# All Questions

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### How to trade the Ornstein-Uhlenbeck process?

My question comes from this paper, which is a short version of Avellaneda's paper The picture bellow provides a summary of the equations. Do I understand correctly that in order to trade OU process ...
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### How to show that the exponential Vasicek model is not an affine term-structure model?

From the pricing formula, we know that the value at time $t\in [0,T]$ of a zero coupon bond maturing at time $T$ is $$B(t,T)=E\left(\exp{\left(-\int_{t}^{T}r_sds\right)}|\mathcal{F}_t\right).$$ ...
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### Vasicek model problem

I am analyzing a problem where the below is given Vasicek model with risk-neutral dynamics $$dr_t = \kappa (\theta - r_t)dt + \sqrt{r_t} dW_t \quad \quad (1)$$ bond prices ...
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### trading equities on options data

Obviously, not asking for a trading strategy, but do people successfully use options data to trade equities intraday? What's the general framework for such strategies?
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### How can I set buy and sell price for testing my automatic stock trading system? [on hold]

I'm testing my automatic trading system in stock market (data mining system). I'm modeling day by day for 30-days and calculate profit in every step. Suppose that my system predicts tomorrow close ...
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### Modelling log-returns and calculating the portfolio return

I know this might be a trivial question, however, I would be grateful for some clarification. I am working on weekly log-return data, doing volatility-foracasting using GARCH models and then using ...
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I'm trying to implement Andersen and Broadie's dual method for an upper bound (here) of a regular American Put. I understand the process to compute it, but I have a conceptual issue : everything ...
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### Girsanov Theorem for Quanto/Compo adjustment

Assume that I have a foreign asset $Y_t = Y_0 \exp((r_f-\frac{1}{2}\sigma^2_Y)t+\sigma_Y W_t^1$ and an exchange rate $X_t = X_0 \exp((r_d-r_f-\frac{1}{2}\sigma^2_X)t+\sigma_X W_t^2$. I would like to ...
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### Do efficient market hypothesis and random walk theory convey the same concept?

According to investopedia efficent market hypothesis is The efficient market hypothesis (EMH) is an investment theory that states it is impossible to "beat the market" because stock market ...
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### Option delta - Conditional probability definition?

Can someone help me interpret this definition of delta? Delta is a conditional probability of terminal value (St) being greater than the Strike (X) given that St > X for a call option. Is the ...
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### Quanto/Compo adjustments - Product of two geometric brownian motion

Let's say I have two processes $X_t =X_0 \exp((a-\frac{1}{2}\sigma_X^2)t +\sigma_X dW_t^1)$ and $Y_t=Y_0 \exp((b-\frac{1}{2}\sigma_Y^2)t +\sigma_Y dW_t^2)$ and I then multiply them together (like ...
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### model to predict variable evolution [migrated]

Suppose that I have a set of variables X1 X2 and X3 that explain the evolution of a ...
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### Control over finance [on hold]

I don't know if this the right site to ask, so I hope you guys can direct me to the appropriate site if I'm wrong. My question is, Is it possible for a man or a company to control at least 50% of ...
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### Quantlib xll - Converting deposit/swap curve to zero curve

I am trying to create a spreadsheet using the Quantlib xll to convert deposit/swap rates to zero rates. I tried to implement such by referencing to the C++ code listed here: How to sum interest rate ...
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### Why NYSE is not included in TAQ data for NASDAQ listed companies?

I am using TAQ data to see from which exchanges bids (or asks) are coming. I have got this for AAPL (Apple company, listed in NASDAQ) for a sample day: ...
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### Daycount Actual/Actual AFB example

This question is about the following example in Wikipedia about time factor using the Actual/Actual AFB daycount. Assume that the $t_1=\text{28 Feb 2004}$ and $t_2=\text{29 Feb 2008}$. There are ...
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### SABR Calibration: Normal vs Log-Normal Market Data

This question is about getting some clarification as to how to understand market quotes for normal & log-normal vols together with certain model assumptions. So let us define ...
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### Interest rate modelling [on hold]

Assume that the price of a stock is given as where rt is the interest rate process in the Ho & Lee model and Bt is a second Brownian motion, which is correlated with the Brownian motion ...
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### Local and Stochastic volatility [on hold]

a.What is a volatility surface and how does it point in general to the limitations of the Black-Scholes model? Discuss. b. Describe the algorithm based on the Newton method to compute implied ...
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### approximating fBm sotchastic integral

Suppose I have the following stochastic integral: $$\int_a^b f(t)dB_H(t)$$ with the term $dB_H(t)$ a fractional brownian motion with associated $H$ parameter. Is it true that for $H \in (1/2,1)$, ...
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### Global Min Var Portfolio Weights for each period (restricted model) [on hold]

I have daily returns for 5 assets from 1990 to 2015. I am trying to see the evolution of the weights for the Global Min Var Portfolio with 2 restrictions: 1) all portfolio weights are strictly ...
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### How to choose a GARCH model which delivers iid standardized residuals?

For my thesis I first need to examine nine financial time series and fit a conditional volatility model such that the obtained standardized residuals ($z_t = \epsilon_t / \sigma_t$) are approximately ...
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### Where to find good notations to teach investment portfolio maths?

I don't know whether this question is in order here. I do a bit of teaching and I am preparing my own notes but I thought that his should not be necessary. In which book/pdf on the web can we find a ...
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### Is there any wordpress widget that i can add on my website for customized stocks? [on hold]

Is there any wordpress widget that i can add on my website for customized stocks? Because so far from what i have searched, all the stock tickers widgets are using data provided from Google Finance, ...
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Let ${(I_t)}_{t\geq 0}$ be a stochastic integral defined by $$I_t=\int_{0}^{t}\theta_sdW_t,$$ where $W$ is a standard Brownian motion defined on $(\Omega,\mathcal{F},{(\mathcal{F}_t)}_{t\geq ... 1answer 27 views ### What does it mean for an option strategy to be leveraged Probably a newbie question, but what do traders mean when they say that an option strategy is leveraged ? And when can we say that it is the case ? 0answers 27 views ### Scraping options data and returning ticker symbols of companies meeting certain criteria [on hold] This is my first post on this site and I am looking forward to becoming more involved as my skills in coding increase. My first questions involves scraping options (calls and puts) data from the web ... 1answer 47 views ### Mathematically: How does increasing the number of assets reduce idiosyncratic risk? As part of an Asset Pricing Module I'm currently taking, whilst looking at APT Ross (1974), we looked at how according to this model, risk originates from both systematic and idiosyncratic asset ... 1answer 27 views ### How can I compute zero coupon bond prices from dirty/clean prices of coupon bonds? I am having problems with computing zero-coupon bond prices. The question is the following: Today is$t$=14.4.2016 and I know dirty and clean prices of coupon bonds expiring at maturities: 4.7.2016, ... 0answers 20 views ### How to fit model implied forward curve with market forward curve for Ornstein-Uhlebeck? I have a spread option model of 2 correlated Ornstein-Uhlenbeck commodity prices that I estimate the parameters of with Maximum Likelihood. What is the formula for introducing the additional ... 2answers 27 views ### The relation between exchange rate SDE and respective interest rates The exchange rate between a domestic currency money market and a foreign currency money market can be expressed as $$dQ(t) = (r_d - r_f)Q(t)dt + \sigma Q(t)d\tilde{W}(t)$$ where$r_d$is the ... 0answers 47 views ### Interpolation of forward zeros-coupons bonds simulations for missing maturities (ESG data) I have a set of economic scenarios simulated with Barrie and Hibbert ESG. The stochastic model for interest rates used is Libor Market Model Shifted. I am facing a problem with zeros-coupons prices. ... 1answer 51 views ### Volatility of investment (/w currency hedging) [on hold] I´ve been trying to compute a volatility of invesment with currency hedging and I have a question. Let's take this example. We have our money in a fond copying the S&P500 index, which has 16% ... 1answer 19 views ### short selling with collateral accounting I don't know how the accounting works for short selling with collateral: For example if a stock is \$10 a share and turn out to be $15 a share a week later. At time 0, you borrow and sell 10 shares ... 0answers 13 views ### Calibrating and simulating returns from a t-distribution A slight twist (I hope) on the familiar problem of simulating log returns from a t distribution. My two questions concern calibration to sample data. First, one can infer the degrees of freedom in the ... 0answers 17 views ### Thompson Reuters TRBC and GICS I can retrieve the components But I would like 2 retrieve the Index RIC by the sector scheme Code for Both GCIS and TRBC. I would really like 2 get my hands on the components for the Dow Jones sectors ... 0answers 61 views ### Problems with a Black-Scholes modified equation I haven't really studied much financial mathematics until about 2 months ago so I'm quite new to this stuff, so I'm sorry if this is a trivial question. At the moment I'm trying to work out what the ... 1answer 30 views ### trading strategy problem - initial capital x buys S over time [0,T] at the constant rate of x/T euros per unit of time I am looking for clarification to the trading strategy problem where the number of stocks is depending on time. In the Market with zero safe rate and stock dynamics defined as ... 1answer 34 views ### Why do we assume quadratic utility in portfolio theory? In my text (Investments by BKM), the investor's mean-variance utility (given as$U = E[R] - \frac12A\sigma^2$) is stated to be the objective function we wish to maximize. Upon further digging, it ... 0answers 24 views ### financial mathematics bond related problem [on hold] Joe must pay liabilities of 1,000 due 6 months from now and another 1,000 due one year from now. There are two possible investments: 1) A 6-month bond with face amount of 1,000, an 8% nominal annual ... 1answer 27 views ### Is this representation of the put-call parity correct? (Implied dividend estimation) I am looking at implied dividend yields to be obtained from the put-call parity and have come across the following answer: Implied dividend estimation It states that$$PV(div) = P - C + (S - K) + ... 0answers 19 views ### Validation of unrealized P&L calculation [on hold] Given I am long EUR/USD$10$m (in EUR) at$1.3500$and if now the marked to market value is$1.3470$, then would the unrealized P&L be \$ $30,000$? The initial position in dollars is EUR $10$ ...
Given that the spot USD/CAD (for example) is $1.6120/25$ and six month forward swaps are $27/26$. What would the outright price be? I notice that bid of swap is larger than ask, that implies that is ...