# All Questions

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### List of VaR and CVaR formulas for continuous distributions?

Where can I find more VaR and CVaR formulas for continuous distributions? I collected a list here:
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### What is the formula for beta weighted delta and gamma?

I am trying to calculate the beta weighted delta and gamma for a portfolio of options of different underlying stocks, but I can't seem to find the correct formula. Can someone point me to it or a ...
1k views

### How to calculate the most realistic historical option prices with additional publicly available parameters

This is a follow up question of this one. My aim is to create the most realistic historical option prices possible with publicly available data. I want to do this for backtesting purposes. The ...
3k views

I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
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I have 40 shares in an index and I want to weight them based on their market value, define the known value as $x_i$ In the traditional way, the weight of each share is calculated as: $w_i = x_i / ... 0answers 7 views ### pricing of weather derivatives using stochastic brownian motion I'm currently doing research in the pricing of weather derivatives using the equation above. How to apply daily temperature data into the model? how do I use the model? 1answer 231 views ### Pricing options under restricted domain How would I price an option when the underlying security is unable to trade above a certain price? I assumed this would be as simple as restricting the limits of integration of the PDF to B (the ... 1answer 36 views ### What is the name of this product? Consider the payoff =$S_T1_{S_T>K}$where$S_T$is the asset price at maturity. What is this type derivative called? and is it a liquid option? 0answers 33 views ### What would be considered a good/competitive throughput for a FIX engine? I am writing my own FIX engine and I am in the process of running some benchmarks. I am not sure whether my results are good or bad. Can someone with experience in the area provide me with some ... 2answers 48 views ### Relationship between Beta and Standard Deviation I was doing some financial analysis on two firms in the coffee industry. After calculating Beta and Standard Deviation for both firms, I seem to have stumbled on some weird phenomenon. It appears ... 1answer 51 views ### Expected Shortfall and Spectral Risk Measure Not sure I am understanding spectral risk measures correctly. Why is there an equal weighting scheme placed on the tail losses in expected shortfall. Will that no bias the expected value of the loss ... 1answer 60 views ### Negative Eonia rates I'm curious how the current negative Eonia (Euro OverNight Index Average) rates would impact derivatives pricing. Does it mean that if I post cash collateral to you, I also need to pay you interest? ... 1answer 26 views ### Wholesale credit risk management Trying to read up on "Wholesale credit risk ", can't find any useful references, why the emphasis on wholesale? - Any help greatly appreciated. 1answer 17 views ### Hedging bond with CDS of different maturity Say I buy a 10-year bond with a notional of 100k. To hedge my credit risk entirely I could buy a 10-year CDS, also on a notional of 100k. Now, if there are only 5-year CDS trading and no 10-year CDS, ... 0answers 16 views ### Variance of “hedged” term structure portfolio increasing? I'm attempting to use PCA to hedge a small fixed income portfolio. I start with one particular bond and chose the nearest other bond to hedge the 1st principle component. This decreases the portfolio ... 1answer 210 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 ... 1answer 31 views ### Data on banks’ leverage Does someone know free resources to estimate the leverage of the banking and financial sector at an aggregate level? In particular I would be interested in something like Federal Reserve’s Flow of ... 3answers 462 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 ... 3answers 119 views +50 ### Volatility skew and how to capture it? We see in the market that a implied volatility surface is not flat. Based on this observation different models were developed to capture the structure, e.g. CEV / SABR. A measure often used for the ... 5answers 160 views ### Option pricing ? Where to get the dividend yield from? I'm trying to apply Black & Scholes formula for a real example to price a vanilla equity option but I'm strugling a little bit whith the dividend yield. Let's assume I have a stock that trades at ... 4answers 383 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 ... 1answer 99 views ### Different ways of portfolio optimization There are different ways to optimize portfolios: $$\max R^Tw\tag{1}$$ or $$\min w^T \Sigma w\tag{2}$$ and finally using a risk tolerance$\lambda$:$$\min{(w^T\Sigma w-\lambda R^T ... 0answers 14 views ### garchOxFit in R-oxo file does not match Could someone please help me with trying to get the Ox interface to work in R. I get the following errors as output: This version may be used for academic research and teaching only Link error: ... 1answer 53 views ### Data on margin volumes? I came across a Financial Times article today that said "Peaks in margin trading have been a precursor to bear runs in the past, notably in March 2000 and July 2007." I'm curious if anyone here would ... 0answers 60 views ### What are the main flaws behind Ross Recovery Theorem? Stephen Ross’ new paper claims that it is possible to separate risk aversions and historical probabilities if the Stochastic Discount Factor is transition independent using Perron-Frobenius Theorem. ... 0answers 20 views ### Volatilty Calculation [on hold] I have 3 years historical prices for the commodity . I want to calculate the annualized volatility of the commodity . Can i scale my daily volatility to annualized volatility by multiple with square ... 0answers 31 views ### Black Scholes Model which Volatilty to use [on hold] Black Scholes Model requires volatility as input . It needs to be annualized/or Daily Volatility for calculation . Input will be appreciated 1answer 37 views ### how to use known premium of options to determine premium of options with another strike? Assuming constant volatility across all strikes, how to use known premium of options to determine premium of options with another strike? e.g. suppose we know premium of \$40 call and put, \$50 call ... 1answer 50 views ### Do people actaully use VaR in professional settings? VaR seems like such an obviously flawed metric, I am surprised that it seems to be used so much in the private sector. First, the way it is named and the way it is presented often imply it is the ... 1answer 44 views ### What are good internship positions I should look for as an undergrad student? [on hold] I am a 3rd year computer engineering student who is interested in quant finance. I was exposed to quantitative courses such as calculus 3, ODEs, optimization, probability and stats, mathematical ... 1answer 64 views ### Briefly stated, why does the function N(x) appear in the European call option pricing model? I'm aware of the the mathematical formula for the price of a European call option on a stock however I'd like to think about it in an intuitive way. 1answer 47 views ### What is Equity Asian Hybrid? As listed in http://www.vectorrisk.com/Views/Solutions/ProductList.aspx What's an Equity Asian Hybrid? Any references? What is exactly a hybrid product? 2answers 107 views ### If I am very fast (less than 10 microseconds latency) what would be the first strategy to execute? [on hold] Let's assume I found the holy grail of low-latency trading (which I didn't). For educational purposes, what would be the first strategy I would direct my trading code? 2answers 210 views ### Why are interest rates and stock prices positively correlated? If I've been looking at graphs correctly, there is a strong positive correlation between stock prices (or P/B values) and interest rates over time, i.e. P/B values tend to be high when interest rates ... 1answer 192 views ### Is it possible to model general wrong way risk via concentration risk? General wrong way risk (GWWR) is defined as due to a positive correlation between the level of exposure and the default probability of the counterparty, due to general market factors. (Specific wrong ... 1answer 103 views ### Stress Testing Methods I'm working on the following task: Given quarterly data: a time series representing the 1-year realized (10 years of data) rates of default on a portfolio of mortgages a slew of ... 1answer 34 views ### Historical Data on$/yen forward exchange rates

Would anyone happen to know where I can find historical forward exchange rate data between the yen and dollar?
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### Where can I find literature (books, articles, etc.) about basic HFT / arbitrage strategies? [on hold]

I am not looking for your winning strategies. Just the basic stuff from where to start. Can anyone share their opinions about what should I read to hit the ground running?
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### Does the correlation of matrices has explanatory power when building a pattern recognition model?

I'm using 8 different variables (with daily observations) with the purpose to compare different months across the historical data. For that purpose I calculate the correlation between each month and ...
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### Why is the duration of a bond important?

I know what duration measures, but now in the age of computers why is it useful? If the yield changes, we could just simply plug the new yield into a program, or excel or something like that, and ...
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### what is a typical way forex brokerages can provide cheap leverage for their customers?

I'm not very well read in the area of high finance but I'm curious how forex brokerages are able to provide the backing for leverage that they can provide to customers. Is it possible to do this ...
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### run time error 424 in IB TWS Excel DDE API; failed to add combo orders

I'm using an Excel DDE to connect to Interactive Brokers TWS via their API 9.72 sample, excel 2013. When I tried to create a combo order, the rum error code 424 said "object required". It seems that ...
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### What are the properties of the Expected Shortall measure when split in multiple time periods?

Suppose I have a single time series of losses $L$ that consists of two sub-parts $L_1$ and $L_2$. Is there a relationship that relates the expected shortfall of $L$ to the expected shortfall of \$L_1, ...
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### 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 ...
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### Can we trade option spreads with more than 4 option legs?

I am wondering why most online brokers restrict multi-legged options spread trades to have a maximum of four legs? Also, is there a broker that allows you to trade say 6 or 8 legged option spreads.
139 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?
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### What is meant by “position at a given time” in the context of a series of forex trades?

Suppose you are only talking about a single currency pair, say EUR/USD. Throughout some period of time, you engage in trades with various other parties, sometimes buying, sometimes selling. The rates ...
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### Moneyness and option prices

I'm attaching stock prices from CRSP to a dataset of option prices in order to compute the option moneyness. I'm wondering whether I should adjust the underlying prices taking into account splits and ...