Quantitative accounting uses existing monetary values to derive other values, without predicting or detecting trends. It emerged in the 1990s as a way to maintain economic stability, but excessive analysis of simple data contributed to the 2008 global recession. The field focuses on finding correlative information, and differs from quantitative economics in that it does not look for patterns. There are two main approaches: portfolio management and derivative pricing.
Quantitative accounting is the field of applied mathematics that is directly concerned with the use of 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 supplied; it does not predict or detect 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 goes by many names: quantitative finance and mathematics 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-based strategies were common in the 1980s and had a very negative overall impact on the economies of the most developed nations. The use of quantitative measures to determine fair and reasonable methods of investing and obtaining value has emerged as a superior method of maintaining economic stability. This served most investors well until the mid-2000s, where excessive analysis of simple data became one of the main factors in a global recession.
The main focus of this field is on the analysis of existing data with the purpose of finding correlative information. In simpler terms, instead of worrying about what any number is what it is, the field simply takes existing information and sends 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 a.m., the new data will describe something related to 3:18 a.m.
This is the difference between quantitative accounting and quantitative economics. An economist would take the given information and use it to look for patterns. For example, the economist can take the information along with the same information over the last few weeks and develop a trend analysis. This would tell potential investors how likely a security is to go up or down in the coming weeks.
There are two main approaches within quantity 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 asset or portfolio section at the time of the original numbers’ existence. The source of the original data need not be based on reality; a speculative investor may give a probable future value to determine related information at a future time.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
