2
votes
1answer
21 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 ...
0
votes
0answers
13 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 ...
1
vote
1answer
29 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 ...
5
votes
1answer
28 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?
0
votes
1answer
16 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!
3
votes
0answers
22 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 ...
1
vote
2answers
22 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 ...
0
votes
1answer
28 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 ...
0
votes
0answers
15 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 ...
0
votes
2answers
30 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 ...
0
votes
0answers
29 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: ...
0
votes
2answers
44 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 ...
1
vote
1answer
68 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 ...
0
votes
0answers
16 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 ...
0
votes
0answers
25 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?
-1
votes
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 ...
1
vote
0answers
21 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 ...
0
votes
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 ...
1
vote
1answer
41 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 ...
0
votes
0answers
17 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: ...
0
votes
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 ...
0
votes
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" ?
0
votes
2answers
70 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 ...
0
votes
1answer
28 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 ...
0
votes
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 ...
1
vote
0answers
27 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 ...
0
votes
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: ...
6
votes
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\}} = ...
0
votes
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 ...
0
votes
0answers
41 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 ...
3
votes
1answer
70 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 ...
0
votes
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 ...
1
vote
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 ...
0
votes
1answer
45 views

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 ...
0
votes
0answers
34 views

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 ?
0
votes
0answers
24 views

Arbitrage and completeness in multiperiod model?

Given a 2-period market with above stock price process along with a riskfree stock with a return of 5%, how do I determine whether the market is arbitrage-free and complete when I only have ...
0
votes
0answers
15 views

Estimate the risk of swaptions

I would like to model OTM Swaptions. I can use some implementation of the Bachelier model (not B76 due to negative rates) and implied volatilities from Bloomberg. For 10Y X 10Y (10 years option ...
2
votes
2answers
182 views

Square of Wiener process

In Ito's calculus one often comes $dW^2=dt$. How does this come about? What is it's relation to the Milstein method?
0
votes
0answers
23 views

Black Litterman: Is it possible to have multiple views (from different sources) on the same asset?

From the basics of Black Litterman I understand that each view on a stock is implemented via the pick matrix P with the expected value of the views in Q. I have read several papers where each stock ...
0
votes
0answers
22 views

FIX engines comparison

Need help, looking for some comparison between c++ FIX engines, like onixs, antenna and some fpga solutions. If anyone has experienced some of the named engines also would like to hear the ...
0
votes
1answer
26 views

LIBOR Quoting Conventions

I have been trying to build a NSS parameterization of LIBOR term structure, and have confused myself over how all the dates are dealt with. On ...
1
vote
2answers
48 views

Correlation between asset A and Portfolio X (which contains A)

After a few hours trying to solve this I give up! I need help. I need to calculate the BETA of an asset with respect to a portfolio that contains this asset. I have the volatility and correlations ...
0
votes
0answers
28 views

Estimate Option Price Given X% Move N Days in the Future

I was wondering if someone could recommend a method to estimate the price of an option N days from now given an X% move in the underlying. I have fitted a volatility surface but where I am running ...
-1
votes
0answers
38 views

How to define the return of this portfolio? [on hold]

I have an insurer with a some assets that he plans to invest into : Stock Zero-coupon bond with maturity 10 years We know also that the stock is driven by the geometric borwnian motion, the short ...
5
votes
2answers
107 views

Interpret simulation results ($P$ and $Q$ measures)

I am struggling in interpreting results of my simulations. I use Monte Carlo algorithm to simulate stock paths and calculate option price. The notation: $r$ is a risk free interest rate, $T$ is time ...
0
votes
1answer
38 views

Risky duration formula for what kind of bond?

In a documentation, there is the following formula for "zero interest rate risky duration" of a bond: $\frac{1-exp(-s \cdot T)}{s}$, where $s$ is spread, $T$ time until maturity. What type of bond ...
-1
votes
0answers
41 views

Stochatic Ito formula [on hold]

I have $$dX_t= a dt + H dB_t $$ With$ B_t$ brownien motion and H is a function t such as $$E(H^2) \leq \infty $$ And$$ c< X_t < b$$ and $$t->X_t$$ is an increasing dunction I have to show ...
1
vote
1answer
62 views

Calculating IR sensitivity

I'm trying to figure out how to find IR sensitivity of a bond whose time to maturity of a bond is 2 years. Bond pays 10.875 percent coupons yearly. Duration is 1.8 years. How do you find the ...
2
votes
1answer
37 views

Calibration of 1F Hull White short-rate model to market data

I want to calibrate the Hull White 1 factor short rate model to market data. The main purpose is to simulate interest rate paths, which I will use to calculate the net pv of banking liabilities. Some ...
1
vote
2answers
41 views

Creating index from bloomberg data in matlab

I'v got 6 different equity index time series from which I want to create an index based on a particular percentage. This would be simple although due to different holidays the date don't always match. ...

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