# Tagged Questions

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193 views

### Valuation of Cox-Ross-Rubinstein Model

We have a Cox-Ross-Rubinstein model with parameters $u$ ("up"), $d$ ("down") , $r$ (interest rate) and $q$ (equivalent martingale probability) $(q=(1+r-d)(u-d)^{-1})$ . We have a contingent claim with ...
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### How do I calculate the present value of a credit default swap?

I am paid 20 million every time a bond drops to a new low over a 120 month period. I need to know how to find the present value of such an arrangement if there is a continuously compound interest of 5 ...
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### The Relation Between the Ricci flow and the Black-Scholes-Merton Equation

Grisha Perelman once wrote that The Ricci-flow equation, a type of heat equation, is a distant relative of the Black-Scholes equation that bond traders around the world use to price stock and ...
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### How to simulate stock price with support and resistance level

I couldn't find good resources on how to simulate a stock price data sequence including some basic effects. The basis might be a Brownian motion model; but in real stock prices, there are additional ...
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### What are your list of concept or model in standard textbooks that are always reliable to used in working?

What are your list of concept or model in standard textbooks that are always reliable to used in working? As opposed back to this: What concepts are the most dangerous ones in quantitative finance ...
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### A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

[I already posted this question on the math forum of stackexchange and I was advised that I should post this question here] In Evans and Jovanovic (1989) you will find a model for entrepreneurs with ...
3k views

### Are PX_BID and PX_ASK on Bloomberg closing bid/ask? or are they daily averaged?

Bloomberg provides PX_BID and PX_ASK on a daily basis, but it's not clear exactly where these numbers come from. Are they closing bid and ask prices, or are they averaged over the entire day? For ...
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### Difference between stochastic calculus and newton calculus

As I am not a student of hard core mathematics,I just want to know how stochastic calculus is different from newton calculus. What make stochastic calculus different from simple newton calculus ?
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### What interest rate should I use for testing the covered interest parity?

I am doing an empirical test of the CIP from the recent financial crisis between Canada and the United States. I am using 1,2,3,6,12 month forwards (monthly data). What interest rates should I use? I ...
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### How to simulate stock prices with stochastic time change subordinated arithmetic Brownian Motion?

the idea is to simulate price returns thus to be normally distributed i 'am trying to use subordinated arithmetic brownian motion subordinated to time activity (volume) stock prices are following GBM ...
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### In Yahoo! Finance, what determines the number of decimals for a stock/index quote?

In Yahoo! Finance, we see the following quotes among others: ...
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### Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$, does this have to do with weights?

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$ for each of the investment projects, where the returns $K_1, K_2$, and $K_3$ depend on the market scenario: ...
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### Why there are almost no book for revenue analytic?

Why there are almost no book for revenue analytic? By revenue analytic, it is meant to be predicting the revenue of a firm in the future
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### $\frac{1}{p(T_{i-1},T_i)}(A-p(T_{i-1},T_i))^+$ at time $T_i$ is equivalent to a payment of $(A-p(T_{i-1},T_i))^+$ at time $T_{i-1}$

How can I show that payment of $\frac{1}{p(T_{i-1},T_i)}(A-p(T_{i-1},T_i))^+$ at time $T_i$ is equivalent to a payment of $(A-p(T_{i-1},T_i))^+$ at time $T_{i-1}$ ? Where A is a deterministic ...
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### PEGY Ratio: Does it make sense?

PEGY ratio is calculated as PE ratio/(Earnings Growth Rate + Dividend Yield). Putting aside the discussion of whether forward or trailing P/E ratio should be used, isn't adding dividend yield over ...
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### How does currency valuation depend on the cash reserve ratio for a country?

Currency valuation (with respect to other currencies) is an important parameter in finance, but how is it related to the cash reserve ratio?
19k views

### Wealth Management Vs Asset Management [closed]

What is the difference between the two? Today in the FT I see that UBS is the second biggest 'wealth manager' after BOA whilst I was always under the impression that Blackrock was the largest asset ...
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### Want to understand the links and relationship between all the risk metrics?

For Example : if Risk weighted asset (RWA) increased or decreased this month, which other risk metrics could have influenced RWA to increase or decrease. Also in different situations like, upward ...
788 views

### Philips-Ouliaris test for cointegration

I'm trying to implement cointegration tests using the R urca package. I've figured out the Johansen test (ca.jo), but I'm having trouble with the Philips-Ouliaris test (ca.po). I have two questions: ...
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### Keynesian Multiplier [closed]

I am taking a degree in macro economics, and am at a juncture where knowledge about the Keynesian Multiplier is imperative. Though I've been at the lectures, read the literature and scoured the web, I ...
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### Question about the stochastic differential equation in the Merton model

in the following stochastic differential equation merton model we have $$\frac{ds}{s}=(\alpha-\lambda k)dt+\sigma dW+dq$$ where $\alpha$ is the instantaneous expected return on the stock; ...
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### Get discount factors with limited knowledge?

I am facing the problem of just having this information: 6% coupon bond with 2.5 years to maturity, traded at a 100% clean price 4% coupon bond with 1.5 years to maturity, traded at a 98% clean price ...
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### Given monthly returns of 10-Year Govt Bond, how to get monthly risk free rate of return

I have a list of monthly returns of a 10 year Govt Bond. I am not sure if this is a good proxy for the monthly risk free rate of return. Can somebody suggest how I can derive the monthly risk free ...
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### What causes discontinuities with stock prices

With reference to the figure above, why is it that the price at which the stock closed at on monday not equal to the open price on tuesday? Is this discontinuity due to an adjustment in the price ...
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Consider Hull White model $dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$ when we solve the SDE above we have $r(t)=e^{-\alpha t}r(0)+\frac{\theta}{\alpha}(1-e^{-\alpha t})+\sigma e^{-\alpha ... 2answers 518 views ### What are the properties of Max and Min functions? I am having trouble understanding the transition from the third line to the fourth line. I see how it works through cases, but is there a general property that allows this? 1answer 1k views ### What are DGTW adjusted returns? Many papers, e.g. in The Journal of Finance, discuss DGTW adjusted returns (or DGTW abnormal returns) instead of just returns. What are these and how does one compute them? 1answer 57 views ### Why is the discount function non increasing if pure cash holdings are feasible? I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ... 1answer 1k views ### How to get started in quant finance? [closed] I am a programmer and I have no finance background. I am looking for advice as to how to get started in the quant finance industry. My goal would be to have solid understanding about the industry and ... 2answers 53 views ### what data sources are useful for obtaining financial statement data of listed companies NYSE and NASDAQ? Exactly, I need balance sheet, income statement, cash flow statement, stock market, bankruptcy situation, fraud situation and corporate governance data of companies in USA. Thanks beforehand, 3answers 245 views ### Best known performance of stock prediction algorithms I asked this question here and was directed to answer it on this stack exchange. My question is very simple. What is the best [known] performance of a stock prediction algorithm? I've seen papers ... 2answers 103 views ### how negative rates (mr and rf) affect CAPM I don't understand how the negative rates factor into this and what it means in the market ... 2answers 136 views ### Linear combination of geometric Brownian motion Let$X_t= e^{\left(\mu-\sigma^2/2 \right)t+\sigma W_t}$be a geometric Brownian motion with drift$\mu$and volatility$\sigma$. I am trying to find an analytical solution to$$\mathbb{E}\left[ ... 1answer 108 views ### How to use WACC for investment? How to use a value of WACC? I have calculated WACC of company to be 7%. What if company had smaller or bigger WACC? Which one would attract investment? 2answers 4k views ### where can i get data for foreign exchange order flow I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!! 1answer 2k views ### How to apply Ljung Box Test? I am checking the closing prices(about 9000+ prices) of the stocks data to test for randomness. The test I am using is Ljung Box test, in MFE toolbox for MATLAB, I used 300 data of closing prices, ... 1answer 51 views ### Put-on-call option confusion So the question asks: Given a 3-steps Binomial Tree model with$S(0) = 50$,$U = 20%,D = 􀀀20%$, and$R = 5%$. A European call option has the strike price$X = 40$and maturity time$T = 3$. Also, a ... 1answer 71 views ### Options and bond related to convexity Relevant definition: Assumption 2.1 (No dominance). If the payoff$P$of a financial instrument is nonnegative, then the price$p$of the financial instrument is nonnegative. Notation:$T$- the ... 1answer 29 views ### no arbitrage condition for paylater option a paylater option has the folowing payoff:$(S_{T}-K)_{+}-P1_{S_{T}>K}$. To determine the fee P that the option holder must pay, we must write the non arbitrage condition. Why is it this: ... 1answer 43 views ### Negative risk neutral probabilities economic argument We know of plenty ways to extract risk neutral distirbutions from option prices (for example Breeden Litzberger) but there is no real analysis on how to interpret negative state prices (Haug 2007 for ... 1answer 258 views ### Portfolio Management in R I’ve been looking around for a R-package that will allow me to track my stock portfolio - basically I would like to enter stocks that I own, track the trades I make, calculate my open position & ... 1answer 79 views ### What is more likely effect to call and put prices, respectively, if the stock price decreases by$1?

The current stock price is \$80.Call ,and ,put, options, with ,exercise ,prices, of$50 and 3 days to maturity are currently trading. What is more likely effect to call and put prices, respectively, ...
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### Finding a stock traded at two venues

For a project of mine I need to find a stock that is traded on two venues, e.g. NYSE and NASDAQ, but could be others. So I ...
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### Aggregating growth rates

I'm working on a simple forecast model that uses Cumulative Annual Growth Rate (CAGR) to project future growth, and I've run into an apparent paradox. The model includes multiple lines of business ...
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### Using IRR to calculate future value of cashflow

Discounting a cashflow using given forward rates will result in the following present value: PV = 102.875 = ${5\over (1+3\%)}$ + ${5\over (1+3\%)(1+4\%)}$ + ${105\over (1+3\%)(1+4\%)(1+5\%)}$ where ...
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### Cash flow diagram, interest rate inflow series

I have a econ midterm coming up soon and stumbled upon this question. My approach is: 2C=800/(1.12^2)+1200/(1.12^6)=125.71 or C=1245.71/2=622.85 But I have a gut feeling this is wrong. I believe the ...
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### finance - using CAPM [closed]

The risk-free rate is 4%, and the expected return on the market portfolio is 12%. Using the Capital Asset Pricing Model: a. What is the risk premium on the market? b. what is the required return on ...
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### I want to prove Determine the coupon rate $r$, such that the price of the bond, at $T_0$, equals its face value

Consider a coupon bond, starting at $T_{0}$ , with face value $K$, coupon payments at $T_1, . . . , T_n$ and a fixed coupon rate $r$. Determine the coupon rate $r$, such that the price of the bond, at ...