Quant Finance Glossary

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

Concepts

Black-Scholes Model

The Black-Scholes model is a mathematical framework for pricing European-style options, providing closed-form formulas that revolutionized derivatives markets when introduced in 1973.

14 min read

Options & DerivativesAdvanced

Volatility Smile

The volatility smile is the observed pattern where implied volatility varies across option strike prices, forming a U-shaped curve that contradicts the constant-volatility assumption of Black-Scholes.

9 min read

Options & DerivativesAdvanced

Risk-Neutral Pricing

Risk-neutral pricing is a framework that prices derivatives by assuming all investors are risk-neutral, allowing expected payoffs to be discounted at the risk-free rate regardless of actual risk preferences.

11 min read

Math FoundationsAdvanced

Stochastic Calculus

Stochastic calculus extends classical calculus to handle random processes, providing the mathematical foundation for derivatives pricing models like Black-Scholes and modern quantitative finance.

14 min read

Math FoundationsAdvanced

Brownian Motion

Brownian motion (Wiener process) is the continuous-time random process that models the random component of asset price movements and is the foundation of the Black-Scholes model and stochastic calculus.

10 min read

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