Quantitative Finance
Formal reasoning about uncertainty, risk, return, portfolio decisions and capital allocation.
Uncertainty requires structure.
Financial decisions are made before outcomes are known. Quantitative finance gives The Quant Society a language for expressing uncertainty, comparing alternatives and making risk explicit.
We use mathematical and probabilistic models to study capital allocation, portfolio construction, position sizing, distributions, correlations, derivatives and scenario risk. Models are useful only when their assumptions are understood.
The objective is not mathematical complexity for its own sake. The objective is better decisions when capital is exposed to uncertain outcomes.
Quantitative finance turns uncertainty into explicit assumptions, probabilities and capital decisions that can be tested, compared and revised.
What are we trying to understand?
How should capital be allocated when future outcomes are uncertain?
Which assumptions make a financial model useful or misleading?
How should probability, payoff and risk interact in a decision?
When does diversification reduce risk and when does correlation make it disappear?