Chapter 2. Statistical Modeling

In this chapter, we are going to discuss statistical modeling, which will be the first step in learning quantitative finance in R as the concepts of statistical modeling are the driving force for quantitative finance. Before starting this chapter, the assumption is that learners are familiar with basic programming in R and have a sound knowledge of statistical concepts. We will not be discussing statistical concepts in this chapter. We will be discussing how to do the statistical modeling in R.

This chapter covers the following topics:

• Probability distributions
• Sampling
• Statistics
• Correlation
• Hypothesis testing
• Parameter estimation
• Outlier detection
• Standardization
• Normalization