The modeling tag has no wiki summary.
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0answers
56 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 ...
14
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2answers
793 views
From a high frequency point of view, with a price prediction and assuming infinite leverage, how do you determine optimal trade size?
I have read about something like Kelly criterion for long term expectation maximization assuming a fixed starting bankroll. But if one can assume unlimited leverage, and one has a signal for a price ...
7
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3answers
140 views
How to justify a model that could not predict external factors?
I'm building some models, for example, Bad Loan (NPL) rate.
It's based on historical simulation method -- basically it's saying the future behavior could be predicted by history data.
However, this ...
5
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0answers
133 views
VaR model Unconditional Coverage Tests: Is this extension of Kupiec POF test correct?
Background: Kupiec P. in 1995, published paper "Techniques for Verifying the Accuracy of Risk Management Models" on Journal of Derivatives, v3, P73-84, it's a Unconditional Coverage Tests designe for ...
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1answer
54 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 ...
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0answers
108 views
effectiveness of linear regression in prediction [closed]
How effective is linear regression in predicting asset Price ?
If not, which is the most effective way to predicting an asset price?
Also,price movements are non-linear, why is linear regression ...
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0answers
40 views
Looking for a recommendation for a Fund Transfer Pricing modelling book
Recently I started working in a bank as a modeler, one of the possible topic is FTP - Fund Transfer Pricing.
After I studied that subject a little on wiki and read a website or two in that field I ...
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3answers
537 views
What are some research articles on using principle components to generate alpha?
Here's an example by Marco Avellenada from NYU titled "Statistical Arbitrage in the U.S. Equities Market". The idea of this paper involves capturing mean reversion in the residual returns of a ...
3
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0answers
171 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 ...
5
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1answer
243 views
Problems with dealing with GARCH models and intra-day data
Short question would be "Which type of model from GARCH family is most suitable for modeling 5-minute data returns ?" but I've added some story to it.
Long time ago I was preparing my thesis, one ...
0
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1answer
119 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 ...
4
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1answer
193 views
Derive a short rate model from HJM
Suppose we are assuming the HJM framework. My question is, if it is possible to derive for different choices of the volatility function $\sigma$ (and hence of the drift function) the most common short ...
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1answer
159 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 ...
3
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0answers
182 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 ...
4
votes
1answer
377 views
Coin Toss System
Coin Toss Runs Calculator
The expected number of runs for two consecutive heads or tails is 3. Is there an edge if we place a progressive constant size bet(limited to 3 times)for consecutive ...
6
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0answers
542 views
Modelling with negative interest rates
For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...
5
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4answers
1k views
Predicting Price Movements on a Betting Exchange
On a betting exchange the price (the odds that an event will happen expressed as a decimal, 1/(percentage chance event occurring) of a runner can experience a great deal of volatility before the event ...
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0answers
111 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" ...
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5answers
706 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 ...
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64 views
Split in two the observed negative interest rates (theoretically always positive/negative)?
An autoregressive model to get the future evolution a non-jumpy evolution of the interest rates seems a good option , but not taking into account the possible future variations in credit rate states ...
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0answers
260 views
Can the Heston model be shown to reduce to the original Black Scholes model if appropriate parameters are chosen?
Summary
For Heston model parameters that render the variance process constant, the solution should revert to plain Black-Scholes. Closed from solutions to the Heston model don't seem to do this, even ...
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0answers
48 views
Modelling the magnitude of negative interest rates as depending on the deposited volume
The discounting curves are generally inferred from zero coupon bonds, especially for short rates, where such zero coupon bonds exist. Given the recent governmental negative interest rate bonds, this ...
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0answers
36 views
The observed negative interest rates should be modelled as the observed positive ones?
The presently observed negative interest rates for the recently emitted negative interest bonds by France, etc seem to increase in magnitude with the term. This might suggest that their modelling is ...
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0answers
44 views
Bibliography and historical data relevant to negative interest rates modelling
For a project, I am interested to model the impact of recently negative interest bonds on the portfolio.
From this point of view, the literature I have found is limited.
I am asking for some ...
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1answer
330 views
Do people use unbounded interest rate models, and what alternatives exist?
A simple interest rate model in discrete time is the autoregressive model,
$$
I_{n+1} = \alpha I_n+w_n
$$
where $\alpha\in [0,1)$ and $w_n\geq 0$ are i.i.d. random variables. When working with ruin ...
2
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1answer
153 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, ...
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0answers
458 views
Help With Quant Modelling Software
Im a software developer (freelance) working in investment banking, and I'm looking to improve my CV by gaining a better understanding of the financial quant role and the software used by quants to ...
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1answer
212 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.
...
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1answer
616 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:
...
-3
votes
1answer
316 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 ...
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6answers
3k views
Which approach dominates? Mathematical modeling or data mining?
According to my current understanding, there is a clear difference between data mining and mathematical modeling.
Data mining methods treat systems (e.g., financial markets) as a "black box". The ...
3
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1answer
391 views
What are some applications of bioinformatics or genetics to generating alpha in U.S. equities?
There are many disciplines that have contributed to how one model's risk and return. Physics introduced Brownian motion and RMT. Machine learning has helped to solve complex portfolio construction ...
8
votes
1answer
275 views
What is a commonly accepted econometric model for volume?
What is the gold standard econometric model for volume? For example, a common model for price is the autoregressive (AR) model with GARCH(1,1) innovations. Do you know of any good survey articles ...
5
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1answer
339 views
How to model time series of illiquid stocks - 400 observations (transactions) per 8 hours?
How to model time series which are illiquid - 400 observations (transactions) per 8 hours ? Are there models suitable for this situation which incorporate not only size of the transactions but also ...
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4answers
100 views
Are there any valuation models of securities that use hyperbolic discounting?
To quote Wikipedia:
In hyperbolic discounting, valuations fall very rapidly for small delay periods, but then fall slowly for longer delay periods. This contrasts with exponential discounting, in ...
3
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5answers
848 views
Recommendation for a book on CVA/Credit Risk and PD/LGD/EAD modeling?
I need suggestions for some good books on the following topics:
Credit Value Adjustment (CVA) / Credit Risk
Probability of Default / Loss-Given-Default / Exposure-At-Default modeling
Any pointers ...
4
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3answers
300 views
Is it possible to demonstrate that one pricing model is better than another?
Take the classic GBM (geometric Brownian motion) model for equities as an example:
ds = mu * S * dt + sigma * S * dW.
It is the basis for the classic ...
3
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1answer
240 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 ...
4
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1answer
348 views
Discrete time Ho lee model
This is my first question in this forum. I am stuck with my current testing the Ho Lee model. I am having difficulty computing the perturbation factor $\Delta$.
The ho lee model should be completely ...
6
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1answer
1k views
What are the main differences between discrete and continuous time models when modeling asset price dynamics?
My intuition says that both approaches, discrete time models and continuous time models will be models (i.e. approximations) of reality. Therefore it should be possible to develop useful models in ...
6
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3answers
347 views
How to account for jumps in intraday data when calculating beta?
I am calculating betas on intraday trade data at 15-minute intervals. For simplicity sake, let's assume I am modeling
\begin{equation}
Y = \beta * X + c
\end{equation}
where $Y$ is the return of XLF ...
7
votes
3answers
281 views
How to improve the consistency of explained variance statistics in a linear equity model?
I have an intraday equity returns linear model that, overall, shows good values in terms of $R^2$, p-value and other explained variance statistics. Around 70% of the stocks show consistent R-squared ...
6
votes
1answer
416 views
How to 'calibrate' simple pricing models for equity index options and equity options?
I am interested in doing some research on plain vanilla equity options and equity index options. I have historical data for these options. I also happen to have market maker 'fair price' (bid and ask) ...
4
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1answer
142 views
Modeling interest rates with correlation
I'm trying to model interest rates, and will use the following equation:
$dr = \mu r dt + \sigma r dW $
I'm also being told that interest rates are 40% correlated to S&P returns. How can I ...
4
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0answers
403 views
Algorithms for predicting a couple points in the future
I'm familiar with supervised learning algorithms like regression and neural networks which look at a bunch of input points and learn a function which outputs a value (the value varying depending on ...
9
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1answer
346 views
Fixed income modeling
I am currently working on my research paper and trying to explain a two-dimensional variable: volume and instrument of corporate debt financing.
Independent variables that I believe must be included ...
5
votes
5answers
1k views
How many explanatory variables is too many?
When researching any sort of predictive model, whether using ordinary linear regression or more sophisticated methods such as neural networks or classification and regression trees, there seems to ...
5
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1answer
308 views
What is the forward rate for a Black-Karasinski interest rate model?
I was wondering if anyone could help me with the instantaneous forward rate equation for a Black-Karasinski interest rate model?
I was also after the Black-Karasinski Bond Option Pricing Formula.
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2answers
732 views
How to build a regime-switching model which knows its own limits?
In recent months I've come to the conclusion that there are not only certain regimes in the markets (like bear or bull) but phases where all models fail because we are in uncharted territory. The ...
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1answer
378 views
What to ask for in a good prototyping framework?
Reading up on quantitative methods, model development, and back-testing, one obvious question springs to mind:
What should one ask of a prototyping (model testing) framework?
I know a lot of people ...
