington,
D.C. suburb in Maryland, she now resides in San Francisco, California.
Fan Gao (fg299)
Yinfeng Zhang (yz683)
Chengyang Liu (cl938)
Vanessa Qiying Kuang(qk22)
Flora Qian Qiao (qq22)
Leesa Shiyang Xu (sx69)
Sean Lao (xl452)
Assignment 1 and new Assignment 2
Modern Portfolio Theory
variance [ var() ]
standard deviation [ sd() ]
mean [ mean() ]
correlation coefficient [ cor() ]
covariance [ cov() ]
stock = equity
bond = debt = fixed income
IPO = initial public offering
options (buy = call, sell = put)
derivatives (options, futures, forwards, swaps, credit default swaps, swaptions, mortgage backed securities [MBS], collateralized debt obligations [CDO's], CDO-squared)
Black Scholes option pricing model
asset classes (equity, fixed income, real estate, private equity,
venture capital, real estate, timber, jewelry store receivables,
rock band royalties)
Capital Allocation Line (CAL) == Capital Market Line (CML)
Capital Asset Pricing Model (CAPM)
Security Market Line (SML)
Value at Risk (VAR)
market capitalization (market cap)
large cap, mid cap, small cap
basis points, bps, "bips"
leverage buy out (LBO)
junk bonds == high yield bonds
- Multi Strategy Funds
- On-the-run / off-the-run
- Basis point / bps / bips (beat the benchmark, haircut)
- IRS interest rate swap market, e.g., mortgages
- EURUSD - exchange rates, FX. See
- Exchanges: CME
- LIBOR - London Interbank Overnight Rate
- Bonds: TIPS, TBA, On-the-run 10y
- OTC - derivatives market
- Transparency: Exchange > Securities < OTC
- Sharpe Ratio
- PnL - Profit and Loss
- IRS swap has 200 fields
- Notional Value
- bullet / vanilla swap (Zero Present Value)
- Fed funds rate is a step function
- OIS - overnight index swap
- Monte Carlo
- [Black Swans]
- CAD swaps dataq is unreliable
- Capacity - can have a great strategy (Sharpe > 40) that does not scale.
- Spectrum of automation: Macro < Model Informed < Model Driven < Algorithmic < HFT
- Languages used at Citadel: C++, Python, C#, Excel.
Indices excercise data (2007):
Which investment would you prefer? How could you create
a diversified portfolio from these investments that has
a better risk/return profile?