0
votes
1answer
7 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. ...
0
votes
1answer
10 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
0answers
13 views

Market price of risk for interest rates

What is the "market price of risk" in interest rates models? Is it different for short-term and long-term government bond yields?
0
votes
2answers
20 views

Understanding N(d1) and how to use the stock itself as the numeraire?

Assume the stock price follows GBM. Then in BS pricing model, N(d2) is the risk-neutral probability that the option expires in-the-money. However, it is said that N(d1) is also the probability that ...
1
vote
2answers
30 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!
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 ...
0
votes
3answers
38 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 ...
1
vote
1answer
16 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 ...
1
vote
0answers
32 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 ...
0
votes
1answer
38 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 ...
0
votes
1answer
50 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
26 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
38 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 ...
0
votes
1answer
42 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. ...
0
votes
1answer
41 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
55 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
54 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
1answer
48 views

calculating portfolio volatility [on hold]

Given: vector of portfolio weights $W = [w_1 w_1 ]$ correlation matrix $C = \left( \begin{array}{ccc} a & b \\ d & e \end{array} \right) $ standard deviation of the asset returns $S = [s_1 ...
0
votes
0answers
38 views

Chartered Financial Analyst or European Financial Advisor [on hold]

What is the difference between the Chartered Financial Analyst certificate (CFA institute) and the European Financial Advisor certificate (European Financial Planning Association)? I mean in terms of ...
1
vote
1answer
67 views

Libor OIS basis swap equation

I'm a little embarrassed about this because I have a PhD in math, but I'm having a little trouble working out how to bootstrap an OIS curve from libor rates and basis swap rates. If I had an equation ...
0
votes
1answer
103 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 ...
1
vote
1answer
75 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 ...
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 ...
3
votes
1answer
34 views

Standard term for the components of a distribution waterfall?

I'm writing software for calculating distribution waterfalls. When displaying the results of a particular calculation, I want to show amounts that correspond to specific provisions in the relevant ...
2
votes
2answers
73 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 ...
1
vote
1answer
51 views

What Exactly is Expected Return

Consider the following plot, courtesy of this page: Regarding the $y$-axis, how does this "expected return" relate to the "instantaneous expected return" in a geometric Brownian motion (GBM)? E.g., ...
2
votes
1answer
68 views

Wrong discount factors when finding Nelson Siegel Svensson model 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. Some of the code I have written is below and this is where my ...
3
votes
1answer
53 views

Proving Derivative Property of Moment-Generating Function

In Shreve II, exercise 1.8, he walks the reader through proving the derivative of a moment-generating function $\phi$ is equal to the expectation $\mathrm{E}[Xe^{tX}]$; i.e., $$ \phi^\prime(t) = ...
3
votes
1answer
105 views

Are all stocks and stock indexes just white noise

In the paper Super-Whiteness of Returns Spectra from Erhard Reschenhofer of University of Vienna it is commented the following "Until the late 70’s the spectral densities of stock returns and stock ...
5
votes
2answers
120 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 ...
2
votes
2answers
64 views

How to discretize a GBM under P- and Q-measures?

Under the P-measure, a geometric Brownian motion can be specified using the following SDE: $$dS_t=\mu S_tdt+\sigma S_tdW_t^P$$ and its Euler discretization is $$S_{t+\Delta t}=S_t + \mu S_t \Delta ...
0
votes
2answers
59 views

Spot price and volatility has a correlation of -1, why?

A stock option trader taught me yesterday that the correlation between the spot price of asset X and the variance of asset X is approximately -1. Can anyone give me a explanation why this is true?
4
votes
0answers
77 views

Momentum - Statistical Argument

In their seminal paper Jegadeesh and Titman (1993) develop a statistical model to infer where moment comes from. In practice they setup the following: $r_{it}=\mu_i + b_i f_t +e_{it}$ ...
0
votes
0answers
11 views

Consumption Based Asset Pricing

I am working on some consumption based asset pricing models. I am modelling consumption growth in several different ways. An obvious one is to model consumption growth as an AR(1) process: $g_{t+1} = ...
2
votes
0answers
61 views

How would it be possible to use Dynamic Programming to search a space of investment strategies to find an optimum?

As my question states, the problem I am having is finding a sensible way to search a large space. Any help or insight that could be provided would be hugely appreciated. Currently I am trying to ...
0
votes
0answers
21 views

Which bond would the investor rather hold? [closed]

Consider two discount bonds. Both have face value of $100 and the yield to maturity is 5%. Bond A has maturity of 1 year and bond B has maturity of 5 years. If interest rates fall from 5% to 4%, ...
1
vote
2answers
115 views

What are some examples of non-solvable SDE where Monte Carlo discretization is necessary

Reading Glasserman - "Monte Carlo Methods in Finance" it says in the introduction to Chapter 6 - Discretization Methods, that moste models arising in derivatives pricing can be simulated only ...
0
votes
1answer
17 views

Finding Maximum mortgage given some conditions? [closed]

Suppose the interest rate on a fixed-rate, 30-year mortgage is 6.5%. Lex can afford to make payments of $1100/month. What is the maximum mortgage Lex can afford? I believe the formula is P = F * (1 - ...
2
votes
1answer
71 views

Fit linear model to higher moments of CAPM

How can one fit a linear model to the higher moments of CAPM in R? Fitting a linear model to the second moment (classical CAPM) would be ...
1
vote
1answer
37 views

Negative adjusted strike in Levy's Asian option approximation?

In Edmond Levy's 1992 paper, he introduced a moment-matching method to approximate the price of an Asian option assuming GBM for the underlying. It suggested that, if some monitor points are already ...
0
votes
0answers
35 views

Issues with +100 symbols in Quantstrat, Erratic Trades

I've tested my code against individual symbols and very small groups of symbols. I'm finding the more symbols I add the fewer trades I get. For instance, if I just include the first five symbols, all ...
0
votes
0answers
36 views

Forecast of ARMA-GARCH model in R

I managed to forecast a GARCH model yesterday and run a Monte Carlo simulation on R. Nevertheless, I can't do the same with an ARMA-GARCH. I tested 4 different method but without achieving an ...
0
votes
1answer
33 views

How to scale $\alpha$, trading costs in a standard portfolio optimization problem

In the usual "portfolio optimization problem under linear constraints". Let me define the terms here. $$ \text{Find } w^*=\underset{w}{\text{argmax}} \ \ r^Tw - \lambda w^{T} \Sigma w - ...
0
votes
0answers
9 views

What are commercial impact models and transaction cost analysis models out there for simulation?

I have heard that ITG, LiquidMetrix, MarkIT and TradingScreen has good Transaction Cost Analysis (TCA) research. I wonder which firm one would choose to have an impact model formula inside his ...
0
votes
0answers
11 views

3-dimensional Arbitrage algorithm implementation [closed]

While reading on the net for quite some time about 3-dimensional and n-dimensional arbitrage i, as a programmer, couldn't help but got more interested in how such algorithms look like, translated into ...
0
votes
0answers
13 views

How can I pull ASX Data using R? [closed]

I want to pull CBA stock data using Quantmod I have tried most variations of international exchange codes with no luck i.e CBA.AX CBA:ASX ASX:CBA symbols <- c("CBA", "BHP") getSymbols(symbols, ...
0
votes
0answers
22 views

How to calculate Yield to Maturity on this one [closed]

YTM of a 5.25 % subordinated mortgage bond due at the end of 2024 that is selling for $1,020 today. Calculate the current yield as well.
0
votes
0answers
17 views

Optimize Kelly Criterion in these circumstances for Binary Options

For simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds, the Kelly bet is: f* is the fraction of ...
4
votes
1answer
80 views

justification of square root process

In finance, many stochastic processes $X(t)$ are defined via \begin{equation} dX = \text{(some drift term)} dt + \sigma X^\gamma dW_t \end{equation} with $\gamma = 1/2$ (for instance the Heston model ...
-2
votes
0answers
16 views

Any package to run BEKK-GARCH-X models in R [duplicate]

I tried using a package called mgarchBEKK (or mgarch) to estimate a VECM-GARCH model with a BEKK approach. It seems like the package firstly estimates the VECM model, then uses the residuals (Epsilon ...

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