📚Quantitative Finance & Econometrics Dictionary
Institutional methodology guide defining the mathematical frameworks, statistical risk metrics, and statutory insider tracking models powering ARX Terminal.
Authored & Audited by Chartered Financial Analysts (CFA) & Econometric Systems Engineers
Methodology Standard: All mathematical models, statutory STOCK Act disclosures, and execution geometries are continuously audited via automated Kupiec POF backtests and walk-forward RMSE tracking.
Econometric & Mathematical Modeling
5 TermsAutoregressive with Exogenous Inputs (ARX Model)
→A foundational econometric time-series model that predicts a target financial variable using both its own historical lagged values and external (exogenous) market drivers.
y_t = c + \sum_{i=1}^p \phi_i y_{t-i} + \sum_{j=1}^m \beta_j x_{t-j} + \epsilon_tCornish-Fisher Modified Value-at-Risk (M-VaR)
→An advanced statistical risk metric that calculates downside Value-at-Risk by adjusting standard Gaussian quantiles for skewness and fat-tailed excess kurtosis.
\tilde{z}_\alpha = z_\alpha + \frac{S}{6}(z_\alpha^2 - 1) + \frac{K}{24}(z_\alpha^3 - 3z_\alpha) - \frac{S^2}{36}(2z_\alpha^3 - 5z_\alpha)Amihud Illiquidity Ratio (Price Impact)
→A classic microstructure econometric measure that calculates the absolute price change per dollar of daily trading volume, measuring liquidity depth.
\text{ILLIQ}_t = \frac{1}{N} \sum_{d=1}^N \frac{|R_d|}{\text{Volume}_d \times \text{Price}_d}Piotroski 9-Point Fundamental Accounting Score
→A discrete score between 0 and 9 based on nine accounting criteria that evaluates the financial health, profitability, and operational efficiency of a company.
\text{F-Score} = \sum_{i=1}^9 C_i Kupiec Proportion of Failures (POF) Test
→A formal statistical likelihood ratio test used by financial regulators and risk managers to evaluate whether a Value-at-Risk (VaR) model is calibrated accurately.
LR_{\text{POF}} = -2 \ln \left( \frac{p^x (1-p)^{N-x}}{(x/N)^x (1 - x/N)^{N-x}} \right) \sim \chi^2(1)Algorithmic Setups & Execution
3 TermsMark Minervini Volatility Contraction Pattern (VCP)
→An institutional swing accumulation pattern characterized by progressive contractions in price volatility paired with volume dry-up prior to an asymmetric pivot breakout.
\text{Contraction Ratio: } \Delta_k = \frac{\text{High}_k - \text{Low}_k}{\text{High}_k} Turtle Trading Average True Range (ATR) Trailing Stop
→A dynamic risk management framework that calibrates stop-loss distances to the underlying volatility of an asset using the 14-period Average True Range.
\text{Stop Loss} = \text{Entry} - (k \times \text{ATR}_{14}) Linda Raschke 20-Period EMA Pullback Model
→A high-probability swing trading setup that identifies shallow counter-trend pullbacks into an advancing 20-day Exponential Moving Average in strong trends.
\text{Buy Trigger: } \text{Price} \in [\text{EMA}_{20} - 0.5\times\text{ATR}, \text{EMA}_{20} + 0.5\times\text{ATR}] Statutory & Smart Money Forensics
2 TermsStop Trading on Congressional Knowledge (STOCK) Act of 2012
→A U.S. federal statute (Public Law 112-105) prohibiting members of Congress and legislative staff from using non-public information for private securities trading.
\text{Statutory Window: } t_{\text{filing}} - t_{\text{transaction}} \le 45 \text{ days}Congressional Disclosure Staleness Decay Function
→A quantitative decay formula that progressively reduces the actionable weighting of political insider filings as the latency between trade execution and public filing widens.
W(t) = \max\left(0, 1 - \lambda \cdot (t_{\text{filed}} - t_{\text{trade}})\right) 💡 Why Quantitative Terminology Matters
Unlike retail indicators that rely on subjective visual chart overlays, institutional quantitative finance relies on mathematically auditable definitions. ARX Terminal enforces strict epistemic standards: every factor score, execution corridor, and risk parameter is grounded in peer-reviewed econometric literature (from Box-Jenkins time series to Amihud microstructure).