8
votes
3answers
285 views

GARCH model, expectation of volatility?

Consider a time series $\{r_t\}$ following a standard GARCH(1,1) model, i.e., $$ r_t = \sigma_t \epsilon_t,$$ where $\epsilon_t \sim N(0,1)$ and are i.i.d, and $$\sigma_t^2 = \omega + \alpha_1 ...
0
votes
1answer
17 views

Legitimate input parameters for Nelson Siegel Svensson model

I had previously asked this question and have come to better understand the answer with regards to setting the input parameters for the Non-Linear Optimization problem that provides the NSS ...
0
votes
3answers
44 views

To currency hedge or not to currency hedge (ETFs)?

When is it preferable to use a currency hedged ETF over a none currency hedged ETF? There has been studies which have shown over the longer term currency hedging does not make a difference. ...
5
votes
1answer
73 views

Sharpe Maximization under Quadratic Constraints

When doing Sharpe optimization $$ \max_x \frac{\mu^T x}{\sqrt{x^T Q x}} $$ there is a common trick (section 5.2) used to put the problem in convex form. You add a variable $\kappa$ such that $x = ...
1
vote
0answers
21 views

Rebalancing portfolio weights

I have a matrix of returns and weights for every time period. ...
1
vote
1answer
46 views

Pricing employee stock options

ESOs are typically priced using the black-scholes model, but with an additional parameter for for the employee turnover rates . An example ...
0
votes
1answer
18 views

Compound Discounting(?)

I am a programmer interning at a small contract furniture company. This company receives multiple discounts from the manufacturers, and I am trying to calculate the end discount. For example, the ...
0
votes
1answer
12 views

Understanding portfolio weights and purchasing stock in modern portfolio theory

Recently I've been learning about the markowitz algorithm. It's pretty interesting, but I'm curious how we apply this in practice. Lets say I have some optimal portfolio: $R_p = x_aR_a + x_bR_b$ ...
0
votes
1answer
27 views

About the boundary conditions of the Black-Scholes-Merton PDE

I have a question about the solution of the Black-Scholes PDE for the European call option when I read the book Stochastic Calculus for Finance II of Steven E.Shreve. Let $c(t,x)$ be the value of the ...
0
votes
1answer
36 views

Calculating discount factors using Nelson Siegel Svensson model

I am trying to understand how to calculate the discount factors $disc(TTM)$ mentioned on Page 9 of this pdf. When I'm calculating the discount factors, mentioned each bond has its own cash flow and ...
2
votes
1answer
41 views

Comparing Equity Funds

I am trying to compare 2 equity funds, I have 10Y of monthly returns (no knowledge of their share allocations) - and their index benchmark returns. They are both Value managers but I am not looking ...
1
vote
0answers
25 views

soft vs hard contraints in portfolio optimizations

Consider two sample portfolio optimizations: Optimization 1: $\begin{matrix} \\ \min \frac{1}{2} w'\Sigma w \\ w'\mu = r \\ Aw = 0 \\ w_l \le w \le w_u \end{matrix}$ Optimization 2: $\begin{matrix} ...
0
votes
3answers
61 views

Understanding $N(d_1)$ and how to use the stock itself as the numeraire?

Assume the stock price follows a geometric Brownian motion Then in Black-Scholes pricing model, $N(d_2)$ is the risk-neutral probability that the option expires in-the-money. However, it is said that ...
0
votes
0answers
16 views

Carry Trade vs synthetic Carry Trade using forward contracts

When it comes to foreign exchange carry trade strategy, the definition is straightforward: an investor borrows 1 USD in the US (low interest country) and invests that $1 to AU (high interest country). ...
0
votes
0answers
9 views

Transforming coupon bond returns to ZC bond returns

I am interested in aggregated Amihud ratios measures over bond groups. For a large panel data set with daily bond prices and volumes I have calculated already Amihud ratios per ISIN/day. Naive ...
2
votes
0answers
23 views

why many option contract price less than minimum boundary price?

I downloaded data from NSE(National Stock Exchange) website regarding closing price of European Call Option written on Index. From standard textbook, I read that option contract must satisfy $C(t) ...
0
votes
1answer
21 views

Term to Maturity when calculating discount function

I am just trying to understand what TTM (Term to Maturity) means in Page 8 of this PDF when calculating the discount function. Is it just the vector representing the difference between the time to ...
0
votes
3answers
50 views

How can a share price be different on its open than it was on the previous close?

The changing in price of shares are down to the number of people buying or selling stock. So, if there is a large demand for a stock then the share price will increase, and if there are lots of people ...
3
votes
1answer
258 views

How to calculate a forward-starting swap with forward equations?

I have been trying to resolve this problem for some time but I cannot get the correct answer. The problem is the following one. Compute the initial value of a forward-starting swap that begins at ...
1
vote
2answers
46 views

What‘s the definition of static arbitrage?

Could someone give the strict definition of static arbitrage? I know what the arbitrage means but have no idea about the term "Static". Thanks in advance!
4
votes
1answer
214 views

US options market/microstruture research

Can someone point out where to find up to date market/microstruture research in the options market?
0
votes
1answer
53 views

Asset pricing - Technology

I am working a bit on this paper, which is about Long-run risk through Consumption Smoothing. In equation (8) and (9) the authors define the stochastic process for the technology as: $Z_t = exp(\mu ...
0
votes
1answer
42 views

European call down and out option (geometric Brownian motion, Monte Carlo, Euler)

I need to estimate the expected value and the Greeks of an European call down and out option, assuming geometrical Brownian motion of the asset, with Monte Carlo simulation employing Euler ...
1
vote
1answer
66 views

Test .mql4 (meta trader 4 editor) when the fx market offline

I am coding some simple .mql4 program, you know, the fx market is offline on weekend, and the market will be not shown in Meta trader 4 platform. I wanna test my program in meta trader 4 on weekend. ...
1
vote
1answer
250 views

Technical Analysis in FX: literature on effective methods

I am trying to use technical analysis method (Kagi and Renko method in particular) to analyse my high frequency data. I applied those methods over 1 year, 2 years and 5 years high frequency data. I ...
3
votes
1answer
163 views

How to estimate CVA by valuing a CDS of the counterparty?

I'm trying to estimate CVA of one of my derivatives by valuing a credit default swap (CDS) of my counterparty. However, I don't know how to set up the CDS deal (notional amount, maturity, etc.). ...
0
votes
0answers
8 views

Bayesian logit model in Psychometric or Behavioural Testing for Credit Scoring in Developing Countries

A lot of parameters in one title, I know. So there's credit scoring but not using credit history. Then there's using a Bayesian logit model. Then there's doing so in a developing country such as Haiti ...
1
vote
1answer
22 views

market change, correlation and estimation bias

I hear many quants sating that markets change very slowly. This "fact" is even presented as a justification of statistical arbitrage, for example, by affirming that correlations remain roughly the ...
2
votes
1answer
77 views

Completeness and Hedging Question

A question in some private notes I'm struggling to work through (exam. prep.). (iii) is where I hit a wall with my understanding & I'm lost thereafter. Any help/clarification gratefully received. ...
4
votes
1answer
291 views

VaR mapping - Forward Foreign Currency Contract

I have a question about VaR mapping for FX forwards. Please bear with me while I outline the problem. Philippe Jorion's book discusses VaR mapping; a means to break down complex instruments into ...
1
vote
0answers
34 views

Long-term proportion of convex and concave strategies in artificial financial markets

In their classic paper "Dynamic Strategies for Asset Allocation" Perold and Sharpe state: "That convex and concave strategies are mirror images of one another tells us that the more demand there ...
5
votes
2answers
134 views

Is there any research on pyramiding techniques of entering/exiting a trend?

I am looking for any research about optimal strategies for gradually building (scaling in) positions inside a trend as well as optimal gradual exit strategies on pullbacks/reversals to minimise ...
0
votes
1answer
28 views

optimization with absolute constraints

Suppose I have an optimization where I need to impose ADV-like constraint (for a case where Shorting is allowed): $\max \mu'w - \lambda w'\Sigma w$ $ |w| \le V $ $ Aw = 0$ and I want to use a ...
0
votes
2answers
39 views

Correlation Between 2 Portfolios

I have a set of assets, n. I'm trying to find the correlation between 2 portfolios, say x and y, where x is nested in, or, a sub-set of y. That is, x is a portfolio based on a sub-set of n, while y is ...
1
vote
1answer
37 views

Lease Accounting / FX Embedded Derivatives

I have a lease agreement where the functional currency is USD, domestic currency is UAH. Lease agreement is written in EUR (rent rate) and payments are to be done in UAH in the amount of rent rate ...
3
votes
1answer
45 views

Is there a Bloomberg field for the first trading date after an event?

For example, if a company reports earnings today after the close (6/24), the earnings date would be 6/24 but the field I'm looking for would be 6/25. If they reported tomorrow before the open, both ...
2
votes
1answer
139 views

Arbitrage question

Consider a hypothetical Payment in Kind (PIK) bond of XYZ Corporation. The bond has 2 years to maturity, a face value of $1000, and has an annual coupon rate of 10%. Coupons are paid annually. XYZ ...
0
votes
1answer
109 views

Understanding how to obtain Nelson Siegel Svensson parameters

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non- Linear Optimization problem to do this. I am using the procedure presented in this paper. The way I ...
2
votes
1answer
422 views

ex ante tracking error correlation between funds

I have two portfolio's called Comb & Global. They both have the same investable universe lets says 3000 stocks & are measured against the same benchmark. So it is possible that both funds hold ...
0
votes
1answer
44 views

Newbie Quant: Bulding price feeder to securities master db

First of all, warm hello to all. I am newbie and i admit it, but with at least 15+ years of exp in C++. Working in IB - derivatives mainly, but unfortunately on the business side not trading at all. ...
1
vote
1answer
55 views

Why is Indian rupee is stable against the USD even though most other currencies weakening?

The Indian Rupee (INR) seems fairly stable against the USD (1 USD = 62-64 INR) in the recent times even though most other currencies have weakened against USD, some by 20-30%. Apparently, INR is ...
2
votes
2answers
79 views

American vs European Options on equity index options

I have a question regarding the usage of European vs American Options. According to Professional Risk Mgr Handbook 2010, American-style options are used mostly on equities whereas European-style ...
10
votes
7answers
723 views

What is the fair price of this option?

Without having to use Black-Scholes, how do I price this option using a basic no-arbitrage argument? Question Assume zero interest rate and a stock with current price at \$$1$ that pays no dividend. ...
0
votes
1answer
42 views

Careers in finance for postgraduates? [on hold]

Having read through similar topics, I see these questions are often poorly received, so apologies if this is not the place to ask (would appreciate if someone could redirect me). I shall try to be as ...
0
votes
1answer
61 views

Setting input parameters for Nelson Siegel Svensson model

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non-Linear Optimization problem to do this. I am trying to solve: $$ \min_\theta{\sum{(p_i - \hat ...
1
vote
1answer
335 views

MonteCarlo simulation of stock prices using milstein scheme with dividend yield?

While performing a montecarlo simulation of stock prices using the milstein scheme is it possible to take into account the dividend yield into the simulation itself somehow, if we are given a ...
1
vote
1answer
1k views

Integrating R with Bloomberg

In the past, I have used the package RBloomberg to directly pull bloomberg data into R. I've also seen it go by the names Rbbg or R[Name Redacted]. It seems to me, however, that this package no longer ...
1
vote
1answer
56 views

Quantlib FRA with shifted start date

I'm new to quantlib. I am trying to construct a PiecewiseYieldCurve. I been looking at the implementation of FRA. It seems that the start date of the FRA must be an integer number of month from the ...
0
votes
0answers
148 views

negative probabilities in the bivariate tree heston model

I am trying to implement the bivariate tree approach for the Heston model by Beliaeva and Nawalkha. I currently have the problem that given the specifications in their examples, I always obtain ...
1
vote
1answer
76 views

Numerical Solutions for PIDE

I want to solve an exotic options of PIDE by Numerical Methods.I just focus on the integral part of PIDE and want to underestand some tips on numerical solution of how to numerically solve it. Exactly ...

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