# All Questions

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### Why vega increases further out in time

Why do back months options have a higher vega than front month options? If possible , kindly explain on an intuitive level without a lot of math.
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### Exercise 2.2 from the book “The concept and practice of Mathematical Finance”

I am a newbie. Please help me understand how to resolve the exercise 2.2 from the book "The concept and practice of Mathematical Finance". The solution from the book says that our super-replicating ...
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### Spread over LIBOR on a Equity Swap

Does anyone how banks determine the spread over LIBOR on a Equity Swap? Example: Party A pays the return on SPTR to Party B Party B pays 1M LIBOR + 40 bps to Party A Does anyone know how the 40 ...
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### The future language of quant programming?

Im just about to begin the programming aspect of my education towards being a Quant. I know what languages are currently being used and how popular they are. However, I have several good friends ...
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### How to manage risk on a call calendar when underlying is falling

Let us say I bough a call calendar spread. Now, at expiry of the short option, the underlying has decreased significantly, and I am approaching my max loss(i.e both the options are close to 0). In ...
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### Why theta multipled by days to expiry exceeds the total time premium of the option

Sometimes, I find an option where the total time value of the option may be 5 cents(rest is intrinsic value) and there are about 15 days to expiry and theta is .08 (8 cents). How is this possible. If ...
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### What is the purpose of doing MTM and Cross Currency Swaps?

Both the trades are cross currency, however in MTM one leg is constant and other is variable. But what might the reason for exchanging cash flows into two different currencies? Could someone please ...
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### Using Forward Equity Returns to Value Stream of Equity Return Cash Flows

Can I value the equity leg of an equity swap using the projected forward equity returns? In other words, for a sequence of times $t_{0}<t_{1}<\ldots<t_{n}$, where $t_{0}$ begins a brand new ...
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### Why does the OTM call sometimes have a higher theta than the ATM call?

In this AAPL option chain on Mar20 call options, the OTM calls have a slightly higher theta than the ATM calls. Why is this? Is not time value(and thereby time decay) supposed to be highest for ...
17 views

### Cointegration example

Does anyone know where to find an example of implementing Engle-Granger 2-step cointegration? Python's ideal, but any language will do. I've skimmed and read many articles, but understand little about ...
29 views

### Technical Indicators reference

I have been looking for a good reference where I can find how technical indicators of stock market analysis are calculated. I have a dataset (time series) which I want to extract these indicators to ...
38 views

### Is it too important that my residuals be normal? I am Using an ARMA/GARCH model

I am trying to fit an ARMA/GARCH model to a time series. I found that the best candidate is an ARMA(1,0) + GARCH(1,1) with gaussian white noise It has coefficients with p-values near cero and the ...
34 views

### Question about historical volatility ranking

I have seen this strategy example, which uses garch in a regime switching context: https://systematicinvestor.wordpress.com/2012/01/06/trading-using-garch-volatility-forecast/ The author classifies ...
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### Does higher vega imply higher IV and vice versa

If an option A has higher vega than option B, does that also mean that A has a higher IV than B? I understand that by definition, a higher vega means that A's price is more sensitive to its IV than B. ...
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### If an option went down in value, how much is due to theta decay and how much due to fall in IV

Let us say that there was a stock trading at 100 and the 105 call was trading at 3 $. with 1 month to go Now stock went up to 104 after 15 days, and the call dropped to 2.80$, to the call buyer's ...
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### Amortizing Bond QuantLibXL

I would ask if anybody knows how to do get the NPV of an amortizing bond with QuantLibXL in the most automated way. I found some solutions but are very close to a manual calc, say, pass the vector of ...
190 views

### What is the yield on an infinitely lived ZCB?

I guess the price of a Zero-Coupon Bond with infinite maturity should go to zero, what about its yield? I am asking this because I was dealing with the yield curve and its asymptotic properties when ...
110 views

### correlation for portfolio of stocks

I have a portfolio of stocks and all I want to do is to make sure that I'm not trading one big position, so I would like to monitor some type of metric that gives me a rough idea of what the overall ...
26 views

### Forward Curves and Par Yield Curves

I'm recently reading a research paper on the yield curve by Salomon brothers and in it it states that when the forward curve is above the par yield curve, it is seen as cheaper. If for example, the ...
28 views

### Desperate for help with simple derivative

Can someone help explain how differentiating the following with respect to $x$: $$\frac{1}{2} \alpha \mathbf{x}^T \Sigma \mathbf{x} + (\mathbf{\mu} - R\mathbf{1})\mathbf{x}$$ Yields the following: ...
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### Please recommend a book regarding Monte Carlo simulation in OAS

I couldn't find a book that explains in details how to use Monte Carlo Simulation to generate a number of interest rate scenarios. And then based on the interest rate scenarios, how to calculate the ...
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### Pricing of a call option in one period binomial model

You are given a $5\%$ call option worth $\$2.66$. The strike price$k$is$\$41.00$. $S(0)=40$, $Sd=35$ (i.e the lower price of the stock at $t=1$) find $Su$ (i.e the high price of the stock at ...
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### hedging correlated instruments

If two instruments have a significant negative correlation but the percent change in the price of the instrument moving in positive direction is always more by a fraction than the one moving in ...
34 views

### Reputational Harm

How would you measure the reputational harm incurred on an individual by an organization. How is Market Pricing in the expected payout resulting from the law suit by an individual ? The news breaks ...
30 views

### Delta-Gamma Neutral portfolio, derivation issue

Let $C$ be an option on an underlying $S$. I want to construct a portfolio $V$ using another asset $C_0$ such that the delta and the gamma of $V$ is the same as the delta/gamma of $C$, in order to ...
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### forward curve and cap/floors in nowadays environment

I'm currently trying to get the implied volatility of a vanilla Euro floor with maturity 1Y with data from bloom. I have the price ( which is not supposed to take into account the first floorlet ...
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### What is the difference between a book value and a market value?

0 down vote favorite I would like to understand the following problem. A 2yr zero-coupon bond has an annual yield rate of 11% per year. A 4yr zero-coupon bond has an annual yield rate of 19% ...
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### Calculating the optimal portfolio for an investor with quadratic utility

The problem is from Asset Pricing and Portfolio Theory by Back and can be found here. The relevant info from section 2.5 can be found here. Given that we have the Expected value and the variance of ...
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### Why an option has sometimes and implied volatility greater than 100%?

Sometimes, in an option chain, the implied volatility of an option is greater than 100% . How is this possible? I mean, it is possible for 100\$ stock to increase more than 100%, but not decrease more ...
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### De-annualizing a target alpha return

apologies if this is not the correct place for this type of question, but I just want to confirm if the following de-annualization is correct. if a manager states that he will earn 200 bps of target ...
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### Black Scholes: How does it help to transform uncertainty and still not be able to calculate a fair price?

Recapitulating the history of Black-Scholes: Nobody knows the fair price of options. Revolution: BS! You put in all the parameters and get a price -> A Nobel Prize for that one! Wait: Nobody knows ...
127 views

### Why is Brownian motion merely 'almost surely' continuous?

Why is Brownian motion required to be merely almost surely continuous instead of continuous? For example, this is stated as condition 2 in this article in section 1, Characterizations of the Wiener ...