# All Questions

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### How do I build a cross currency basis swap pricer using implied levels generated from fx forwards?

I'm building a strategy where I would take positions depending on whether the basis swap looks rich or cheap relative to the forwards, inside 1yr maturity. Depending on liquidity the market in ...
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### How to apply Kelly criterion to a portfolio made by a stock plus a option?

First of all, assuming a Gaussian, Markowitz, well behaved world. Extensions for non-well behaved world will be welcomed. I know that by a portfolio made by only by one stock (and a risk free bond) I ...
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### Simulate drifted geometric brownian motion under new measure

I have a very fundamental question regarding simulation of DRIFTED geometric brownian motion. We have the standard Blackos Scholes model: $dS(t)=r S(t)dt+\sigma S(t) dW^{\mathbb{P}}(t)$, where ...
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### Yahoo Finance data scraper

I am building a small financial web application and I need a data source for price (Adj. Close) and volume data. I have written a scraper to scrape equity data for yahoo finance and can pass this to ...
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### Polynomial interpolation of corrected lognormal distribution

Can anyone provide a formula for a polynomial interpolation of the corrected lognormal distribution used to model returns traditionally resulting from the wrong Brownian motion generated model? ...
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### Calculating the global minimum variance portfolio in R?

I am attempting to use the globalMin.portfolio command to calculate the global minimum variance portfolio in RStudio. My code is as follows (note that several libraries have been included which may ...
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### How to compute the yield on the Ultra-Bond Treasury Futures

I am trying to compute the yield on the Ultra-Bond Treasury Futures which is roughly 172.2187. Heres the description of the contract: U.S. Treasury bonds with remaining term to maturity of not ...
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### Minimum Variance Portfolio problem [on hold]

Minimum Variance Portfolio Suppose there are N stocks in the investmentable universe and we have a fully invested portfolio investing 100% of the capital. The Covariance matrix is denoted as ∑. We ...
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Assume a basket of 3 credits, each with some unconditional default probability ${q_i}(t) = \Pr [{\tau _i} \le t]$. Consider the joint CDF $H$ of the default times is given by $H(t,t,t) = \Pr [{\tau ... 0answers 12 views ### Estimating time-varying tail dependence for Archimedean copulas Patton (2006) defines the upper tail dependence coefficient for a time-varying bivariate SJC copula as $$\tau^u_t=\Lambda \left(\omega_u + \beta_u \tau^u_{t-1}+\alpha_u ... 0answers 21 views ### Portfolio with a certain pay-off curve I would like to find a relevant optimization option's portfolio models which can describe a certain pay-off curve (objective function) under same assumptions. For example, assumptions on how to limit ... 1answer 25 views ### Beta = 1 and 0. Type of portfolios I read in E. Quian's "Quantitative Equitity Portoflio Management" the following: A traditional long-only portfolio [with unit beta] would have most of its risk in the market risk. However, a zero ... 0answers 20 views ### Selection of optimal backtesting parameters Suppose I backtest some strategy on in-sample data while varying two parameters, say X and Y. X can take the values \{3,6,9,12,15,18\} while Y can take \{10,15,20,25,30\}. I want to select ... 1answer 62 views ### Could someone teach me how to construct the portfolios by compute (like using R, Excel or Eviews) Recently, I am doing my dissertation that covers asset pricing theory. The empirical test of Fama 3 factors model is an important part of this dissertation. Please let me review the fama model. Fama ... 0answers 24 views ### Which is better for quantitative finance, a computer science PhD or an applied mathematics PhD? [on hold] In the world of quantitative finance which of the following would be more highly regarded or useful when it comes to applying for jobs: A computer science PhD focused on machine learning used to ... 1answer 44 views ### Using R with princomp to create hedge baskets I am experimenting to try to find better ways to hedge some of our equity portfolios. It's easy enough to use R to get a PCA breakdown of exposure for a portfolio but I can't figure out how to then ... 1answer 35 views ### Who pays for sovereign ratings? Does the "issuer-pay" model hold also for sovereign credit ratings? Do States pay for having their bond being rated? 1answer 26 views ### Time series of European sovereign credit ratings by the Big Three? I would need time series, from 2000 to 2015 (if possible) of sovereign credit ratings by Moody's, S&P and Fitch. Could you suggest me a source or provide me such a dataset? Thank you very much! 1answer 26 views ### What approaches are there for keeping local and remote order books in sync? Scenario: developing a custom application which defines a structured workflow for manual order submission to Bloomberg EMSX; it should minimize own persisted state and rely on the remote order book as ... 2answers 28 views ### How to take care of newly auctioned yield/price in fixed income data This is a financial data cleaning question. I have raw price and yield data for US cash treasury across the curve. In the time-series there are jumps on the day after the treasury auction results come ... 1answer 36 views ### Special term for 'intersection' of option price Suppose, I have written two ordered lists: S_{call}= (\textbf{8000, 8050, 8100}, 8150, 8200, 8250) and S_{put} = (7850, 7900, 7950, \textbf{8000, 8050, 8100}). Entities are correspond to strike ... 0answers 17 views ### Interest rates - Swaptions implied volatility - Volatility anchoring with Black and with normal volatilities In a LMM+ with displacement factor a volatility anchoring technique is used, i.e. a long term volatility assumptions is applied, derived from historic time series. Should I adjust this historic ... 2answers 35 views ### In an example of “call options” The following is an excerpt from Introduction to the Mathematics of Finance by Roman: As a more concrete example, suppose that IBM is selling for \100 per share at this moment. A 3 month ... 0answers 40 views ### Cointegration for forex using ARMA model to forecast the spread I am working on an automatized quantitative strategy that use cointegration in Forex. I am backtesting this strategy in Python. Please see below the python file: ... 2answers 49 views ### Conditional probability of geometric brownian motion I created paths using GBM to implement The stochastic mesh method. But the method requires the conditional distribution, given some S(t) the probability of S(t+1). I've searched and can't find this ... 1answer 79 views ### Modeling the Stock Market Hi I was wondering what is the model that best describes the price movement of the stock market? A Brownian motion Process with drift? An Ornstein Uhlenbeck_process? (where the long term mean ... 0answers 18 views ### How to perform batch-trading using Interactive Broker API? My definition of batch-trading: Given N BUY orders, M SELL orders and O (O < N) as the max number of open positions to be held. Batch-trading should monitor the orders and when O BUY ... 0answers 26 views ### Is it possible to place hidden order inside spread when trading E-mini S&P 500? My question is not about hidden orders in general. In equity market a trader can post his hidden order inside spread, is it the same way for E-mini S&P 500? 0answers 14 views ### Regression model extension [on hold] I've been asked to do out of sample procedure for my simple regression model. my dependent data is belong to 2500 index nad independent one is belong to 2500 stock log returned data. how should i ... 0answers 22 views ### “Risk” Factor vs Double Sorts With regards to a cross-sectional asset pricing (stocks) study, I am testing if one variable can explain another. One common approach to do this, is to use the double-sorting portfolio technique (sort ... 0answers 32 views ### How to write time-varying functions in R? Applied example Let's say I want to use a Gaussian copula$$C_{R_t}(\eta_1, ..., \eta_n) = N_{R_t}(N^{-1}(\eta_1), ...,N^{-1}(\eta_n))$$with a time-varying correlation matrix R_t. Through DCC we model the ... 1answer 44 views ### How to build a cross currency swap pricer? We're looking to build a pricer to convert a funding spread in a given currency over a specific funding basis e.g. 20 bps EUR 3m€ and convert it to a funding spread to a different currency with a ... 0answers 18 views ### Python regenerating ARMA params using statsmodels I am trying to regenerate the ARMA parameters from statsmodel in python. The code I am using is: ... 0answers 12 views ### Define the order of GARCH(m.s) I know that if the order of Arch(m) is over 3, we should use GARCH and GARCH(1,1) was proved to be the best. But was GARCH(1,1) proved to be available for any country's stock market? My result show ... 0answers 19 views ### Converting a factor vector in R [on hold] If I have a factor vector with 3 levels, "", "No" and "Yes" how can I convert this to a binary factor vector with "na" if no answer , 1 for "Yes" and 0 for "No" ? 2answers 74 views ### How is the fundamental theorem of asset pricing used? I know that a multi-period market model is complete and arbitrage free if there's a unique equivalent martingale measure. The thing is, I have absolutely no clue how to apply this theorem to a simple ... 1answer 29 views ### Python statsmodel ARMA question I am reading through the documentation of statsmodel package in python from the link The (p,q) order of the model for the number of AR parameters, differences, and MA parameters to use. How do I ... 1answer 10 views ### anyone know haw would we calculate hml ,(fama and french three factors model) [on hold] how we calculate hml and smb from our own data (malaysian data) so i can not use the dta from keneth french library using excel and when we divide firms into 6 portfolios we use value and book ratio ... 0answers 28 views ### 0-beta stock and diversification If we invest w in the market portfolio and 1 - w in the risk-free asset, and observe a 0-beta asset with expected return greater than the return on the risk-free asset, how can this be used in ... 0answers 15 views ### R:log return calculation for panel data structure I have a long form panel for hourly prices of stocks. I want to do log return calculation for this panel data structure. Below is my code: ... 2answers 372 views ### How to derive the price of a square-or-nothing call option? At maturity T, the holder of a "square-or-nothing" call option written on an underlying S_t receives a payoff of the form$$ \phi(S_T) = \frac{S_T^2}{K} \pmb{1}_{\{S_T \geq K\}} = ... 2answers 29 views ### What is a definition of “Benchmark”? The word "benchmark" is often used in Finance, but in a rather fuzzy manner, there for a rough idea of what it is, and how it is 'defined'. Can someone provide a rigorous and precise definition of ... 0answers 44 views ### Physical interpretation of variance in returns in a portfolio design I have a downloaded the log-returns at successive times of 98 stocks from S&P index over 753 days. I calculated the total daily return according to the formula 1 below, where ... 1answer 72 views ### Is This A Viable Alternative Options Pricing Method? i'm currently a high school student who hasn't gone past Algebra II, and thus I have minimal Calculus knowledge. I know the basics of Integration and Derivation (drop the coefficient, raise to the ... 1answer 14 views ### Reference for option pricing, binomial multi-period model using martingales and conditional expectations The title basically says it all. I am looking for a reference text on the pricing of options in a binomial multi-period model. It should be mathemathically rigorous using martingales and conditional ... 0answers 29 views ### Is$(1,0,0,0,…,0)\$ a legitimate dividend stream?

A book I am reading defines a positive linear functional as a "price functional" from a set of adapted processes to the real numbers. Specifically, it defines a "consistent price functional" as one ...
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### Preparation for interview: influx of power of the moon

I am preparing myself for an interview for a quantitative analyst position and one of the sample questions asked in previous examinations was: "Suppose the moon were to disintegrate, and fall to ...
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### Option based approach to real capital structures

Has anyone made a serious attempt to apply option theory to real assets and capital structures, taking into account all the messy details ?