2
votes
1answer
217 views

Why does changing the time step size in my Monte Carlo simulation change my result a lot?

I have written some software to price a call option using Monte Carlo simulation. It produces a price which is consistent with the model when I set the time step as recommended in a tutorial that I ...
0
votes
0answers
10 views

Sharpe Ratio for strategies with different rebalancing period

Strategies published in journal papers like SMB, HML, UMD have annualized sharpe ratios around 0.5. These long-short portfolios are formed with monthly rebalance. People who backtest some daily ...
0
votes
0answers
6 views

Force of Interest Compounding at Annual Rate i

I'm working through some actuarial practice and am lost as to what's going on with the differentiation here (it's been a while since I've had calc): Derive an expression for $\delta_t$ if ...
0
votes
1answer
12 views

Put-Call Parity Arbitrage Exploitation for Binary-Asset-or-Nothing Options

Is the Put-Call-Parity valid for binary (asset-or-nothing) options? If not, is there another formula for such exotic options? I know that for regular options, there are arbitrage opportunities when ...
0
votes
1answer
21 views

Projecting cash flows via Monte Carlo Simulation

I am looking to model the cash flows associated with a company as part of a Project finance experiment, where I got the idea from here. I'm looking to project cash flows for an Automotive company in ...
1
vote
0answers
18 views

Historical calibration of Hull-White model

I have a question concerning 1-factor Hull-White model. For my master project I need to calibrate it to compute Counterparty credit risk metrics. I know that the model might be calibrated either for ...
1
vote
0answers
15 views

Calculate and compare IRR among products and companies

I am trying to calculate return on investment for a couple of companies and their respective products. I have two main products: credit card installment loan Owners would like to be able to ...
1
vote
0answers
25 views

How to calculate the estimation error of portfolio variance using propagation results?

I am trying to find a conservative approximation for the propagated estimation error of a investment portfolio's variance (comprising two assets), given we know the estimation error for the variance ...
0
votes
2answers
49 views

Portfolio Strategies Project

My first assignment for my Quantitative Finance Masters is to design a portfolio that theoretically makes money under any market movement. I am also asked to state all necessary assumptions. What ...
2
votes
0answers
36 views

Approximate asian geometric option with Heston

I am trying to implement Theorem 1 from this Journal in RStudio. The journal says the it is possible to find a approximate price of a geometric asian option in a Heston setup this way: ...
0
votes
1answer
11 views

How to find optimal noise covariance matrices Q & R

I am trying to use the discrete Kalman filter for forecasting and I wonder what is commonly considered as the optimal way of determining the measurement noise covariance constants (Q and R) for a ...
1
vote
2answers
44 views

does there need to be risk-neutral agents in the market to enforce risk-neutral pricing?

I'm trying to understand a fundamental link between mathematical finance and economics. I understand that risk-neutral pricing is free of arbitrage with replicating portfolio. Does risk-neutral ...
0
votes
0answers
27 views

Are limit orders mostly being matched by market orders?

When going over order book data, most limit-order executions look similar to the following: ...
0
votes
0answers
10 views

Estimating Credit VaR using a simulation of joint defaults with a copula

I'm trying to follow the steps Malz gives to calculate Credit VaR using simulation of joint defaults with a copula. I'm having trouble understanding some of the steps. My math knowledge is rather ...
0
votes
0answers
10 views

Unexplained delimiters in Nasdaq ITCH file

I'm working on writing an order book constructor for Nasdaq ITCH v5 files, and I'm noticing some occasional message identifies/ delimiters that are not included in the ITCH5 specification, ...
0
votes
1answer
25 views

Calculating unweighted performance of stocks within a period

The well known calculation of unweighted index of stocks is just calculating an arithmetic average. And then, to calculate the performance of the index, I calculate the %change of the unweighted ...
0
votes
1answer
35 views

Interpretation of vega out of BS formula

I am comparing Monte Carlo estimates of VaR (using importance sampling) under both the normal and student distributions. I am also considering risk factors other than log-prices; in particular, ...
0
votes
1answer
64 views

Feynman Kac Formula for path-dependent options

Consier geometric Brownian motion: $dS_t/S_t=\mu dt+\sigma dW_t$ Feynman Kac theorem tells us that the conditional expectation $v(t,x)=E[ e^{-rT}\Psi(S_T) | S_t=x]$ can be computed by solving the ...
0
votes
0answers
25 views

Shrinkage Estimator giving unrealistic portfolio variances

I have a historical covariance matrix which is invertible for daily and monthly returns. I used the Ledoit,Wolf shrinkage estimator for the covariance matrix and now I get really small portfolio ...
0
votes
0answers
12 views

C++: Derive a class template from QuantLib::PiecewiseYieldCurve [migrated]

I would like to derive a class template from QuantLib::PiecewiseYieldCurve. This is my derived class definition: ...
0
votes
1answer
33 views

Ledoit-Wolf Shrinkage estimator not giving positive definite covariance matrix

I used ten year daily data for 407 stocks and computed the daily and monthly covariance matrices. Since I have more variables than observations for the monthly matrix, I wasn't surprised to find the ...
3
votes
2answers
119 views

Thesis using Momentum strategies in R, tips on good books, guidelines etc on how to do the programming?

I am quite new to R and will be doing an empirical analysis of momentum strategies in R using a dataset from the index OSEAX from 1980 to 2014. The momentum strategy will for the most part resemble ...
1
vote
1answer
99 views

What are some quantitative trading strategies used by high-frequency trading companies to make a killing on a market crash day on 24Aug2015?

http://blogs.barrons.com/focusonfunds/2015/08/24/high-frequency-trading-firms-just-made-a-killing/ Virtu Financial (VIRT), the high-speed trading firm that went public earlier this year, was one ...
0
votes
0answers
8 views

The calculation of NIBID rate from 2013 by using NIBOR rate (UIP)

I need to calculate the NIBID rates from 2013. I have the NIBOR as a starting point and some indications but I am still quite confused. I found some advices online, but it does not seem to get me the ...
0
votes
0answers
13 views

Expectation Hypothesis: forward variance

I am trying to understand the Expectation Hypothesis from Campa and Chang (1995). In the paper of Byoun et al. they use this formula to estimate the forecast biasness of options. $$ V_{1,k} - V_{0,k} ...
0
votes
0answers
8 views

What equal installment of annual payment will discharge a debt which is due as Rs. 848 at the end of 4 years at 4% per annum simple interest? [on hold]

The above question can be calculated by using the formula x=100P/(100n+n(n−1)r/2), which gives the result = 200. My doubt is that 200*4 gives 800. So when the balance (848-800) 48 will be paid?
2
votes
2answers
109 views

Option with payoff $K^2/S^2$

Given the dynamics of the risky asset ( with dividend $q$ ), $$ \frac{dS_t}{S_t}=(\mu-q)dt + \sigma dW_t^P $$ Consider a european option with payoff, $$ P_0(S) = \begin{cases} 1, & ...
2
votes
1answer
57 views

Parametric VaR with Student-t distribution

Im using VaR to estimate parametric VaR. I have been able to do this using a Normal Distribution, however I want to also do this using a Student t-distribution and I'm unsure how to implement that in ...
0
votes
1answer
27 views

Futures Parameters for Value at Risk

I am new to risk management. I am calculating the VaR for a portfolio of futures contracts, long and shorts. I calculated it using the historical, parametric, and MC method. But there is something ...
0
votes
0answers
12 views

Historical UK Gilt 2-year and 5-year data

Data on the Medium (approx. 5-years) and Short (approx. 2-years) futures contract listed on ICE only goes back to 2009. Is anyone able to point me towards where I can get a longer time series, perhaps ...
2
votes
1answer
76 views

Up and Down days in GBPUSD and a Filter

I want to study if the odds of an up or down day in a forex pairs is 50-50. I just count the total number of up and down days in X years and compare it with the total days. The results are very ...
0
votes
0answers
21 views

Stock valuation: Solving non constant growth problem statement: stock evaluation [closed]

Note: I have the answer I think but it doesn't make any sense to me as to what the question actually is asking or what the method is to solve. •Suppose a firm is expected to increase dividends by 20% ...
0
votes
1answer
53 views

What exotic options are exchange-traded?

There are a number of exchanges that trade vanilla Call/Put American/European options on various underlyings (equities, indices, futures). There have been some trading in digital options on certain ...
-1
votes
0answers
36 views

Software project in QF? [closed]

I am relatively new in QF and I still need to learn lots of things about the subject. But I can't wait to start to use my analytic+math+software skills in some QF project. So basically, I would like ...
0
votes
3answers
97 views

Is variance additive only under Log-returns?

Can't seem to figure this one out by thinking it through. Let's say that the simple return $R_t=P_{t+1}/P_t -1$ is assumed to be $R_t \sim iid N(0,\sigma^2)$. Thus, a two period return would be ...
1
vote
1answer
26 views

How are netting sets determined for CVA calculation?

In his book, Gregory describes a netting set as a set of trades that can be legally netted together in the event of a default Obviously, the netting agreements (as per ISDA master agreement) ...
0
votes
0answers
14 views

Mutual Fund Cash Level Data

I look for a source to download historical monthly mutual fund cash level data from. Is there any free/cheap source available?
4
votes
2answers
213 views

HFT to blame for Flash Crashes?

Some people 1, 2, 3 claim that High Frequency Trading is partly to blame for the extreme volatilities in the markets yesterday (24. August 2015). Is that true? Is the amount HFTs move even enough ...
3
votes
1answer
52 views

Yahoo finance, interactive chart and historical prices are different

I am very new to the stocks. I checked the TNTE.AS stock on Yahoo Finance website. Here it provides "Interactive Chart" and "Historical Prices". But I found they are showing different values. For ...
1
vote
1answer
41 views

How are Quandl monthly S&P500 earnings estimates derived?

Can someone explain how the monthly earnings estimates are derived for S&P500? Quandl sources multpl.com, who state: ...
0
votes
0answers
19 views

reference for elementary mortgage math

I have a student doing a project on default rate & prepayment rate for mortgages. She would like to include a section on how the quantities affect pricing, & so would like to reference a ...
1
vote
0answers
27 views

Specifying integration level of time series [closed]

Following model was estimated on 200 observations. How to specify the level of integration of $X_t?$ In brackets there are standard errors and p-value of Breusch-Godfrey test is also shown. ...
2
votes
2answers
132 views

Relationships between white noise and random walk

I would like to ask 5 questions about relations between these processes. 1) Could white noise be also a random walk? 2) Could random walk be also a white noise? 3) Could white noise be stationary? ...
0
votes
3answers
62 views

Realtime Exchange Rate Data API

There are various sources for real-time exchange rate data, e.g. Ariva EUR/USD. Is there also an API or other source which enables to automatically retrieve real-time exchange rates as a data stream ...
0
votes
1answer
31 views

How to arrive at expectation of negative utility function via Taylor series expansion

I'm attempting to follow an author's steps in an argument and having trouble seeing how Taylor series expansion can be applied to give the stated result. The scenario is as follows. The mid price ...
0
votes
0answers
21 views

how best to equalize individual pair risk in a portfolio of stock pairs?

I am building a portfolio of stock pairs in which each pair is individually hedged via beta/hedge ratio adjustment. I am looking for a method to ensure that I am taking the same risk in each pair that ...
2
votes
0answers
37 views

The best way to generate market scenarios [closed]

What general approaches could you recommend for modeling spot rates(for different maturities) and forward rates?(eg for LIBOR) I need to generate scenarios for term-structure of interest rates. What ...
0
votes
0answers
13 views

Stiffness of numerical methods for SDE

What can I do with stiffness of numerical methods for SDE? I want to use numerical approach for solving SDE in market's scenarios generation. Is there any general approach to handle it?
2
votes
1answer
61 views

Hidden/Dark Pool Hedge Funds

Is there a noun for investment funds which do not disclose the assets they are investing in to their customers? Some exchanges are called "Dark Pools" where the orderbook is hidden to traders, so I ...
1
vote
2answers
72 views

Vega hedging with implied volatility smile

I have a problem with vega hedging. Consider the management of an exotic derivative, such as Barrier option. Typically we do the following tasks: selecting a pricing model, say, a local volatility ...

15 30 50 per page