Options, swaps, futures, forward contracts, options on futures, options
on indexes, and other more exotic instruments are called deritvatives because
their value and definition is derived from other securities. With some
derivatives you can gain a lot of leverage on an investment, which increases
the level of risk greatly. If risk management is not properly exercised,
a disaster will eventually occur, and this has given derivatives a bad
reputation. It's not a problem with derivatives, however, but rather a
problem of a lack of proper risk management.
These are stocks, basicaly. They are the publicly traded shares
of a corporation. Not all companies are publicly traded. To own stock
in a company is to own shares in it, and that means you have equity in
the company. Equities are different from bonds; holders of bonds do not
own a piece of a company, they own debt obligations instead.
This stands for long distance relationship. Basically, with the advent
of the Internet, the concept of LDRs gained in popularity because frequently,
or actually most of the time, the person you met on the 'net would live far,
far away. So the LDR was invented, and it was quickly shown (through
scientific observation of laboratory tests) that LDRs are bad for your health,
and are doomed to failure 90% of the time. The remaining 10% are either lies
or amazing luck, but they act as a carrot for future fools.
An angstfull derivative of "point". Often used with bean, as in "poing
bean", meaning, the point being that had this been a regular universe, had
there been any justice in the world, this thing would never have happened, and
thus the reason it did happen would have been irrelevant, but it's not, so
reasons are important, if you get my poing.
Using advanced mathematical and programmnig techniques to model, analyze,
and predict the markets. The dream job. Also known on Wall Street as
"Rocket Science" although it has nothing to do with rockets and is, in
fact, far more complex than the science related to rocketry.
This is a computational simulation technique using lagrangian-style
numerical analysis. Basically, you take the substances you are modelling
and represent them with particles, so an armored explosive, such as steel
plate over Comp-B exposlive material, would be represented by a large
field of Comp-B particles, covered by a layer of steel particles. Then
you would take your projectile, say, a Tungsten Carbide cube, and represent
that by a cube-shaped array of WC particles. Each particle has mass, velocity,
pressure, energy, stress, and about 20 other parameters. So you might
consider this a 25-dimensional simulation of a 55,000-body problem. Computers
are faster today however, so a lot more particles may be used. I would
show you pictures, but apparently that information has become classified.
The work I did at TERA was (mostly) unclassified, modelling explosions and
shock waves. Anyway, in order to make this solvable in our lifetime, a
smoothing function is applied to the particles, such that they don't
factor in the effects of particles far away.
The science of doing a statistical study of a string of sequential
data, where the primary index is typically time. This can involve
fourier transforms, auto-correlation, auto-regression, comparison against
derived functions, and other techniques. Mastery requires a knowledge of
partial differential equations, stochastics, numerical analysis,
probability, mathematical programming, and fourier analysis. Basically
all of the neat stuff!
This is an extremely important concept that everyone should learn as
early as possible. A dollar today is not worth a dollar tomorrow. A
dollar invested at the risk-free rate (say, about 6%, for institutional
firms) is worth $1.06 after a year (roughly; it's actually compounded daily).
To find out what a dollar will be worth a year from now, you have to discount
it using the same risk-free rate, and you would get about $0.94. The effect
of this is that in order to measure the real return of an investment, you
have to subtract out the risk-free rate. Another implication of this is that
if you can invest money and get a return of Y% while borrowing money at X%,
and Y is greater than X after taxes and risks are taken into consideration,
then it is actually wiser to use new money to invest in Y instead of pay off
the loan at X. A common application of this is to avoid paying off your
30-year mortgage if you have a really low rate.