0
votes
1answer
12 views

Formula for the forward rates?

I'm reading a book about interest rate modelling. It states the following formula P(0,T) = exp(-sum of the forward rates) But I thought it's the average of the forward rates?
2
votes
1answer
7 views

How does trade deficit affect the economy of a country

How does trade deficit for a prolonged period(say 10-15 years) affect a country's economy? I have read that it should affect it adversely, but the US trade deficit has been negative since the mid ...
-3
votes
0answers
25 views

Modelling portfolio of stocks [on hold]

Olaker did not understand my original question thus it is rephrased. I have a portfolio containing N stocks. N may be very small (2 or 3) or larger (25) but in general N is not expected over 30. ...
1
vote
1answer
37 views

Company rank within an industry

I'm looking at the list of companies in the S&P 500 Pure Value Index. For each firm, I want to obtain the dividend yield industry percentile rank and the PEG ratio industry percentile rank. I've ...
2
votes
0answers
14 views

Fitting stochastic variance distributions to index return data

I want to calculate option prices based on a realistic distribution of the underlying. The underlying is a liquid index such as Eurostoxx50. I think of two aproaches, both of them incorporate ...
1
vote
3answers
185 views

Is an economy where money yields interest able to be sustainable and healthy? If yes, how?

There are two points that concern me Loans If someone takes a loan of let's say 1000\$, he has to pay back the money with 5% interest, i. e. 1050\$. But where do the 50\$ come from? They didn't ...
3
votes
1answer
83 views

How to find optimal look back in quant trading models

I'm in the process of building a quantitative trading model, I want to improve on the way in which I decide upon a look back length for the indicators. I understand the different pros/cons for very ...
0
votes
0answers
44 views

Should I analyze the tick data day by day?

Let assume that we have one month of tick data which were traded at NYSE. We want to model the price changes as a function of the last p lags of price changes and the last q lags of the time duration ...
3
votes
4answers
142 views

What happens when bond price is less than the recovery rate

I am simulating various price path of bonds, and one issue that came up is the recovery rate. When a bond defaults, the amount you get back recovery rate * principle. This creates a problem if the ...
0
votes
0answers
41 views

where to find historical option prices?

I have a dataset of options (traded in European exchanges such as NYSE Euronext) and I would like to find their price history. Where to find it? I see that ...
0
votes
0answers
23 views

Heding foreign stocks with futures. the return? [on hold]

I am a euro guy and wants to invest in a us stock. I want to hedge it through currency futures. can you tell me what is the hedged return and unhedged return ? let us assume $S(t-1)$ is the stock ...
4
votes
0answers
48 views

Some clarifications on eigenvectors and eigenvalues from PCA

Could somebody tell me whether suggestions in bold true or not? Q # 1: http://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf ...
1
vote
1answer
46 views

reference question about portfolio optimization

I know the "classical" modern portfolio theory. However I have quite a lot of different sources. It seems that there is not a book which cover this topic in a rigorous way: theory application ...
3
votes
3answers
289 views

How to deal with extreme cases in normal random numbers generation?

In order to generate normal random numbers, one usually generates random numbers following a uniform distribution $Z \sim \mathcal{U}(0,1)$ and then applies the reverse CDF function on them ...
1
vote
2answers
43 views

Opposite of Tail-Risk Hedge (Established Vocabulary)

I'm working on a client memo explaining several approaches to equity hedging, and I'm looking for a not-too-technical term for a hedging strategy where I try to keep options near the money, as to have ...
3
votes
1answer
87 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 ...
1
vote
1answer
194 views

How to get Geometric Brownian Motion's closed-form solution in Black-Scholes model?

The Black Scholes model assumes the following dynamics for the underlying, well known as the Geometric Brownian Motion: $$dS_t=S_t(\mu dt+\sigma dW_t)$$ Then the solution is given: ...
2
votes
0answers
40 views

Comparison of multicurve calibration methods

It seems that there are mayor softwares around offering a multicurve framework based on bootstrap. I find this puzzling nowadays, given the distinct advantages of best-fit optimization methods and ...
5
votes
1answer
138 views

Worked examples of applying Ito's lemma

In most textbooks Ito's lemma is derived (on different levels of technicality depending on the intended audience) and then only the classic examples of Geometric Brownian motion and the Black-Scholes ...
1
vote
0answers
34 views

Questions related to the banking crisis during the European sovereign debt crisis

I am studying the European Sovereign Debt crisis and I have the following questions which I am struggling to find examples for: 1) I have heard that during the sovereign debt crisis, European ...
7
votes
4answers
150 views

Does Modern Portfolio Theory align with EMH?

I came to the conclusion that in literature Markowitz' Portfolio Theory is believed to be compliant with the Efficient Market Hypothesis. The weakest form states that the current price fully ...
0
votes
0answers
24 views

How does the Bitcoin forex work? [migrated]

Does it work differently in relation to a regular forex because of its underlying technology? How can the market calculate its value?
0
votes
2answers
91 views

Historic Value at Risk - Ratios vs. Differences

Quick Summary on Historic VaR Let $S_0,...,S_n$ be the daily values of some stock (where $S_0$ is the current value). Then for $i=1,\ldots,n$ we let $$\hat r_i:=S_{i-1}/S_i \quad \text{and}\quad \hat ...
0
votes
0answers
18 views

Finding Trailing Twelve Months on a month between two quarterly reporting periods [closed]

I can clearly understand the concept of Trailing Twelve Months or TTM. However i always had a missing piece on fully understanding TTM. e.g If we have a corporation that reports on March(Q1), ...
0
votes
0answers
62 views

plotting High Frequency finance data using quantmod [on hold]

Hi I have data in XTS format like this ...
0
votes
1answer
44 views

Calculate bond yield in python

I want to run the newton method on a large dataset to calculate bond yield. Below is the code I created using a loop. I need to run it on ~50 million lines and the loop is quite unwieldy. Is there a ...
0
votes
2answers
59 views

How is the price of a bond actually determined?

How the price of a bond is actually determined? Is it the supply-demand that determines the price first and then the YTM is calculated on the back of this for that bond. Or is it that the changes to ...
1
vote
0answers
13 views

code assistance - how to bootstrap and plot paths with a mixed model [migrated]

I created an Arima (3,1,1) model using the steps below. I was able to create a nonparametric model, but now I would like bootstrap for the created model (model 3). Also I'd like to plot the paths of ...
1
vote
3answers
221 views

How is PnL calculated

In Fixed Income, I know that bonds PnL are evaluated depending on where the price lies on price/yield curve at the end of the day, compared to where it started from at beginning of the day. The ...
1
vote
3answers
139 views

Handling Missing values in stocks returns when estimating the co variance matrix

What is the best way to handle missing values when stocks did not exist for the entire historical period?.
1
vote
3answers
59 views

Arbitrage free implies complete market?

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this proposition It seems that to show that the model is complete, we must show that the claims are reachable. That is, we ...
1
vote
2answers
84 views

Pricing Principle 1

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this Pricing Principle. Is the one in red supposed to be the proof of the Pricing Principle 1? Or merely an intuitive ...
-4
votes
0answers
39 views

Where Can I Find Risk Modelling Functions? [on hold]

I'm looking for functions that take the historical value of an asset as the input and return how much risk/uncertainty is associated with the investment. I've been searching for a while but haven't ...
0
votes
0answers
43 views

forecasting crash time of KLSE index (1991-1994)

Price deviation = financial bubbles. i try to fit the following stock price index to predict recession. I couldn't fit the model with the data(Data are not available in yahoo finance for the ...
2
votes
1answer
111 views

ETFs have lower tracking error than Futures?

I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ...
0
votes
1answer
53 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 ...
2
votes
2answers
152 views

SVCJ (SVJJ) Duffie et. al Model implementation in Matlab

I'm attempting to implement aforementioned SVCJ model by Duffie et al in MATLAB. so far without success. It's supposed to price vanilla (european) calls . parameters provided, the expected price is: ...
0
votes
0answers
55 views

How to construct a deterministic trading model based on a loess (local regression) model?

Given data that has been fit to a loess model, can you make reliable decisions on future trades given a good past fit? Has anyone here done so and can give an example of their use case? I am yet to ...
0
votes
1answer
25 views

(Purchased) terminology on Net Preferred Equity Issued

I understand what we mean when we say: Net Preferred Equity Issued it is the total amount of Preffered Stocks plus their price. But does the chart mean when it says (Purchased)? What other can it be? ...
-1
votes
1answer
17 views

Difference between Total Long Term Debt and Net Total Long Term Debt

What is the difference between Total Long Term Debt and Net Total Long Term Debt? Below you can see a picture revealing that they are not equal.
1
vote
3answers
46 views

Interpretation of equation derived from the delta of a call European call option

I have started reading an introductory book called: A Course in Derivative Securities by Kerry Back. On page 12 they mention the following: The delta of the call option is $\delta = (C_{u} - C_{d}) / ...
-1
votes
0answers
26 views

How to compare the results of covered call and protective put option strategies?

I'm doing a Scenario analysis by creating delta options hedging strategies for Hong KongHSI. In this scenario I hold a basket of stocks and select protective put option hedging or covered call ...
1
vote
2answers
119 views

Sharpe Ratio - my own calculation differs from Yahoo finance, Morningstar

I am trying to compute the Sharpe ratio for my portfolio. To check that I am doing this correctly, I am first trying to compute it for SPY (the S&P 500 index). ...
0
votes
1answer
74 views

why people want to get a continuous time series from futures data?

So for the backtesting , is it necessary to make an adjustment for the last day of the current contract and the first day of the next far contract? Even if there's is a gap, that's the actual price, u ...
1
vote
0answers
52 views

Max Likelihood via Marquardt Optimisation

I asked a related question here: How to apply Levenberg Marquardt to Max Likelihood Estimation I tried the approach suggested it works for some of the parameters but not the variances. I spoke to ...
0
votes
1answer
85 views

How to get permanently growing chart within PCA

I looked onto different questions and answers about application of PCA on this site and found this interesting article : ...
0
votes
2answers
93 views

Technical analysis in Python - source of knowledge

I did my best, but I could not find answer for this one - is there any good and in-depth source of knowledge about using Python for technical analysis ? Obviously, there are plenty of tutorials, blogs ...
9
votes
2answers
919 views

Why Ito calculus?

Coming from physics, I am used to the fact that the Ito interpretation of most natural stochastic equations is wrong, and one should be using Stratonovich calculus instead (of course they are ...
0
votes
2answers
40 views

Break down XIRR to different segments

Currently, I have the following transactions. ...
2
votes
1answer
84 views

Where can I buy historic raw order by order data for Euronext market?

I cannot find any vendor that sell the full depth order by order data historically. I called Euronext and for some sick reason they "have the data" but "do not sell it". Do you guys know where I can ...

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