What is quantitative accounting?

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Quantitative accounting is the field of applied mathematics that is directly related to using existing monetary values ​​to derive other values. Most forms of applied mathematics are used as predictive processes to analyze or understand trends in data. Quantitative accounting is not concerned with any value other than the one provided; does not predict or identify trends. The field takes existing known values, for example the price of a stock at a specific time, and uses that value to derive other values ​​associated with it. This field has many names: quantitative finance and mathematical finance are two of the common alternatives.

The field of quantitative accounting was in its infancy in the 1980s and became a more common area of ​​study in the early 1990s. Speculative and money-driven strategies were common in the 1980s and had an overall very negative impact on economies. of most developed nations. The use of quantitative measures to determine fair and reasonable methods of investing and deriving value has emerged as a superior method of maintaining economic stability. This served most investors well until the mid-2000s, when over-analysis of simple data became a major factor in a worldwide recession.

The main focus of this field is the analysis of existing data with the aim of finding correlated information. In simpler terms, instead of worrying about why any number is what it is, the field simply takes in the existing information and sends out new information. The new information is related to the data provided in terms of time and scope. If the old data described something as it existed at 3:18 am, the new data will describe something related to 3:18 am

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That’s the difference between quantitative accounting and quantitative economics. An economist would take the information provided and use it to look for patterns. For example, the economist can take the information together with the same information from the last few weeks and do a trend analysis. This would indicate to potential investors the likelihood of a value going up or down in the coming weeks.

There are two main focuses in quantitative accounting: portfolio management and derivative pricing. In both cases, the process is the same. The accountant receives information related to the derivative or portfolio. Using available information, the accountant determines the overall value of any derivative good or section of the portfolio at the time the original numbers existed. The source of the original data need not be based on reality; a speculative investor may provide probable future value to determine related information at a future time.

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