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The test is closed book, closed notes, closed calculator. We will provide all of the numbers you need.

  • Chapters in book: Chapters 1, 2, 3, 4
  • Term Frequency, tf: Given an example sentence, compute the tf for each word.
  • idf: Provide the equation defining iff.
  • KNN: Are you more likely to overfit if K = 1 or if K = 10? Why?
  • Overfitting: Given a graph that shows in-sample error and out-of-sample error as a factor of degrees of freedom, identify the region where overfitting is occurring.
  • Name and describe two incentives for hedge fund managers. In other words, do they get paid?
  • Name and describe two metrics for assessing strategy or fund performance.
  • Assume the numpy array price[] contains rows of daily prices for a stock. Write a single line of python to convert it into daily returns, for instance:
    • daily_rets = price XXXXXXXXX
  • Write an equation for Sharpe Ratio based in terms of daily returns, daily_rets[]. Assume the daily risk free return is 0.0.
  • Does the equation for Sharpe Ratio change if the trading period was 40 days versus 30?
  • Consider the order book below. What average, total price would a market order to sell 100 shares result in?
  • If you sell 100 shares of IBM short. You owe somebody something. What is it that you owe them?