# All Questions

0answers
4 views

### Game theory and antagonistic games in trading

In one of the topic here, particularly in the comments, i saw a link to the page describing connection between Antagonistic Games and finances but i cannot find it now and would appreciate if somebody ...
2answers
75 views

### Approximation of different volatilities

Suppose I model the forward swap rate lognormal $$dS_t = \sigma_{ln}S_tdW_t$$ On the other hand we could model it simply by a normal assumption: $$dS_t = \sigma_{n}dW_t$$ I would like to know if ...
1answer
76 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 ...
1answer
57 views

### Why most of apple stock price since 10years have been gained overnight?

I've been playing with stock data and I've discovered a terrible truth : in 10 years apple stock price passed from roughly 3\$to 100$. However this gain isn't due to intraday price variation ...
8answers
152 views

### Why would there be a positive risk-free rate?

Most financial models include a risk-free rate or risk-free asset. Why should there be such thing as a positive risk-free rate? I dont see why an asset would provide a positive (real) return if it ...
1answer
161 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
49 views

1answer
51 views

### Girsanov Theorem and Quadratic Variation

Girsanov theorem seems to have many different forms. I've got a problem matching the form in wiki to the one in Shreve's book, due to the difficulty of quadratic variation calculation. Below is the ...
3answers
139 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 ...
0answers
91 views
+100

### Scale of Market Quakes Computation

I would like to reproduce the results in the paper "The scale of market quakes", from T. Bisig, But I am getting stuck at the computation of the Fourier Coefficients in equation (4). They are defined ...
1answer
48 views

### What data should be used for regression-based model backtesting?

I ran regressions using historical valuation data and now want to backtest the models I came up with. Are there any issues with using the same historical data set for the backtest that I need to be ...
1answer
54 views

### What is the best way of updating data while using Empirical Mode Decomposition to analyze

I have a question about EMD updating new data points. For an entire time series, from beginning to the end, the EMD preforms quite good using the cubic spline function. The problem happens when new ...
2answers
344 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 ...
2answers
44 views

### Is this a reasonable approach to determine the relative importance of valuation factors?

I am trying to come up with a measure of relative importance of a number of valuation factors. I am wondering whether correlation coefficients can't be used for determining this. More on the issue: ...
2answers
105 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?
2answers
34 views

### How to combine Gaussian marginals with Gaussian copula to obtain multivariate normals?

in the book "Numerical Methods and Optimization in Finance" I red the following: "Combining the Gaussian copula with Gaussian marginal gives a fancy way of expressing multivariate normals. However, ...
3answers
98 views

### Capital Allocation for Portfolio of Multi-Strategy and Multi-Instrument

I would like to know if there is a way (or theory) to manage a multi-strategy, multi-instruments portfolio that would calculate the optimal weight to allocate capital for each combination of strategy ...
1answer
22 views

### Why does the price of a convertible bond go up if the CDS spread goes up?

Looking at convertible bond prices in a commercial pricing tool, which is based on a model of Black-Scholes volatility plus a Poisson process of jump to default, I noticed that increasing the spread ...
1answer
92 views

### Why is two-factor model so popular for bond futures?

Given that which bond in the basket becomes CTD depends massively on idiosyncratic moves among different bonds, should we not be always using N factor model instead of 2 Factor model? By using only ...
2answers
104 views

### Logic behind Gordon Growth Model in a DCF analysis?

Sorry, I wanted to ask this on the finance/money forum, but they don't support LaTeX there. Let's say we are valuing a company using the DCF methodology with a 5-year projection period. We project ...
3answers
129 views

### multiperiod optimization using R

I'm interested in multistage optimization problems. Are there any good R packages around to solve such problems over time? I'm not at all an expert in it, so maybe someone knows a good paper / lecture ...
2answers
867 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 ...
1answer
32 views

### Why is the duration of a bond is important?

I know what it 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 calculate ...
1answer
65 views

### How to select optimal betting strategy from backtest?

I have written a model for predicting the winner of UFC fights. My model calculates the probability of each fighter to win a given match. I have back tested the model and found it to be very ...
1answer
76 views

### Does anyone have a C# implementation of the Barone Adesi Whaley options pricing model?

Thanks. Can't seem to find it through google. Worst case, if you can provide me the code in Java or C++ I can convert it to C#.
1answer
30 views

### Hedging using relative values

Consider I have two stocks $A$ and $B$, $A$ is trading at $\$40$and$B$at$\$30$. The standard deviation of its returns are $\sigma_A=25\%$ and $\sigma_B = 30\%$. Correlation between the returns is ...
5answers
1k views

### How to optimally allocate capital among trading strategies?

I'm trying to find an optimal way to allocate capital among trading strategies. "Quantitative Trading" by Ernie Chan claims on page 97 that the optimal fraction of capital to allocate to a given ...
2answers
175 views

### Why is “full” Yield Curve (term structure of interest rates) 3 component based?

I am trying to understand bond-valuation and construction of yield curve. I don't have any exposure to bootstrapping or what-so-ever as of now. So it's appreciated to have an example but not too ...
1answer
35 views

### Is there a way to adjust R PerformanceAnalytics function VaR with EWMA or GARCH method?

Is there a way to upgrade R PerformanceAnalytics function VaR with more risk sensitive approaches like EWMA or GARCH? Or is there another R package which can handle the issue?
1answer
60 views

### Do people hedge with leveraged ETFs intraday? How?

Seems that the answer to the first part should be yes, but haven't seen any references or examples. E.g. suppose I want to hedge XLF position with FAZ. Do people use close to current returns, or just ...
1answer
34 views

### Calculating short/long order percentages?

I have a feed in real time that lists the ask and bid orders. Each order consists of a value and a quantity. I want to calculate the percentage of short orders from the total orders in terms of ...

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