# Tagged Questions

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28 views

Lets say I have two stocks x and y and their corresponding stock price p(x) and p(y). consider HR as hedge ratio. Then we can calculate the spread using this equation. $spread=p(x)-HR*p(y)$ from ...
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### Bootstrapping bond spreads as in the standard CDS model

Suppose that we have a spread curve $\boldsymbol{s}:=(s_1, ..., s_n)$, where $s_i$ are CDS par spreads. Moreover, assume the standard ISDA model framework, i.e. piecewise constant forward / hazard ...
62 views

### Risky duration formula for what kind of bond?

In a documentation, there is the following formula for "zero interest rate risky duration" of a bond: $\frac{1-exp(-s \cdot T)}{s}$, where $s$ is spread, $T$ time until maturity. What type of bond (...
30 views

### calculate 6 month change in TED spread

I have a basic question if someone could help me out how would I calculate the 6 month change in TED spread. I have a monthly time series of TED spreads.
23 views

First and foremost thank you for reading my question, I hope all if you have a Happy Holiday this weekend. On to my question: I am completing an assignment on global sovereign bonds, I've been ...
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### Calendar spreading and difference in cash and futures

"Often the calendar spreading gives rise to two different levels of gamma: a long gamma in one maturity against a short gamma in another one. This may be stable except that the two maturities might ...
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I already asked this yesterday at "Economics Stack Exchange" but think this question might be better suited here. In the meantime i really tried to solve it by myself, but couldn't find anything what ...
44 views

### Observing bid-ask bounce in high frequency stock data

I have a series of 1-minute return data for an unnamed stock, a sample is provided below, in order: ...
97 views

An increase in default correlation ceteris paribus increases the value of the equity tranche of a CDO. This I get. How then, do I make sense of the statement that as default correlation in the ...
145 views

### Whites Reality Check for Pair Trading

I want to use the Monte Carlo Method described in Aronsons book Evidence based Technical Analysis to test if a given pairs trading strategy is useless. First step there is to randomize the returns of ...
331 views

### How to calculate yield spread?

I came across this multiple choice question on yield spread and I can't understand why the reasoning for the selected answer is correct.Can you confirm or clarify ? ( emphasis in the text is mine) ...
35 views

### Expected value of bivariate lognormal spread

I donĀ“t know how to derivate the Expected Value for the following problem: Suppose that the random vector (S_1, S_2) has a bivariate lognormal distribution with ...
51 views

Are there any studies on the average difference or ratio between Settlement (execution price) and the Spot price dependant on lot size. I'm looking for a function such as ...
111 views

### Yield for valuation of illiquid corporate bond

I am trying to value a illiquid corporate bond issued at a discount to face value by a privately held company in India. The corporate bond is a sinkable bond (amortizing principle) with coupon rate of ...
29 views

### What does it mean to change the currency of a spread between bonds from 2 different countries?

On reuters I charted the spread between the 10yr US bond and the 10yr UK bond. It gives the me the option of choosing the currency. For just the standard spread(ie: yield(US)-yield(UK)) you select ...
99 views

I have a beginner question in credit quantitative modelling. I would like to know how we can derive forward credit spread curve, i.e the counterparty of forward yield curves. Indeed, for deriving a ...
172 views

### Spread over LIBOR on a Equity Swap

Does anyone how banks determine the spread over LIBOR on a Equity Swap? Example: Party A pays the return on SPTR to Party B Party B pays 1M LIBOR + 40 bps to Party A Does anyone know how the 40 ...
80 views

### Foreign exchange - Dealer spreads and order size

Is it true that in foreign exchange markets, dealer spreads are lower for smaller order and increases for larger orders? This seems counter-intuitive when compared to other markets where dealer ...
249 views

### Impact on bid/offer due to volume/size of trades placed

When observing bid/offer in the market I came across a question. How much trading a bond would impact its spread for subsequent trades ie. what is the impact on bid/offer due to volume/size of ...
23 views

### What to do when I do not get enough fill in cash leg during cash - future arbitrage

Futures have fixed lot sizes in my exchange, but cash do not. When I am spread trading the cash - future pair, what should I do if I am unable to get enough fill on the cash side.
118 views

### ZSpread in multiple curve framework

how do I calculate ZSpread for a govt. bond in a multiple curve framework? I have not come across the exact details anywhere so I want to verify if I'm right. Below is my understanding, please correct ...
89 views

### Binary option expression

Given r=0, Ļ(K)=const Binary=limā¬(Īµā0)ā”ć((C(K,Ļ(K))-C(K+Īµ,Ļ(K+Īµ))))/Īµć What is the analytical expression for the binary option value? Ļ(K)=const Therefore, Binary=limā¬(Īµā0)ā”ć((C(K)-C(K+Īµ)))/Īµć ...
642 views

I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at $s$, maturity $T$ and recovery function $... 2answers 8k views ### What's the intuition behind DTS(duration times spread) in fixed income? I am having some difficulty grasping the concept of using DTS to measure credit risk. In the equity world, one typical measure of risk is beta, which is quite well-defined as the exposure to a common ... 1answer 220 views ### Short-term directional trading Did value of ratio between informed and uninformed traders at market, making difference to profitability of short-term directional trading on that market? My guess is yes and better play short-term ... 1answer 148 views ### At-the-money Call Spread approximation In a trading manual I got during a course, the value of the ATM Call-Spread is approximated by$CS_{ATM}=\frac{1}{2}StrD+(F-m)\times\Delta CS\$ The lecturer skipped the part where he derived this ...
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I'm constructing money-neutral spread by this formula: Spread = log(P1) - log(P2), where P1 and P2 is prices of two instruments But sometimes spread can get into ...
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### Forecasting amount of slippage in executing option spreads

Is there a good quantitative model to estimate how much slippage is required to execute a particular option spread trade? For example, let's say you want to execute an Iron Condor. Given X, Y, Z ...
288 views

### Funding spread in FVA calculation

For the FVA calculation, is the funding spread (either borrowing or lending) treated as a piecewise constant function (i.e., if the length of the exposure is 5 month and I know the 3 and 6 months ...
410 views

### Interpolation on CDS rates

I am just wondering if there is any way we could calculate a CDS Spread (not harzard rate) on a CDS curve. Most of the papers that I have come across so far discuss about interpolating the hazard ...
738 views

### mean reversion with Kalman Filter - Spread calculation

Ernest Chan in its book "Algorithmic Trading" shows how to use the Kalman Filter for mean reversion pair trading. I have seen that he uses the measurement prediction error for calculating the spread ...
231 views

### How to synthesize a futures spread option?

Is it possible to synthesize a futures spread option using only the options on the spread's underlyings? If so, how? If not, is there another way? As an example, please show me how to synthesize ...
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I have calculated a hedge ratio that generates a mean reverting spread (stationary, without trends) 60-70% of the time. But the remaining 30% of the time, it seems like there is a trend in the spread. ...
138 views

### What happens at market open when there is a reverse spread during preopen?

During pre-open When checking the depth of one particularly bullish stock I am following (NZE:XRO went up 200% this year and 12% yesterday) I saw that the BUYs were much higher than the ASKs by about ...
257 views

### What is most reasonable approach to determine side of a multi-leg options order?

Say, 4-legged multi-leg options order with below leg ...
139 views

Is there a quant model that can help estimate how much slippage one would have to give up in order to get an "option spread" (vertical, butterflies, etc.) order executed? What factors should one look ...
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### Input for unanticipated risk premium estimation

In the paper "Economic Forces and the Stock Market" by Chen, Roll and Ross, unanticipated risk premium (URP) is tested as a potential risk factor for stock returns. This factor is commonly calculated ...
432 views

### Bond futures - calendar spread pricing

I am looking on literature and models on pricing a bond futures' calendar spread. assuming the basket of deliverable bonds is the same and the ctd is the same, what are the factores determining the ...
176 views

### monthly contract volume required for penny increments?

Have the exchanges disclosed their criteria? Does anyone have a best guess based upon observations of volume (however you wish to define it)? Please no qualitative answers.
213 views

### Model-implied yield spread on corporate bonds

While using Merton (or any other) model, is the model-implied yield spread on bonds greater than actual yield spread? And is it possible to estimate actual probablities of default?
427 views

### Is making a bid/ask offer a good way to lower the spreads?

I have written an algorithmic trading program which relies heavily on low spreads in the 0.1-0.3 PIP region. I was now wondering if it would be a good idea to place bid/ask offers instead of limit ...
892 views

### Where can I find corporate bond spreads?

I am trying to price a 30 yr bond maturing in December 15, 2035. The bond is rated A- (S&P). Where can I find the spreads for corporate bonds rated A- maturing in 23 years (December 2035)? I ...
1k views

I have few questions about using OAS as a measure of risk: does OAS allow for comparison between bonds with and without embedded options (e.g. a callable bond against a plain vanilla one against a ...
2k views

I'm backtesting an algorithm for trading nasdaq stocks, and would like to take into account the spread. I am using historical data from yahoo, which contains: open, high, low, close, volume, adj. ...
917 views

### How to compute interest rate futures spread ratio?

I am confused on how to compute the spread ratio. For example, this is example I came across with my broker - Consider 2 contracts Bobl and Euribor. The DV01 of Bobl i 44.8 and Euribor is 25. To ...
760 views

### How to calculate the weight of the stocks using the linear regression?

I do a simple example with the follow three series(stocks prices): ...
2k views

### How to hedge a bull call spread

I am trying to make a theoretical hedge to a bull call spread. (buy out the money call, sell further out the money call) What I have now is almost effective but there is one possible 80% loss (...