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TL;DR

Generating Functions: Encode a sequence as coefficients of a power series to solve recurrences and counting problems. This concept is essential for quantitative trading interviews and is frequently tested at top firms.

By Valenke Exam Prep Team·Last updated 2026-06-01
Algebra

Generating Functions

Encode a sequence as coefficients of a power series to solve recurrences and counting problems.

A generating function encodes a sequence a0,a1,a2,a_0, a_1, a_2, \ldots as: A(x)=n=0anxnA(x) = \sum_{n=0}^{\infty} a_n x^n Key operations: - Addition: A(x)+B(x)A(x) + B(x) adds sequences term-by-term - Multiplication: A(x)B(x)A(x) \cdot B(x) gives the convolution cn=k=0nakbnkc_n = \sum_{k=0}^n a_k b_{n-k} - Differentiation: A(x)=nanxn1A'(x) = \sum n a_n x^{n-1} shifts and weights - Substitution: A(x2)A(x^2) picks out even-indexed terms Common generating functions: - 11x=1+x+x2+\frac{1}{1-x} = 1 + x + x^2 + \cdots (geometric series) - 1(1x)2=1+2x+3x2+\frac{1}{(1-x)^2} = 1 + 2x + 3x^2 + \cdots - ex=1+x+x22!+e^x = 1 + x + \frac{x^2}{2!} + \cdots (exponential g.f.) - 114x2x\frac{1-\sqrt{1-4x}}{2x} generates Catalan numbers When to use: Solving linear recurrences with constant coefficients. Counting problems where you need to track a parameter. Proving combinatorial identities. This is a fundamental technique for combinatorics and probability. Many "narrow" identities (Vandermonde, Catalan formula) can be derived via generating functions.

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