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Practical Methods of Financial Engineering and Risk Management by Rupak Chatterjee

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CHAPTER 3

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Statistical Analysis of Financial Data

Chapters 1 and 2 presented various financial instruments in the form of market data familiar to Wall Street traders—namely, Bloomberg screens. Chapter 3 lays the mathematical foundation for the valuation of financial instruments, which depends in the first place on an analysis of the likelihood of future events using the tools of statistics and probability. This chapter shows you how to perform a statistical analysis of a given financial instrument by first identifying a suitable probability distribution and then calibrating it appropriately. Finally, this chapter discusses Risk measures such as ...

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