The tag has no wiki summary.

learn more… | top users | synonyms

3
votes
1answer
914 views

How popular is the Linear Gauss Markov (LGM) model?

Some friends recommend to me Linear Gauss Markov model, saying it's interesting to have a look at it. Basically it's a framework different from HJM, with potential to extend, and the merit is that ...
3
votes
2answers
275 views

Resources for finding quantitative finance examples using excel, VBA and access

I am seeking to increase my knowledge in the quantitative finance field. I would be grateful if someone could point me to useful resource online, where I can find working examples of they types of ...
3
votes
1answer
266 views

How to use volatility to assess the accuracy of a stock market model?

Background: For a dissertation I have a multi-agent stock market model that I am using to assess different mechanisms for producing particular dynamic regimes. A key point is assessing how closely it ...
3
votes
1answer
121 views

Covariance structure of call option surface

Assume the observed call option prices $C(K_i,T_i)$ for $i = 1,\dots,N$ are disturbed by some unknown measurement noise $\epsilon$. What would an appropriate covariance structure be for $\epsilon$? ...
3
votes
0answers
154 views

“Stable-Floating” model for non-maturing deposit for FTP purpose

Non-maturing deposits (NMD) is a deposit without maturity date. The deposit rate is normally low. Banks could adjust the rate at any time. The customer can withdraw without penalty, however, in real ...
3
votes
0answers
165 views

Credit Rating vs Bond Yield

I am looking for some references on quantifying the dependence between credit rating and bond yield. I have some data (found some Bloomberg indices which give average yield based on credit rating), ...
3
votes
0answers
216 views

how to represent financial data as a spatial process

Does any one have a good tutorial , introduction or overview on the web for different ways of representing financial data as a spatial process? Such as those spatial processes often used in ...
3
votes
0answers
319 views

Monty Hall Model

Given a fixed time period,say 3 days, the stock/market can go up,down or stay sideways. A hedge fund can long, short or use rangebound(options strategy) to bet for that 3 days closing level. Hedge ...
2
votes
3answers
2k views

Why are exotic options most popular in FX?

I was reading Derman's latest blog post on Vanna Volga pricing, which, according to the linked Wikipedia article, is used mostly for pricing exotic options on foreign exchange (FX). This Willmott ...
2
votes
2answers
251 views

Shortcomings of generalized Brownian motion for asset price modelling

I'm simply interested on hearing some views on which shortcomings arise by using the (multidimensional) SDE $$dS(t)=S(t)\alpha(t,S(t))dt+S(t)\sigma(t,S(t))dW(t)$$ as a model for asset prices. I know ...
2
votes
3answers
136 views

How to estimate parameters of geometric brownian motion with time-varying mean?

Does anyone know how to estimate $A$, $\sigma_1$,$\sigma_2$ from the following system? $$dx = \mu_t x dt + \sigma_1 x dB_x$$ $$d\mu = A(\bar\mu - \mu) dt + \sigma_2 dB_\mu$$ Variation in $x$ could ...
2
votes
2answers
97 views

Using Financial Ratios to get credit rating or PD

Hello I'm looking for papers, aside from ones that use CDS spreads, about credit rating development or estimating default probability based on financial ratios that also include methodology and maybe ...
2
votes
2answers
116 views

How to compute the conditional expected value of a geometric brownian motion?

I'm working on a project, and I have to use the cumulative and conditional expected value of the variations of a stock following a Geometric Brownian Motion. I know that the cumulative is as follows ...
2
votes
1answer
92 views

To understand FOMC events and its impact on the market

Last month when FOMC meeting decision went out that fed would start to exit QE3, immediately we saw a deleveraging effect: SPY went down, GLD went down, and LQD (bond) went down, but US dollars went ...
2
votes
2answers
250 views

How to select optimal betting strategy from backtest?

I have written a model for predicting the winner of UFC fights. My model calculates the probability of each fighter to win a given match. I have back tested the model and found it to be very ...
2
votes
1answer
566 views

Question on OIS and fed funds rate

If i am considering the 0-5 year irs spread for the USD market, would it be more accurate to use the fed funds rate or the OIS rate? I believe the OIS rate is calculated based on the fed funds rate, ...
2
votes
2answers
182 views

How to find the best fitting GARCH model for a portfolio composed of 3 ETFs in R?

I am doing a project for my class Financial Time Series in which I am trying to forecast my portfolio log returns using a GARCH fit. I am having a bit of trouble determining the best way to fit this ...
2
votes
1answer
114 views

Is there an easily implementable alternative to lognormal growth (something with fatter tails)?

I have a toy model in Excel for the growth of a investment portfolio. I assume iid lognormal annual growth factors: =EXP(mu+sigma*NORM.S.INV(RAND())) where mu and ...
2
votes
1answer
66 views

Finding Credit Risk Population Data

Are there any free or relatively cheap sources of aggregate data on credit risk for specific geographic regions, ages, and so on?
2
votes
1answer
106 views

if market is always assumed right, what happened when LIBOR was manupulated?

Recently Monetary Authority of Singapore (MAS) raps banks in rate-rigging. This is nothing new, LIBOR was also manupulated before, by some "major" banks. however, before the censorship, did any ...
2
votes
0answers
47 views

Fitting High Frequency Indicators

I have a high frequency time series of the bid and ask prices of a stock recorded on every tick. For each data point I also have a certain indicators that predict the future movement of the price. The ...
2
votes
0answers
24 views

What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable? [closed]

According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
2
votes
2answers
182 views

Predict Futures Prices based on weather + agricultural data

I’m working in the area of Data Mining and have come up with the following idea for my Masters project.The text may not be the best structured but it’s a working draft to give you a quick idea. ...
2
votes
0answers
108 views

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 ...
1
vote
1answer
2k views

Calculating portfolio allocation beta with different asset classes?

I'd like to calculate portfolio allocation beta on a portfolio that has different asset classes. The portfolio may be made up of: ...
1
vote
2answers
137 views

how to extend lognormal model so that $\sigma$ is correlated to $\mu$?

Consider a log-normal model, $dx / x = \mu dt + \sigma dW$, where $W(t)$ is a Wiener process. Let's say $\mu$ and $\sigma$ change with time, slowly, so we note them by $\mu(t)$ and $\sigma(t)$. ...
1
vote
1answer
248 views

Normalized data

I am new to this. I trained and tested my data using SVM in Matlab with the autoscale option true => the data would be normalized with unit SD. Let's say the training data have the price around 200. ...
1
vote
1answer
77 views

Covariance Matrix vs. Volatility Matrix

Consider a general multidimensional market model in which each of $m$ stocks is driven by $d$ Brownian motions (as in Shreve II, p. 226), viz. $$ dS_i/S_i = \alpha_i dt + \sum_{j=1}^d \sigma_{ij}dW_j, ...
1
vote
1answer
70 views

How to model the effect of earnings surprises on long-term returns?

I'm looking into modeling the relationship between EPS announcement surprises with long-term returns (1 quarter to 3 years with intervals). I've based my current methodology off papers looking at the ...
1
vote
2answers
116 views

how to make a distribution model tolerable of trend?

I'm building an model on different loans' NPL rate. The problem is NPL rates are always affected by the market. When NPL rates move in trend, my model will fail the back-testing. Assuming $x(t)$ is a ...
1
vote
1answer
65 views

How to model housing loan market?

Housing loan market vibrates according to the policies, such as LTV rate, for example, if must pay 20% downpayment, LTV rate would be 80% interest rate, for example, lifting the loan rate, the ...
1
vote
0answers
62 views

How can I do a dynamic GARCH model using extended Kalman filter in R?

Today I was reading an article quoted here, in this article is proposed an adaptive (dynamic) Garch model. How can I do it in R? The use of extended Kalman filter or particle filter is indifferent. I ...
1
vote
0answers
184 views

Modelling long run relationship between dividend and earnings

I am working on a paper where I have to model the long run relationship between earnings and dividends. I have downloaded the raw data from shillers website. I have converted the series to ...
1
vote
0answers
206 views

Modeling asset performance to Bitcoin revenue

I'm attempting to model asset performance to Bitcoin revenue, which is a driving force in the Bitcoin community. Question Is there any model, or research being done that tracks "hashes per second" ...
0
votes
1answer
38 views

GNP/GDP and modelling [closed]

Is GNP a continuous, static or a dynamic model ? What about GDP ? What I do know is that it has yearly discrete values. However, when it is modeled, it becomes a continuous graph. So what exactly is ...
0
votes
1answer
69 views

Making portfolios better than others for a 16 week portfolio game? [closed]

I'm going to participate in a game of making portfolios. The objective of the game is to make the portfolio with the bigger ROI over 16 weeks. Over each week every player can see the ROI of each ...
0
votes
1answer
89 views

How to forecast bond price with time series

I have the goal of being able to develop a model that can forecast the future prices of european government bond (or other private bonds), particularly from the historical prices and returns of the ...
0
votes
1answer
178 views

Numerical difficulties in fitting option prices

In [1], the authors state that "Although some studies apply the curve-fitting method directly to option prices, the severely nonlinear relationship between option price and strike price often leads to ...
0
votes
1answer
345 views

Using OpenCL video cards to offload Quant Finance calculations, what features should I look for?

I'm benchmarking some software and am looking for cards that are better at parallel multiplication vs parallel addition. Is there any prior work that may have this information? What GPU features ...
0
votes
0answers
6 views

FInding the Delta in margin based on Pricing, Unit Types, Product Mix, and Sale Types

Is there a way to find the change in margin based on the the changes in pricing, unit types, product mix and sale types? Is there a standard formula we can use? We have tried ...
0
votes
0answers
32 views

Invoice Discount pricing model

I was wondering whether there exist pricing models in particular for Invoice Discounting contracts and short-term financing solution where credit risk plays a major role. Specifically, assuming that ...
0
votes
0answers
15 views

Most-efficient/effective Incentive Scheme Design to Minimize Loan Default Probability

Here is an open-ended, hypothetical question regarding the optimization of a loan incentive scheme. Any and all suggestions/plans are welcome. Please ask any clarifying questions if you wish: A loan ...
0
votes
0answers
13 views

Cross-post on the prediction mean squared error of a model

In accordance with what discussed in the meta here I am cross-posting this question from cross-validated. Suppose my model is $y_t = \alpha + \beta t + \epsilon_t$ the l-step-ahead prediction is ...
0
votes
0answers
10 views

Do you include negative changes in Working Capital in an uFCFF analysis?

I am running a uFCFF analysis for two different scenarios. In one scenario working capital goes down. Do I include this negative number in the "Change in WC" line? Wouldn't this represent that I am ...
0
votes
0answers
100 views

Modelling interest rate: AR(2) modelling

I have a time series of spread that follows an $AR(2)$ (Autoregressive model of Order 2). I need an interest rate model that represents that dynamics. What model should I use?
-1
votes
1answer
185 views

Can Beneish's model for detecting earnings manipulation be applied to companies in the UK?

As I understand it this model derived from data for US companies. Is it valid to apply the model as is to UK companies or does it require any modifications? Description of the model: ...
-2
votes
1answer
562 views

Tutorial for working with tick data? [closed]

Can you recommend a good tutorial for working with tick data for the purpose of algorithmic trading? Is the data normally stored in a database and only bits are read into memory at a time? Is there ...
-2
votes
1answer
351 views

Interest Rate Swaps on Mortgages [closed]

Is it possible to get interest rate swaps on mortgages? If not, why not? Are there models that describe this? Any direction would be great.