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3
votes
2answers
88 views
Transformation to reduce standard deviation without changing median
Consider some negative skew and high kurtosis return time-series $X_t$. I do not know the functional form of the pdf of $X_t$ and have about 150,000 data points.
Suppose that I was to create an ...
4
votes
2answers
167 views
Fitting distributions to financial data using volatility model to estimate VaR
I want to fit a distribution to my financial data using a volatility model to estimate the VaR. So in case of a normal distribution, this would be very easy, I assume the returns to follow a normal ...
2
votes
1answer
104 views
Value at Risk Monte-Carlo using Generalized Pareto Distribution(GPD)
I have created a VBA program to calculate VaR by using Monte Carlo, I have simulated Brownian Motion. This method might be ok for 100% equity portfolio, but let's say this portfolio may have fixed ...
2
votes
1answer
194 views
What are $d_1$ and $d_2$ for Laplace?
What are the formulae for d1 & d2 using a Laplace distribution?
4
votes
1answer
229 views
Benfords law and quantitative finance
Benford's law has been applied in various ways for detecting fraud (e.g. elections or accounting). But what are the most useful applications of Benford in quantitative finance? Are there any? I have ...
6
votes
1answer
296 views
What distribution should I apply to estimate the likelihood of extreme returns?
Say I have a limited sample, a month of daily returns, and I want to estimate the 99.5th percentile of the distribution of absolute daily returns.
Because the estimate will require extrapolation, I ...
3
votes
2answers
323 views
Distribution for High Kurtosis
Can you please advise which distribution to follow when your skewness is 0.28 and Kurtosis value is 51. Since it's leptokurtic and positively skewed I would like to fit distribution and also wanted to ...
3
votes
0answers
116 views
What is the relation between return volatility and return rank volatility, and how can I control the latter?
I have no experience in finance, but I've been playing around with a virtual portfolio.
I'm trying to control the "rank volatility" distribution - that is, the volatility of a stock's daily rank in ...
6
votes
5answers
705 views
What distribution to assume for interest rates?
I am writing a paper with a case study in financial maths. I need to model an interest rate $(I_n)_{n\geq 0}$ as a sequence of non-negative i.i.d. random variables. Which distribution would you advise ...
4
votes
1answer
115 views
What are some common models for one-sided returns?
One typically models the log returns of a portfolio of equities by some unimodal, symmetric (or nearly symmetric) distribution with parameters like the mean and standard deviation estimated by ...
17
votes
2answers
705 views
Tools in R for estimating time-varying copulas?
Are there libraries in R for estimating time-varying joint distributions via copulas?
Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
8
votes
2answers
2k views
How can I compare distributions using only mean and standard deviation?
I only have means and standard deviations of samples of two random variables. What technique can I use to determine how similar the distributions these describe are? Assume that the values are built ...
1
vote
0answers
274 views
Probability distributions in quantitative finance [closed]
What are the most popular probability distributions in quantitative finance and what are their applications?
0
votes
0answers
110 views
Getting the actual distribution of a stock price at time T using implied volatility [duplicate]
Possible Duplicate:
How to derive the implied probability distribution from B-S volatilities?
Let's assume a stock price S, with volatility $\sigma$ constant, no dividend, and risk free ...
9
votes
2answers
2k views
How to derive the implied probability distribution from B-S volatilities?
The general problem I have is visualization of the implied distribution of returns of a currency pair.
I usually use QQplots for historical returns, so for example versus the normal distribution:
...
4
votes
2answers
1k views
How can I estimate the degrees of freedom for a Student's T distribution?
I am doing research estimating the value at risk for non-normally distributed assets. I need help in the process of estimating the parameters of Student's t distribution and which method to use. I ...
