Quant Finance Glossary

Essential concepts for quant trading, research, and interviews — explained clearly.

Concepts

Kelly Criterion

The Kelly criterion is a mathematical formula that determines the optimal fraction of capital to risk on a bet or trade, maximizing long-term geometric growth while managing the risk of ruin.

10 min read

Risk & PortfolioBeginner

Sharpe Ratio

The Sharpe ratio measures risk-adjusted return by dividing a portfolio's excess return over the risk-free rate by its standard deviation, making it the gold standard for comparing strategy performance.

8 min read

Risk & PortfolioIntermediate

Value at Risk (VaR)

Value at Risk (VaR) estimates the maximum expected loss of a portfolio over a specified time period at a given confidence level, serving as a standard risk measure across the financial industry.

10 min read

Risk & PortfolioBeginner

Alpha and Beta

Alpha represents the excess return a portfolio generates above its benchmark (a measure of skill), while beta measures the portfolio's sensitivity to market movements (systematic risk exposure).

7 min read

Risk & PortfolioBeginner

Maximum Drawdown

Maximum drawdown measures the largest peak-to-trough decline in portfolio value, representing the worst-case loss a strategy has experienced and a key metric for evaluating downside risk.

6 min read

Risk & PortfolioIntermediate

Factor Investing

Factor investing is a systematic investment approach that targets specific characteristics (factors) — such as value, momentum, size, and quality — believed to drive returns across asset classes.

10 min read

Master these concepts for quant interviews

Our bootcamp covers probability, market making, options, and every topic you need to ace interviews at top quant firms. Get 1:1 mentorship and 500+ practice questions.

Book a Free Quant Consult