0
votes
0answers
6 views

Replication of the portfolio in single step binomial model

I would be grateful if anyone would comment how to construct this: Assume $S_{i}^k$ is a stock price at time level $i$ and at price level $k$. Assume option is written on $S$ with a a payoff ...
1
vote
0answers
15 views

US options market/microstruture research

Can someone point out where to find up to date market/microstruture research in the options market?
0
votes
0answers
15 views

rollapply with Arima model: testing for stability of coefficients

I am trying to fit an arima model on a rolling window using rollapply.My aim is to plot a graph of the evolution of the coefficient, plot the error and the standard deviation. well i encountered the ...
0
votes
0answers
23 views

Questions on Brownian Motion

Hi all I'm preparing for my final exam in a few days on Stochastic Processes and was wondering how can if I have properly calculated thee following probabilities: (Let $W_1$ be a standard BM in ...
0
votes
0answers
27 views

Monte Carlo simulation returns not normal distributed

I am generating 100,000 paths of SPX out to 1 year using Euler discretization. I look at how S is distributed for 100,000 paths at the 1 year point and I find it is lognormally distributed. I look at ...
0
votes
0answers
7 views

Principal Protected Notes

I have a few questions on the structuring of principal protected notes. Let's say that the note has a call option on the S&P500 so that it has the following payoff at maturity: $PPN_T=100\% + A ...
0
votes
0answers
6 views

Simulated Price Data via Harmonic Logarithmic Walks?

Hi I came up with this equation last week and was wondering if: 1) There was already a name for this mathematical process. If so, where I might find more information. 2) Also, I am not adept at ...
0
votes
1answer
23 views

Futures fair value with spot in different currency

The fair value, $F$, for a futures contract is $ F = S(1+rt) - D,$ where $S$ is the underlying spot price, $r$ is the interest rate, $t$ is the time to maturity, and $D$ is the dividends. What is ...
0
votes
0answers
17 views

What is a Basis Swap Curve?

I know what a Swap Curve is. But I don't understand what a Basis Swap Curve is and how it is constructed? Need some guidance on this.
0
votes
0answers
10 views

Calculating Aroon Indicator Serie

I'm trying to build a class to create Aroon series. But it seems I don't understand the steps well. I'm not sure about what purpose I have to use the period parameter. Here is my first attempt: ...
0
votes
0answers
12 views

Implementing Minimum Leverage in an SOCP Portfolio Optimization

I'm optimizing a portfolio of n assets and my optimization variable is of the form $$x = [t,w,w_L,w_S]$$ where $$t:= \text{slack variable for turning my QP objective into SOCP constraint}$$ ...
0
votes
1answer
27 views

out-of-sample variance using rolling window

I am currently working on the comparison of the constructed portfolios using out-of-sample variance criteria. I am going to use rolling window procedure for the comparison. First, I choose a window ...
2
votes
1answer
34 views

Sortino Ratio calculation

I've been using an excel template to calculate the sortino ratio for my automated trading strategies. http://investexcel.net/calculate-the-sortino-ratio-with-excel Basically i input my monthly ...
0
votes
1answer
23 views

Portfolio of Assets

The following represents a model for an economy. At time $t=0$, four assets have the value $X_1= £5$, $X_2=£5$, $X_3=£10$ and $X_4=£4$. Three possible states of the world exist ($\alpha_1$, ...
0
votes
0answers
22 views

continuous dividend yield - european option

Can someone help with following task? You need to use a 5-period forward binomial model to price options, which is constructed by specifying the up and down moves as follows: u = exp {(r − δ) · h + ...
1
vote
0answers
12 views

What does it mean to change the currency of a spread between bonds from 2 different countries?

On reuters I charted the spread between the 10yr US bond and the 10yr UK bond. It gives the me the option of choosing the currency. For just the standard spread(ie: yield(US)-yield(UK)) you select ...
2
votes
0answers
35 views

The effect of negative interest rates on derivative pricing

I am trying to get an overview of the impact on negative interest rates on financial products (in general). For the time being I distinguished the following products Vanilla options Exotic options ...
0
votes
0answers
40 views

Short term<10 sec volatility model

For example we have Price time series (seconds or ticks) USD/EUR S...Sn 0.937 0.936 0.934 0. 933 0.935 etc and Momentum Series of r(1..n) r=S(n)-S(n-1) ******My qustion is simple************* Which ...
0
votes
0answers
35 views

Why do we need to use the very old data to predict the new trend in regression modeling in stock? [on hold]

Why do we need to use the very old data to predict the new trend in regression modeling in stock? Which horizon of years of data of daily prices should we use, all years, 10 years, or 2 years? For ...
1
vote
0answers
25 views

Why do leveraged and inverse leveraged WTI ETNs have this price relationship?

UWTI: 3x leveraged exposure to WTI DWTI: 3x leveraged inverse exposure to WTI The inverse relationship between these two symbols seems to trend toward the origin on a log-log plot (using log base ...
0
votes
0answers
19 views

Random Matrix Theory in Risk Management [duplicate]

How can we apply Random Matrix Theory(RMT) in Risk Management for estimation risk of portfolio consisting of correlated assets?
1
vote
0answers
21 views

Why do I still see large orders?

When analysing T&S for stocks such as AAPL, I sometimes see huge orders. These orders are in the order of 100.000 shares or more. To my knowledge, large orders are (supposed to be) executed by ...
0
votes
1answer
29 views

Order routing: correlation of having same exchange for buy and sell

I am not familiar with the technicalities of order routing so my main sources of information as of now is the sec gov trade execution info and an explanation of how SOR works. Question 1: Let's ...
0
votes
0answers
10 views

Do I need to update the standard deviation into GARCH for the next step conditional variance predict?

I need to compare two garch models, I try to do that by Value at Risk. In general, if I have an initial conditional variance, for example, h1, then I can predict the next N days conditional variance ...
0
votes
2answers
58 views

Annual dividend yield using option prices

If I have only strike, call and put prices for European options, how do I work towards computing the continuous dividend yield?
2
votes
0answers
28 views

Methodology for handling short american options in a back test

Given that an American option can be exercised at any time, how does one handle algorithmically selling an American option in a back test? I am not sure what the best practice is to simulate the early ...
0
votes
1answer
35 views

Problem - stationarity and relevance

I am doing my Bachelor's thesis at the moment and I ran into a problem I was hoping you could help me out with. While running my data (in Eviews) I had relevant variables. However, when turning to a ...
0
votes
3answers
34 views

Small question about normalization

Lets assume I want to normalize some stock data ( prices or log prices) to compare for different types of correlation for example. And here is the question how should I normalize: a) by subtracting ...
0
votes
0answers
7 views

Replicating portfolio of a “delayed” call on zero-coupon bond

Let $T < T_2 < T+D$ and $B(t,T)$ the value at time $t$ of zero-coupon bond of maturity $T$. We suppose its volatility to be a deterministic function of $t$ and $T$. Let's consider a "delayed" ...
0
votes
1answer
28 views

Compute bond price with more coupon payments in a year

If I have a 5-year bond, which pays every six months a coupon of 2.5% with a yield of 1.5%, should I split up the yield to compute the bond price? Or is below the way to compute it? $\displaystyle ...
0
votes
0answers
13 views

Is it possible to offer promoters of a public company to acquire only their stake?

I am preparing a project report and I am interested in suggesting to buy the promoter stake (34%) in a public company. Will I get into trouble with the Securities Board (like SEC) if I do that instead ...
0
votes
1answer
42 views

Symbols for options on gold futures

I have a historical data set containing only options on gold futures. If I print out a unique list of option symbols I get: ...
1
vote
1answer
43 views

Why normalize only data for CDSs for PCA?

I'm reading a Credit Suisse Research Report on PCA. The report says that to preprocess the data, you should "Centre data (and normalize when considering CDS data)." Why would you only normalize ...
1
vote
0answers
43 views

Getting Into Quant Field without Phd or Masters [on hold]

I was wondering it is possible to get into a quant role without a masters or a PhD. And if so, what are the steps to do so? The only resources I've really been able to find speaking to this on ...
0
votes
1answer
26 views

How to get positions of your portfolio from Interactive Brokers with python ibPy?

I am using ibpy to get the positions of my portfolio. I understand that I can do: ...
5
votes
2answers
165 views

Is a stationary process necessarily mean-reverting?

Intuitively, a stationary stochastic process needs to be mean-reverting. This should follow immediately from the definition of stationarity: the mean of the process needs to be constant over time, so ...
1
vote
0answers
24 views

excel yearfrac 30u/360 across feb month end

Why are both of these formulas returning 1? One of them should be 3. =YEARFRAC(DATE(2015,2,27),DATE(2015,2,28),0)*360 =YEARFRAC(DATE(2015,2,28),DATE(2015,3,1),0)*360 Based on every description of ...
2
votes
1answer
143 views

Method for finding a arbitrage opportunity when market price of call is incorrect

The solution of the Black-scholes equation is the price of a European call. And the option price assumes the underlying stock is a geometric Brownian motion with volatility $\sigma_{1}>0$. ...
0
votes
0answers
33 views

Implied volatility from American options using python

I am currently trying to construct volatility surface from american option prices (using Cox-Ross-Rubinstein tree) in Python 2.7. Below you can find the code I came up with. Any corrections would be ...
3
votes
2answers
94 views
+50

Reference for drawdown, look ahead bias and survivorship bias

I'm writing a PhD thesis and I am using terminology such as maximum drawdown, maximum drawdown duration, lookahead bias, and survivorship bias. Although I understand what these are, and they are ...
0
votes
0answers
38 views

Calculating Asset Returns

The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B ...
0
votes
0answers
16 views

Why does SOR post the order to the primary market if it cannot find best price to execute?

If a Smart Order Router cannot find the best price for an order to execute, it would post this order to the primary market. I think this is because the primary market has more liquid and more active ...
0
votes
0answers
19 views

autocorrelation at milli- or nanosecond timescales [closed]

the efficient market hypothesis states that new information is processed within an infinitesimal time interval, so that all prices (almost) instantly adjust to an "optimal" price. Therefore it is not ...
2
votes
1answer
65 views

Quick way to extrapolate call price as function of strike

Let's say I know the price of a call for two different values of strike. Is there a quick way to guess the price for another value of strike ? Actually, I know that C(100)=15 and C(90)=20 and I have ...
0
votes
1answer
23 views

Compute the (Net) Present Value

Let's have a project where we invest 1000 at the beginning of year 1 and 1000 at the beginning of year 2. At the end of year 2 the income is 2200 and the project is closed. Person A discounted with ...
1
vote
0answers
19 views

Calculate minimum IV increase to offset theta

How would one calculate the minimum implied volatility increase necessary to offset theta decay? IV is typically a percentage, while theta is a dollar value. In theory I think I could look at what ...
1
vote
0answers
19 views

EDGX, EDGA, Nasdaq and Bats-Z Pricing in 2011

I'm trying to find the fee and rebate structure of these 4 exchanges during year 2011, in the specific, I'm interested in the cost of posting a hidden Limit Order, in the cost of removing a visible ...
2
votes
0answers
37 views

Intraday versus daily volatility in slippage estimation

On page 21 of http://www.cims.nyu.edu/~almgren/papers/costestim.pdf Almgren has the formula $\displaystyle{\text{Slippage} = ...
0
votes
1answer
30 views

Determining swaption prices using the characteristic function

There exist multiple techniques to determine call option prices that make use of the characteristic function. These techniques boil down to some integral expression of the option price in terms of the ...
1
vote
1answer
27 views

Identity given in Shreve volume 1

in a solution to a question about random walks (5.3 i), Part of the answer includes the identity: $$\ln \frac{1+\sqrt{1-4 pq}}{2p}=\ln\frac{1-p}{p}$$ note that $p+q=1$ and $0<p<1/2<q<1$. ...

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