ECON 424/CFRM 462
Introduction to Computational
Finance and Financial
Econometrics
Eric Zivot
Savery 348, email:ezivot@uw.edu,
phone 543-6715
http://faculty.washington.edu/ezivot
OH: Th 3:30-4:30
TA: Ming He (Hem611@uw.edu)
ECON 424:IntroEric Zivot

1About Me Robert Richards Chaired Professor of Economics
 Adjunct Professor of Finance (Foster BusinessSchool), Adjunct Professor of Statistics, Adjunct
Professor of Applied Mathematics
 Co-Director of UW MS Degree Program inComputational Finance and Risk Management
 UC Berkeley undergrad: Econ and Stat doublemajor Yale Ph.D. with emphasis in Econometrics andFinance Co-author of Modeling Financial Time Series withS-PLUS, Springer-Verlag and writing Modeling
Financial Time Series with R, to be published bySpringer-Verlag, October 2014
 Consultant to BlackRock Alternative Advisors (7E. Zivotyears)
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Course Material on the WebECON 424 Class Webpage:faculty.washington.edu/ezivot/econ424/econ424.htm» Official course page
» Lecture notes, class slides and R programs

ECON 424/CFRM 462 Canvas sitecanvas.uw.edu» Homework uploads» Discussion boards» Videos Course material will be mirrored on Canvassite.
 Coursera course (online videos)» www.coursera.orgE. Zivot

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Add Codes
 If you are not registered for econ

424/CFRM 462 but wish to get into thecourse, you must sign up on an add
code request sheet
 Advisors will check prerequisites, major,graduation year etc and tell me which
students can be let into the course I will cap enrollment at room capacity
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COURSE MECHANICS(see syllabus on webpage)
Course content
 Prerequisites: math, stat, microeconomic theory
 Text:» introduction to Computational Finance and Financial Econometrics,by Eric Zivot (manuscript in preparation)» Statistics and Data Analysis for Financial Engineering, by David
Ruppert, Springer-Verlag, 2010. Free e-book from UW library.

Additional Readings online.
 Exam Review: Several sets of past exams have beenposted on the class web site Software: Excel, R» Excel is available on computers throughout campus» Download R from www.r-project.org» Highly recommended to use RStudio from www.rstudio.com
Exams, homework, class project» HW due every Tuesday at 8pm (online via Canvas)

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Introduction to Computational
Finance and Financial Econometrics
with examples in R
 Textbook in

preparation based oncourse lecture notes Chapters are posted on
the class webpage
 Feedback is welcomedand encouraged!

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Statistics and Data Analysis forFinancial Engineering Excellent statisticaltreatment of financial
data with R integration
 Extensive revision ofearlier book Statistics
and Finance: AnIntroduction
 Used also in AMATH
542, Financial Data
Modeling and Analysis
in R

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R Cookbook
 No-nonsense guide toR with more than 200
practical recipes helps
you perform dataanalysis with R quickly
and efficiently.
 Written by R financequant Paul Teetor

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A Beginner’s Guide to R
 Gentle introduction toR programming andgraphics language
 Not a book about
statistical analysis withR
 Short, concise chapters

ECON 424:IntroE. Zivot

9Brief History of R R is a language and environment for statisticalcomputing and graphics
 R is based on the S language originally developed byJohn Chambers and colleagues at AT&T Bell Labs inthe late 1970s and early 1980s
 R (sometimes called “GNU S” ) is free open source
software licensed under the GNU general public license(GPL 2)
 R development was initiated by Robert Gentleman andRoss Ihaka at the University of Auckland, New Zealand R is formally known as The R Project for StatisticalComputing www.r-project.org
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What is R great at?
 Data analysis
 Data Manipulation Data Visualization
 Statistical Modelingand Programming

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S Language Implementations
R is the most recent andfull-featured
implementation of the Slanguage Original S - AT & T BellLabs
 S-PLUS (S plus a GUI)
 Statistical Sciences, Inc.


» Mathsoft, Inc., Insightful,Inc., Tibco, Inc.
R - The R Project for
Statistical Computing

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The R Foundation
 The R Foundation is the non-profit

organization located in Vienna, Austria
which is responsible for developing andmaintaining R» Hold and administer the copyright of R softwareand documentation» Support continued development of R
» Organize meetings and conferences related tostatistical computing

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R Homepage

 http://www.r-project.org
 List of CRAN mirrorsites
 Manuals
 FAQs Mailing Lists
 Links
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CRAN – Comprehensive R Archive
Network http://cran.fhcrc.org
 CRAN Mirrors» About 100 sites
worldwide» About 25 sites in US
 R Binaries
 R Packages
 R Sources Task Views
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CRAN Task Views
 Organizes 6000+ Rpackages byapplication
 Relevant tasks
computational finance:» Distributions» Econometrics» Finance» MachineLearning» Multivariate» Time Series
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Other Useful R Sites


R Seek R specific search site:» http://www.rseek.org/

R Bloggers Aggregation of about 100 R blogs:» http://www.r-bloggers.com

Stack Overflow Excellent developer Q&A forum» http://stackoverflow.com

R Graph Gallery Examples of many possible R graphs» http://addictedtor.free.fr/graphiques

Inside-R R community site by Revolution Analytics» http://www.inside-r.org



DataCamp – Learn R online interactively» https://www.datacamp.com/

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