Math for Quantitative Finance

Fermi Estimates

A Fermi estimate is one done using back-of-the-envelope calculations and rough generalizations to estimate values which would require extensive analysis or experimentation to determine exactly.

This is an important skill because what often matters is order of magnitude, rather than an exact value. This is especially useful in quantitative finance (so that you can quickly approximate various values that might appear in a trading situation), and also comes up in interviews.

           

Fermi Estimates

If tickets to a baseball game generally cost between $10 and $30, a season has about 150 games, and each game is attended by 50,000-75,000 people, which of the following is a good estimate for ticket sales revenue?

           

Fermi Estimates

Which value is the most reasonable estimate for how many candies are in the jar?

           

Fermi Estimates

What is the best estimate for how many times a human heart beats in a day?

           

Fermi Estimates

What is the approximate value of the United States gross domestic product (GDP), in dollars?

           

Fermi Estimates

Approximately how many different stocks are listed on the New York Stock Exchange (NYSE)?

           
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