# All Questions

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### Setting entry and exit position in Matlab and computing returns for backtesting purposes

I have to backtest a mean-reverting strategy that use the spread z and goes: long when the indicator z > -2; short-sell when the indicator z < 2; The exit point is when the absolute value of z ...
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### Yahoo OHLC data reflects nonexistant stock split

Can anyone explain why the OHLC data I'm getting from yahoo appears to reflect stock splits during times when no significant corporate actions have occurred? For example, I'm looking at ABT and yahoo ...
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### Fixed volatility portfolio with max returns creates skewed results

I am trying to create a portfolio of only four components using the mean-variance optimization (MVO). I am setting up my problem such that I want to maximize the expected returns with a fixed vol ...
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### State Space models with Short Time Series

My problem is that I have a state space model that I estimate using the Berndt–Hall–Hall–Hausman (BHHH) algorithm. The state space model is relatively simple in that the hidden part follows a pure ...
44 views

### Algorithm to detect the aggressor side of a trade

Most of the exchanges provide aggressor side property of trades (e.g. Tag=5797 AggressorSide on CME) in their raw data. But many data providers do not provide this information via their datafeed ...
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### Explicit solution SDE

I have the following SDE: $$dY_{t}=A\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{1}+B\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{2}$$ where ...
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### Reference on risk measures

I want some reference book on risk measures and their comparisons. Thanks in advance.
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### Which is the better risk sensitive measure?

Consider the two following optimization problem 1) $$\min_{\theta} \ln E_{\theta}[ e^{X}]$$ 2) $$\min_{\theta} E_{\theta}[ X]$$ with the constraint $$Var_{\theta}[X] <c$$ Is it true that ...
22 views

### Contribute to Finance related projects [on hold]

I am currently a student and in the future would like to work as a software developer for a financial institution such as Bloomberg, Factset etc. I was looking to contribute to some open source or ...
61 views

### Nested volatility

The introduction VIX options makes the concept of "volatility of volatility" a real life concept. The idea of "nested volatility" seems interesting, and I am wondering if there are any academic ...
44 views

### Art market specificities

I am looking for some reference on the art market in light of quantitative finance. I am interested in some things: The market in general, how is it compared to financial market ? What about common ...
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### CVA/CDVA - Worsened Credit Quality implies profit?

In the book Counterparty Credit Risk, Collateral and Funding by Brigo et al I found the following: credit quality of investor WORSENS $\Rightarrow$ books POSITIVE MARK TO MKT credit quality of ...
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### How does this follow from the separating hyperplane theorem?

This is from Pliskas book in mathematical finance. I do not know what was best to write the question so I included the pages from the book. He has not written what form of the separating hyperplane ...
87 views

### How to create a model or formula for evaluating trade opportunities

I want to build a formula to produce a score for a potential trade based on 4 variables, time, return, liquidity of security, and probability of failure. For a set of potential trades I first ...
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### Valuation of barrier options in Jump diffusion model

I am trying to evaluate the value of a Barrier option using Monte carlo method. The stock follows a jump diffusion model. I am using the method described in Metwally and Atiya. The authors describe ...
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### ADR vs Foriegn Stock Price Arbitraguers

So I am sure you all know about the whole Argentina default that has been in the papers lately, no need to delve into it. This so called "technical" default has lead some interesting investment ...
67 views

### How can theta be so large on this option?

The AAPL Sep 95 put currently has a theta of -.21. The put midpoint is .84. 84/21 = 4 days. However, the put has nearly a month before expiration, at which time it will be zero. Not 4 days from ...
78 views

### multiperiod optimization using R

I'm interested in multistage optimization problems. Are there any good R packages around to solve such problems over time? I'm not at all an expert in it, so maybe someone knows a good paper / lecture ...
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### Stock Price Evolution Equation Clarifications [closed]

What is the dimension of Δt? Is it second [s]? What are the expected return and the expected volatility? How can I calculate them for any given stock? Should I use the return and volatility values for ...
29 views

### what kind of test for volatility and where find the data

I am working on a model for stochastic volatility. In short, the model try to capture that the volatility goes up suddenly after a shock (war, policy, financial events, etc) and then goes down slowly, ...
56 views

### Explain drop in Correlation between two time series in consecutive periods

I have a time series for a security list with 2 parameters calculated for each time period. For example, for a stock XYZ, I have Param1 and Param2 calculated over various time periods stacked against ...
40 views

### CVA formula proof

I'm struggling to prove the CVA formula in this paper. Equation (3) is the result of computing the expectation of formula (1). Could you please show me how to prove that?
125 views

### Volatility of Futures

Apparently: Under a constant interest rate, the futures price is given by a deterministic time function times the asset price (I think I understand this). This means that the volatility of the ...
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### M&A hedging an equity portfolio against an index

Quick Note This question was already posted under the userID user8170. Reason being I could not access my account. Now I am able to login to my account I am reposting the question here and will ...
49 views

### one-step-ahead Stochastic Volatility for 5-minute VWAP prices

I'm trying to run an SV model against prices of Euro/USD. For those not familiar with SV, its a volatility model in which each point gets its own volatility parameter $h_t$ with 3 main parameters that ...
23 views

### Time series analysis of PnL with an increasing variance and large negative values [closed]

PnL can take large negative values, and its variance increases over time as the firm grows. If we do differencing, an increasing variance remains. If we take log, negative values cannot be defined. ...
22 views

### A question about how to design Option

There is a question about the construction of an option Manufacture and option from plain vanillas that makes money in case of low volatility and does not lose too much in the opposite scenario. ...
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### Testing for the presence of a positive or negative gamma effect

I am currently analyzing a statistic that I believe will have the effect of hedgers having a positive or negative gamma position in certain stocks. In the case where I believe hedgers have positive ...
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### Impact of NZD mid-day EST Roll forward

Was taking a look at an NZD spot deal that was traded on a Friday for value the following Tuesday (t+2). Somehow this trade became classified as a forward by our back office systems (dealer says they ...
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### Incoherence in Bloomberg Data in Swap Curve Builder (ICSV)

When working on calibration for LMM model, we need to have Initial Libor quotes and Swaptions Black vol quotes on the market data. We have data provided by Bloomberg. However, before performing the ...
A regular affine process is defined to have the generator $Af(x) = \sum_{k,l=1}^d(a_{kl}+\langle a_{I,kl},y\rangle)\frac{\partial^2f(x)}{\partial x_k\partial x_l}+\langle b+\beta x,\nabla f(x)\rangle ... 1answer 74 views ### factor models and using cross section regression I have been doing some reading on factor models. In the literature it mentions that when creating a portfolio that maximises particular attributes it may lead to unwanted bias to other factors. I ... 1answer 54 views ### Discounted risky asset stochastic process problem$S_t$is the random variable representing the risky asset price at time$t$. M_t is the riskless asset. They are governed by the equations$\frac{dS_t}{dt}=\mu dt + \sigma dZ_t$and$dM_t = rM_t ...
Referring Cao, Hansch, and Wang (2004) "The Informational Content of an Open Limit Order Book" $$\mbox{WP}^{n_1 - n_2} = \frac{\sum_{j=n_1}^{n_2} (Q_j^d P_j^d + Q_j^s P_j^s)}{(Q_j^d + Q_j^s)}$$ ...