All Questions

51 views

Calculating and interpreting cumulative returns is R

I have buy and sell signals,and accordingly, I artificially generate a signal series,for which,I assign 1 to every buy and -1 to every sell: ...
241 views

Reading recommendation on using statistical analysis in online fraud prevention [closed]

Can you please recommend good reads on statistical analysis related to online fraud detection and prevention of account abuse?
15 views

How is holding an European call option equivalent to holding an asset-or-nothing call option and writing a cash-or-nothing call option?

The cash-or-nothing call option has a payoff that is equal to the strike price. All three options have the same expiry date.
24 views

Wiener process analytic expression from geometric brownian motion

The solution to the SDE $dx= -kx\ dt + cx \ dW$ is $x(t) = x_0 e^{(c - k^2/2)t}e^{-k W}$ with mean $\langle x(t) \rangle = x_0 e^{(c - k^2/2)t}$ where $W(t)$ is the Wiener process. Im ...
444 views

How to simulate stock prices using variance gamma process?

I want to simulate stock prices with the variance gamma process. The model is given by: $S_T=S_0 e^{ {[}(r-1)T + \omega + z{]}}$ where $S_0=$ starting value $T=$ Time ...
35 views

recommendation for books about data analysis [on hold]

I do not know if it is a duplicated. I am a software developer. Now I am trying to study the market data of index future and design an algo about trend analysis. I have a direction of this algo. ...
66 views

How can I calculate the margin requirements for a Bitcoin futures contract?

Suppose that I want to calculate what the margin requirements should be for a Bitcoin futures contract, where the contract is the USD/BTC exchange rate (settled in Bitcoins). I've looked at the SPAN ...
56 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 ...
168 views
+50

Open source equity/bond index data

I have been using the tseries package of R (get.hist.quote) to get historical quotes for various indices from yahoo finance. I am interested in DAX, VDAX, EB.REXX ...
80 views

Drawbacks of Black-Scholes option pricing model

Will highly appreciate if anybody can provide logical financial proof why the Black-Scholes option pricing model overestimates the value for long-term options? Thank you in advance, Pasha
74 views

A Question from “Mathematical Methods for Financial Markets” Chapter 2

Exercise 2.3.1.5: The payoff of a power option is $h(S_T)$, where the function h is given by $h(x) = x^\beta(x-K)^+$. Prove that the payoff can be written as the difference of European payoffs on the ...
2k views

Arbitraging OANDA continuous rollover vs other brokers' discrete rollover

Most brokers compute rollover once a day (2200 GMT), but OANDA calculates it continuously. I thought I'd cleverly found an arbitrage opportunity, but it turns out OANDA knows about this and ...
337 views

Applicability of PCA to get historical volatilities to calibrate interest rates trees

My question in short is as follows: can I take main principal component of historical covariance matrix and use it as historical volatilities when fitting a binomial tree? Here's more detailed ...
30 views

BS Implied Volatility under Normal returns

If I use theoretical prices under a normal valuation model, and I estimate their implied volatility using BLACK SCHOLES implied volatility, do I'll get corresponding log normal volatility?
28 views

Expected Shortfall (CVaR) Backtesting

I am writing my thesis on VaR and ES risk measurements and have encountered some issues with how to best test the accuracy of ES estimates. My understanding of the topic is that backtesting ES ...
272 views

Are there any other standard rates term structure decomposition than PCA?

PCA is sometimes used to estimate components in the rates term structure. Are there any other standard method discussed in the literature or used in practice, what are their advantages and ...
45 views

How to choose the output for a EA based on Neural Network? [on hold]

I'm trying to build a EA based on Neural Network. And I want to find a feature/indicator as the output. I've tried i+1 close value (the close value of next bar), and the up and down direction (from i ...
2k views

Is variable binning a good thing to do?

Let's say you have a logistic regression model. Some of the factors are intrinsically categorical but some are continuous variables. Under which circumstances should a continuous variable be binned ...
7 views

any introduction on beta adjustment for basis risk?

On beta adjustment for basis risk, I could only find an online definition: Gap reports modified to mollify the errors caused by basis risk. The essential concept of beta-adjusted gap is that all ...
31 views

Fixed Income Var calculation

I'm trying to calculate var for a portfolio of fixed income securities. I initially want to just calculate undiversified VaR for each instrument. I'm doing the following for each instrument Take ...
17 views

List of 2008 NACE Rev 2 codes

Am looking for a simple list of the NACE 2008 rev 2 codes (The European classifications for economic sectors). The official publication is here, but is there an easily accessible list of the actual ...
34 views

ITM Puts under negatively skewed return distribution (volatility skew)

I read Hull (2009) on implied volatilies. I understand that (given a negatively skewed return distribution) an OTM-Put is more worth than under a normal distribution and that a OTM-Call is worth less ...
46 views

unique equivalent martingale measure in incomplete markets

Do you have any idea about how we can prove, and under which conditions, that an equivalent martingale measure (EMM) in an incomplete market is unique? The assumptions we have made are: 1) that the ...
64 views

Random Brownian Simulation Startiling Results

I was playing around in Excel the other day, simulating possible equity curve/P&L paths for a simple game I designed. The game is really trying to find an optimal risk managment strategy. I start ...
17 views

(Free) end of day historical data source for FTSE 350 sector indices

I have been searching for a free EOD data source for FTSE350 sector indices. I remember coming across a site on msn finance a few years back, which provided several years worth of this data (no volume ...
48 views

selecting test data for neural networks

I have been working on a neural network based on certain technical indicators. As people familiar with neural networks would know after developing a hypothesis, the developer is also supposed to ...
32 views

Yahoo Finance API

Have been looking for ways to down load stock price data using Yahoo Finance on Chinese Stocks. Symbol that ends with .SS = stock listed in Shanghai, .zz = stock listed in Shenzhen This link ...
28 views

How do you make money through risk free instruments by trading [on hold]

How does a Quant trader makes money through Bonds and similar instruments. Please suggest some papers.
194 views
+50

What is Quantitative Investing and how does it differ from Quantitative Trading?

I have worked in quantitative trading for a couple of years so I know what that space is about. I am curious to know what quantitative investing is all about. Based on what I have read and talked to ...
41 views

Price comparison of a call-like derivative with a call option under Black-Scholes' model

This was an exam question at Cambridge University. Let $S_t = S_0\exp(\sigma W_t + (r-\dfrac{1}{2}\sigma^2)$ and a bank account returns a continuously-compounded rate of interest $r$. Consider the ...
30 views

Option trading strategy with positive and negative vega at the same time?? (BRIC) [on hold]

Someone able to come up with an option trading strategy which behaves like having a positive and negative vega at the same time and with positive vomma but also downside protection in a case of a ...
32 views

How would one perform an orthogonal transformation of return data on factors in excel?

I am working on a multivariate regression model and I'm trying to decompose the unrelated beta coefficients using the method proposed by Rudolf F. Klein and K. Victor Chow ...
35 views

Estimation of Empirical Expected Shortfall of a heavy tailed distribution

Assume that you have a portfolio for which you have estimated a parametric model to the underlying instruments, but the distribution of the portfolio as a whole is too complicated to compute ...
104 views

Evaluation volatility with Garch model

I want to forecast the volatility (with Garch) of a canadian stock in 5 months with daily returns. How many data do I have to collect ? Thanks.
34 views

Scaling Intervals in Diffusion Process

I know this is a very elementary question but... when modeling asset prices through a stochastic process as in $$dS_t=S_t μ dt+S_t σdW_t,$$ where the following is a wiener process ...
243 views

Market weights for Black-Litterman

I'm trying to implement Black-Litterman for an arbitrary selection of assets. One of the input for BL is the "Equilibrium market capitalization weights for each asset". In most examples I've seen, ...
144 views

Liquidity diversification

The liquidity diversification can be measured by the liquidity score, defined here as the ratio between the pure market P&L CVaR and the market+liquidity P&L CVaR. I have tried to reproduce ...
12 views

How to get company ids (like CIK)

I need company ids and jurisdiction codes for all the companies all over the world. So that I can use it to extract information from opencorporates. Any idea where I can find the information
48 views

what's the difference between Peak-Load pricing and price discrimination?

i just don't get it. Peak-load pricing wiki page gives example: in public goods such as public urban transportation, where day demand (peak period) is usually much higher than night demand ...
53 views

Need 24 hours a day real time/slightly delayed prices of futures contracts on US and non-US

I'm looking for a data provider to get real-time/slightly delayed data for futures contracts on US and non-US indexes 24 hours a day. Can you recommend anything for a person, who can't afford ...
26 views

Rate of return calculation [closed]

I'm confused by a theoretical problem involving rate of return and was hoping one of you guys would be able to help me out. As a rather simple example, I have the capital cost for some project of ...
12 views

Need guidance for expense handling [closed]

There is an increasing number of requests from our engineers for cash advance when travelling for remote calls. Since it has now become a routine and there is no process in place we have to approach ...
2k views

What methods do you use to improve expected return estimates when constructing a portfolio in a mean-variance framework?

One of the main problems when trying to apply mean-variance portfolio optimization in practice is its high input sensitivity. As can be seen in (Chopra, 1993) using historical values to estimate ...
33 views

What does “primary calendar” mean?

I was reading the 2013 research rankings article on Institutional Investor and came across the following quote: "We do not expect spread widening in most markets, and we expect the primary calendar to ...
86 views

EuroDollar vs FRA

I am not quite clear about this. When people mention Eurodollar are they mean Eurodollar Futures? One of the difference between Eurodollar and Forward Rate Agreement(FRA) is basically difference ...
149 views

What Forex Services support the ForexConnect API?

I need API access to get ForEx tickers and order books for currency pairs. From what I can tell there is a .Net API called ForexConnect which I can use to get this data. Now where can I get this data ...
46 views