Different Branches of Quantitative Finance

Quantitative finance, a field that applies mathematical models and statistical techniques to financial markets.

As the financial world becomes increasingly sophisticated, the branches of quantitative finance have expanded to address various aspects of market analysis, risk management, and investment strategies.

Here is a Mind-Map to simplify the world of Quantitative Finance -

Note:- This Quantitative Finance Mind-Map is still in making. I will update the Mind-Map with more details in the future.

Now, let me explain these branches :-

1. Risk Management:
   • Market Risk: Added Value at Risk (VaR) and Stress Testing as key techniques.
   • Credit Risk: Included Default Probability and Loss Given Default as important metrics.
   • Operational Risk: Added Key Risk Indicators and Risk Control Self-Assessment as common methods.
2. Derivatives Pricing:
   • Options: Mentioned Black-Scholes and Binomial Models as fundamental pricing models.
   • Futures: Added Forward Pricing and Cost of Carry concepts.
   • Swaps: Specified Interest Rate Swaps and Credit Default Swaps as common types.
3. Portfolio Management:
   • Asset Allocation: Included Modern Portfolio Theory and Factor Investing as key strategies.
   • Performance Attribution: Added Returns-Based and Holdings-Based Analysis as main approaches.
4. Algorithmic Trading:
   • High-Frequency Trading: Mentioned Low Latency and Co-location as crucial aspects.
   • Statistical Arbitrage: Added Pairs Trading and Mean Reversion as common strategies.
5. Financial Engineering:
   • Product Development: Included Exotic Options and Weather Derivatives as examples of innovative products.
   • Structured Products: Mentioned Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities (MBS) as examples.
6. Quantitative Research:
   • Market Microstructure: Added Order Book Dynamics and Liquidity Analysis as key research areas.
   • Econometrics: Included Time Series Analysis and Panel Data Models as important statistical techniques.

This more detailed mind map provides a comprehensive overview of the branches of quantitative finance, including specific concepts, techniques, and examples within each area. It illustrates the depth and complexity of the field, showing how each branch encompasses various specialized topics and methodologies.