1
vote
1answer
16 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?
1
vote
1answer
26 views

What is some prerequisite book that can help me to read “mathematical methods for financial markets”

What is some prerequisite book in mathematics or finance that can help me to read "mathematical methods for financial markets"? I found a lot of difficulties when try to start to read the PDF of this ...
2
votes
7answers
103 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 ...
0
votes
1answer
29 views

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 ...
1
vote
1answer
47 views

In what kind of stochastic process Ito's lemma is adopted?

I have been told that Ito's lemma serves as the stochastic calculus counterpart of the chain rule. And yet again my tutor mentioned it is not used for all stochastic processes. Is this statement ...
1
vote
1answer
30 views

Analog - Pattern Recognition model using KNN

I'm building a pattern recognition model for my master thesis. The idea is to build a framework with some Macro variables (long/short term rates; rates differential; equity; fx; vix) in order to find ...
5
votes
1answer
63 views

Solving Black-Scholes PDE using Laplace transform

I'm trying to obtain the Laplace transform of Call option price with repect to time to maturity under the CEV process. The well known Black scholes PDE is given by $$ ...
5
votes
1answer
45 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 ...
-2
votes
1answer
40 views

Two assets with the same mean and standard deviation - Would there be any benefit? [on hold]

If I have two assets in a portfolio with the same standard deviation and mean and the correlation between the assets is 0, theoretically could there be a situation where it would be beneficial to ...
0
votes
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 ...
1
vote
2answers
32 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, ...
1
vote
2answers
48 views

Predict Futures Prices based on weather + agricultural data

I’m working in the area of Data Mining and have come up with the following idea for my Masters project.The text may not be the best structured but it’s a working draft to give you a quick idea. ...
0
votes
1answer
44 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 ...
2
votes
1answer
86 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 ...
0
votes
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 ...
0
votes
1answer
63 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 ...
3
votes
6answers
186 views

Why should we expect geometric Brownian motion to model asset prices?

Disclaimer: I am a complete ignoramus about finance, so this may be an inappropriate forum for me to ask a question in. I am a mathematician who knows nothing about finance. I heard from a popular ...
1
vote
1answer
29 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 ...
0
votes
0answers
36 views

Exporting Time Series Data For Securities Prices From Bloomberg to Excel

I have a list of securities over a thousand entries long that I want to construct a time series of prices for over a specified historical period (e.g. 2/01/10-2/20/10). Doing this manually would take ...
0
votes
2answers
80 views

Can selling put equity options be a good business?

In one of his last books Jack D. Schwager suggested that selling equity puts can be a good business. The puts are like insurance policies against market downturns and there is a natural demand. ...
1
vote
0answers
13 views

Collateralized Loan Obligation - reliable source of information

Can someone provide me with some reliable source of information about CLOs? Especially some scientific articles etc. Google or wiki are good for starters and I would like to get some examples, ...
2
votes
1answer
68 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#.
0
votes
2answers
40 views

Question 1.18 from Hull's Financial Risk management CAPM

A portfolio manager maintains an active portfolio with beta of 0.2. Risk-free rate is 5% The market return for a particular year is -30% The fund produced a result of -10%. He claimed the return was ...
0
votes
0answers
44 views

Double auctions in online games

I am currently doing a PhD in mathematics and we study the phenomenon of segregation in double auctions. As it is very difficult to gether datas from financial institutions I wanted to start by ...
1
vote
1answer
33 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?
0
votes
0answers
9 views

Decision Tree - Query [migrated]

I am working on decision trees for the first time at job. I have done lot of research on CHAID and CART algorithms but found different answers to a very simple question given below. What kind of ...
0
votes
0answers
28 views

Asian option numerical pricing method generates a negative time value

I use R to write a function which simulates price path and calculates the value of an arithmetic Asian option. I found sometimes the value of the option can be lower than its intrinsic value, i.e., ...
-1
votes
0answers
20 views

How to project video viewcount based on historicals? [closed]

This seemed the best Stack to ask this question; the goal is to create a formula that can quickly give an indication of how a YouTube channel's video will perform in the first 30 days of its lifespan ...
0
votes
1answer
35 views

Calculating returns for a mutual fund with dividends

I'd like to calculate returns for a given mutual fund (in this case, PRWCX from troweprice). When I look at their published performance, it says the Calendar Year Total Returns for 2013 is 22.43% but ...
2
votes
1answer
52 views

Bootstrapping Sharpe Ratios

A similar question to this was asked here: How do i test the significance of Sharpe ratio of a strategy using bootstrap I have bootstrapped the original time series (using block bootstrapping) and ...
2
votes
0answers
80 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 ...
1
vote
2answers
49 views

Algo's Shadowing Limit Orders

So I was trading the option contracts on NLY (Annaly Capital Managment) today. The stock took a big dip today which piqued my interests in selling some OTM puts. Since the options market on this ...
0
votes
0answers
23 views

Fixed Income Swap Sharpe Ratio Calculation

I have a Fixed Income based strategy based on swaps. Q1.) Given that swaps are based on a "notional" principal and no actual exchange of principal's takes place, is it fair to assume a funding cost ...
1
vote
1answer
53 views

Pricing a bond contract from the yield curve

When giving a particular class in financial mathematics for a student I saw a problem in a list of exercises that says: How to calculate the price at 15 December 2010 of a bond paying a coupon of ...
0
votes
0answers
23 views

Calibration Problem in the LMM-Skew (Shifted Diffusion) Model

I have implemented the LIBOR market model (LMM) and I am quite satisfied with the results. I have now added a skew to the model as described in 10.1 of Brigo/Mercurio. That is, I have replaced the SDE ...
0
votes
1answer
38 views

Where can I download intraday series for DAX and S&P500 Index?

Where can I download intraday tick data for DAX and S&P500 index prices? I found only daily closing prices.
5
votes
0answers
44 views

For which instruments performs SABR/LMM better than LMM?

For which class of instruments the SABR/LIBOR Market Model does perform better than the classical LIBOR Market Model? The LIBOR Market Model The LIBOR Market Model — also known as Brace, Gatarek, ...
2
votes
2answers
53 views

Is there a good closed-form approximation for Black-Scholes implied volatility?

While the solution for IV can certainly be reached using numerical search methods, I wonder if a high precision closed-form approximation exists. For example, there is a very robust (precise within ...
2
votes
0answers
58 views

Beta distribution - Holding period

Let's say I have a risk factor that is defined between [0,1], such as recovery rates. Assuming I have daily data, I can estimate the "daily VaR", i.e. the tails over 1 day period, since the data is ...
0
votes
0answers
24 views

Cannot load Bloomberg (Rbbg) in R. rJava Error [closed]

Upon trying to load Rbbg, I receive this error: require(Rbbg) Loading required package: Rbbg Loading required package: rJava Error : .onLoad failed in loadNamespace() for 'rJava', details: ...
0
votes
0answers
33 views

Regarding retrieving Data from yahoo [closed]

I am trying to extract data hopefully from Google finance or Yahoo finance The indices I want are spread from time Aug 1994 till Aug 2009 Thomson Reuters Equal Weight Continuous Commodity Index ...
1
vote
1answer
33 views

What is Base- vs. Implied Correlation of a CDO tranche?

What is the difference between Base Correlation and Implied Correlation for a CDO tranche?
5
votes
2answers
115 views

Filtration and measure change

I asked this question in math stackexchange but to no avail. So i'm trying the luck here. I'm reading Steven E. Shreve's "Stochastic calculus for finance II", and find myself not really understand ...
0
votes
1answer
46 views

Finding historical data for indices [duplicate]

Where can I find historical data for option prices on a given index ? Ideally I'd like to find for a period of several months 1) historical prices on options on a given index 2) historical prices on ...
1
vote
1answer
29 views

MPT and the connection to asset prices / initial capital

I have some question about MPT. Suppose we want to build a portfolio given $N$ assets: $A_1,\dots,A_N$. At time $t$ we build the portfolio using MPT, which yields some weight vector ...
1
vote
2answers
67 views

How can one find an area of research in quantitative finance appropriate to write a masters thesis on? [closed]

I am in the first semester of a MS in mathematics. A requirement for the degree is to write a masters thesis. Here a thesis means writing on a current area of research in finance, but an original ...
0
votes
1answer
47 views

Hedging future USD cost using different IR and forwards

I am facing a problem where I suppose an expense in 6 months from now of 2,500USD. My home currency shall be EUR, and I am trying to hedge given the following information. ...
0
votes
0answers
40 views

Option Prices under the Heston Stochastic Volatility Model

I was wondering if anyone has come across a more straightforward derivation of the semi-closed form solution for the price of a european call under the Heston model than the one proposed by Heston ...
0
votes
3answers
100 views

Calculation of weekly P/E ratio

The P/E-ratio is defined as $$ \frac{\text{Market value per share}}{\text{Earnings per share (EPS)}} $$ I have weekly observations of stock prices, but what measure should I use for EPS? Should it ...
2
votes
1answer
107 views

Predicting stock returns - in a panel data specification or by using portfolio formation strategies?

I'm working on an empirical analysis where I try to predict stock returns using weekly data. Ideally, I would like to use a panel data model like the following: $$ ...

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