# All Questions

36 views

### What happens when bond price is less than the recovery rate

I am simulating various price path of bonds, and one issue that came up is the recovery rate. When a bond defaults, the amount you get back recovery rate * principle. This creates a problem if the ...
10 views

### Should I analyze the tick data day by day?

Let assume that we have one month of tick data which were traded at NYSE. We want to model the price changes as a function of the last p lags of price changes and the last q lags of the time duration ...
41 views

### forward vs spot simply-compounded spot interest rate

Question about forward vs spot simply-compounded spot interest rate.Some definitions $P(a,b)$ a zero coupond price at time $a$ and maturity $b$ $L(a,b)$ simply compounded spot interest rate set at ...
22 views

### where to find historical option prices?

I have a dataset of options (traded in European exchanges such as NYSE Euronext) and I would like to find their price history. Where to find it? I see that ...
16 views

### Heding foreign stocks with futures. the return? [on hold]

I am a euro guy and wants to invest in a us stock. I want to hedge it through currency futures. can you tell me what is the hedged return and unhedged return ? let us assume $S(t-1)$ is the stock ...
71 views

### How to price a Swing Option?

I'm working in the commodity market and I've to price Swing Options with MATLAB, preferably with finite element. Has anyone already priced these kind of derivatives? I'm thinking about using the ...
205 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 ...
73 views

### Discount rate, convertible debt and the effect of time

The way I understand it is that there are three main parameters to a convertible debt investment. An investment amount A discount rate A trigger event Now under most of the examples I have seen, ...
76 views

### questions on VAR manipulation

The book of Financial Risk forecasting by Danielsson gives the following example about VAR manipulation. I have two questions: 1) If $0> VAR_1 > VAR_0$ , why the following figure plots it as ...
35 views

### reference question about portfolio optimization

I know the "classical" modern portfolio theory. However I have quite a lot of different sources. It seems that there is not a book which cover this topic in a rigorous way: theory application ...
48 views

### Intermarket analysis - related time series?

I'm about to embark on training a neural network on daily forex data, with a view to obtaining a predictive network. I'm also interested in using data other than the forex currency pair data itself, ...
138 views

### What are the proper metrics to look at for checking discrepancies in these two time series

I am obtaining bid/ask price and volume market data from two different sources for the same ticker and for the same day and checking to see that at time intervals X they are "roughly the same". The ...
39 views

### Some clarifications on eigenvectors and eigenvalues from PCA

Could somebody tell me whether suggestions in bold true or not? Q # 1: http://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf ...
3k views

### Excellent information source on advanced machine learning / data mining based trading?

I did check the related posts, like this one here. However, given if one already has knowledge in finance, machine learning and statistics, and wants to know something more advanced on machine ...
30k views

### How can I go about applying machine learning algorithms to stock markets?

I am not very sure, if this question fits in here. I have recently begun, reading and learning about machine learning. Can someone throw some light onto how to go about it or rather can anyone share ...
275 views

### How to deal with extreme cases in normal random numbers generation?

In order to generate normal random numbers, one usually generates random numbers following a uniform distribution $Z \sim \mathcal{U}(0,1)$ and then applies the reverse CDF function on them ...
31 views

### Opposite of Tail-Risk Hedge (Established Vocabulary)

I'm working on a client memo explaining several approaches to equity hedging, and I'm looking for a not-too-technical term for a hedging strategy where I try to keep options near the money, as to have ...
56 views

### What are the implication of a negative risk-free rate on SML?

What happens to the Security market line (within the CAPM model) when the risk-free rate turns negative?
100 views

### What is the intuition behind the fact that Modified duration = Macaulay Duration / (1+r)?

I understand the derivation of both:take dP/dR and divide by P which will give you both 1) modified duration OR 2) macaulay duration / (1+r) (notice the weighted average time built into the ...
332 views

### Testing the validity of a factor model for stock returns

Consider the following m regression equation system: $$r^i = X^i \beta^i + \epsilon^i \;\;\; \text{for} \;i=1,2,3,..,n$$ where $r^i$ is a $(T\times 1)$ vector of the T observations of the dependent ...
230 views

### Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
137 views

### Use of geometric mean for average return of several indices

Can anyone give any reference for using the geometric mean to average the returns from several indices? Note, this question is not about the usual use of geometric mean to obtain the average return ...
44 views

### Infinite autocorrelation - Unit root?

I have a time series of gold prices, on which I want to build an ARIMA model. The series is autocorrelated and if I can difference as often as I want, it always is. First: data: d1gold Dickey-Fuller ...
145 views

### SVCJ (SVJJ) Duffie et. al Model implementation in Matlab

I'm attempting to implement aforementioned SVCJ model by Duffie et al in MATLAB. so far without success. It's supposed to price vanilla (european) calls . parameters provided, the expected price is: ...
51 views

### How is the price of a bond actually determined?

How the price of a bond is actually determined? Is it the supply-demand that determines the price first and then the YTM is calculated on the back of this for that bond. Or is it that the changes to ...
84 views

24 views

### How does the Bitcoin forex work? [migrated]

Does it work differently in relation to a regular forex because of its underlying technology? How can the market calculate its value?
29 views

### Questions related to the banking crisis during the European sovereign debt crisis

I am studying the European Sovereign Debt crisis and I have the following questions which I am struggling to find examples for: 1) I have heard that during the sovereign debt crisis, European ...
114 views

### How to work out weights for a portfolio based on an inverse ratio with positive and negative values?

I am trying to work out how to determine weights for the assets in order to form a portfolio. The ratio I am using is EV/EBIT, hence the smaller the better. The problem is I don't know how to handle ...
69 views

### How can I calculate Fama-French betas for a particular stock?

For a particular stock, what's the simplest way to calculate betas for the Fama-French factors SMB and HML?
17 views

### Finding Trailing Twelve Months on a month between two quarterly reporting periods [on hold]

I can clearly understand the concept of Trailing Twelve Months or TTM. However i always had a missing piece on fully understanding TTM. e.g If we have a corporation that reports on March(Q1), ...
40 views

### Calculate bond yield in python

I want to run the newton method on a large dataset to calculate bond yield. Below is the code I created using a loop. I need to run it on ~50 million lines and the loop is quite unwieldy. Is there a ...
281 views

### Robust Returns-Based Style Analysis

Sharpe's Return-Based Style Analysis is an interesting theory but flawed in practice when working with long-short funds or funds that are changing strategies over shorter periods of time due to the ...
471 views

### VaR for corporate bonds

I am trying to create a simple risk calculation for the portfolio (ignoring correlations for the moment). I have some corporate bonds with limited daily price changes. Any one have ideas how I can get ...
687 views

### How is the default probability implied from market implied CDS spreads for CVA/DVA calculation?

From point 38 on P.17 the default probability can be implied from market implied CDS spreads. "Macro Surface" method is mentioned, but I cannot get any clue of what it is? Where do I get the acedemic ...
13 views

### code assistance - how to bootstrap and plot paths with a mixed model [migrated]

I created an Arima (3,1,1) model using the steps below. I was able to create a nonparametric model, but now I would like bootstrap for the created model (model 3). Also I'd like to plot the paths of ...
37 views

### list of ADR's by volume or market cap

I'm looking for a list of ADR's (for a simulation) that I can screen by either market cap or volume? If anyone knows of a free way to get such a list it would be much appreciated.
133 views

### Handling Missing values in stocks returns when estimating the co variance matrix

What is the best way to handle missing values when stocks did not exist for the entire historical period?.