0
votes
0answers
5 views

Delta hedge compound option

Delta hedge portfolio should be adjusted from one period to the other, as the ratio changes. How does it work with compound options though? Suppose, I have a put on a call option on a stock, in 2 time ...
2
votes
0answers
4 views

Equivalency of FX forwards and FX fixed for fixed swaps? Are they still the same under multiple curves environment?

I am encountering two approaches for valuation of FX swaps (fixed for fixed, e.g. fixed USD payments for fixed EUR payments) which seem to result into different values although in theory they should ...
1
vote
1answer
26 views

Appropriate measure of risk if return are not normally distributed

Normally standard deviation of an assets is used as an proxy for the risk in the financial market. In reality distribution of return is more peaked at the center and higher mass in the tail as ...
0
votes
0answers
4 views

Is order flow imbalance more or less correlated with price movements at slower frequency?

Suppose I define order flow imbalance as volume(aggress buy)/volume(aggress sell), or some variant of that. Is this variable more, or less, correlated with price movements when I sample less ...
1
vote
0answers
8 views

Analytical Bond Price under Rendlemen-Bartter?

Assuming the short rate $r_t$ follows the risk-neutral (so $W_t$ is a $Q$-Brownian motion) process $$ dr_t = ar_t dt + \sigma r_t dW_t, $$ does anyone know of an analytical bond price formula? We ...
0
votes
1answer
18 views

Why QuantLib assumes zero rates to discount factor is continuous?

https://github.com/lballabio/QuantLib/blob/0ec43027834220baf0a554d68de79a159a2c5489/ql/termstructures/yield/zeroyieldstructure.hpp ...
0
votes
1answer
15 views

Is an FX forward with delayed settlement still a derivative?

As an example: Trade date: 1/1/16 Maturity date: 2/29/16 Settlement (exchange of currencies) 3/31/16 Is the instrument between 2/29 and 3/31 still deemed a forward? The forward rate is determined so ...
0
votes
1answer
12 views

Bank discount yield and money market yield

I have a question regarding Bank Discount Yield and Money Market Yield for US TBill. Some books mentioned that ...
-1
votes
0answers
14 views

US Bond vs Russian Bond [on hold]

From a neutral point of view : Do you prefer investion in a US Bond or Russian Bond ? I would say US Bond !! But is there any strong argument that permits us to answer ?!
0
votes
1answer
15 views

Binomial Model, Number of nodes from $t = 0$ to $t = n$

How many paths are there in a binomial model from time $t = 0$ to time $t = n$? How many nodes (states) are there? Intutively it seems that there are $2^n$ paths and $2n - 1$ nodes. But I am not sure ...
2
votes
2answers
26 views

Difference in implied volatility calculation

I've been using vollib to calculate IV, but my answers have been different by tenths from other sources like NASDAQ and Yahoo. The answers range +- 0.5, sometimes even more. The inputs are: $S$ ...
0
votes
1answer
41 views

Which studies should be replicated?

The ReplicationWiki provides information on replications and the availability of replication material for published empirical studies. It can be used for research, to build on previous studies, and ...
1
vote
0answers
10 views

Are there alternatives to the Box-Tiao decomposition in identifying mean reverting portfolios?

As documented in this paper, Box-Tiao decomposition (a way to decompose multiple time series into components with different speeds of mean reversion) can be used to identify mean reverting portfolios. ...
0
votes
0answers
17 views

Which obligation choose [on hold]

I have 6 different obligations: A: coupon 4% Maturity 10 years. B:coupon 4% Maturity 15 years. C:coupon 2% Maturity 10 years. D:coupon 2% Maturity 15 years. E:coupon 0% Maturity 10 years. ...
0
votes
0answers
14 views

Historical volatility on bloomberg API

Is there a way to obtain the historical volatility of a stock from the bloomberg API? I would be looking for the data in the HVT table. Actually 3-months historical volatility from now would be ...
0
votes
0answers
31 views

Intraday or overnight returns?

While calculating insider abnormal returns, closing prices of securities are generally used. We take the actual ex post return of the security i on time t, minus the expected normal return for the ...
0
votes
0answers
36 views

How necessary is real analysis and complex analysis for trading at hedge fund levels?

As the title states, I am basically wanting to know the applications of real/complex analysis in finance. How important are such high levels of math ? I can obviously see how things such as ...
0
votes
0answers
11 views

Rblpapi millisecond resolution

I'm using Rblapi to get tick data, using the nice getTicks function. Much to my dismay the index is rounded to the second, while milliseconds time stamp could be provided. Tried returnsAs xts, fts(?) ...
0
votes
1answer
35 views

Where can I find best end of day option data?

Looking for accurate end of day option data. Preferably with Greeks. Any recommendations?
0
votes
0answers
15 views

Where can I find free single-day charts for the S&P 500?

I'm trying to find free historical charts of the S&P 500. I don't need the raw data, I just need to access a simple chart showing the movement of the index over the course of the day (for an ...
3
votes
1answer
50 views

Approximation of an option price

The value of an option in the money is 11.50 Euros. The parameters of the market are: -The price of the underlying stock: 81.4 Euros. -The volatility ofthe underlying is : 34.65 % The ...
0
votes
0answers
4 views

Measuring promotion baseline smoothing [migrated]

I am trying to estimate promo effectiveness for a retail product. To do this I have taken monthly quantity sold data for the product. My question is - Is it logical to model the sales baseline (sales ...
0
votes
0answers
16 views

Data on interest rate differentials (lending on own vs. foreign currency)

I'm looking for data on (inner country) interest rate differentials between lending in own and foreign currency. Is there any data publicly available? If yes, where? If not, which non-free sources are ...
0
votes
1answer
32 views

Strategies on steepen yield curve

Believe that the yield curve is going to steepen very soon. It may be fall in short-term rates, a rise in long-term rates, or some combination of these. What strategy should we pursue in the bond ...
0
votes
1answer
26 views

generate matrix in Matlab [on hold]

Is there any builtin function (or code) in matlab to generate Pairwise Comparison matrix (for Analytic Hierarchy Process - Decision Making) or Positive reciprocal matrix which aji= 1/ aij ? Many ...
0
votes
0answers
13 views

How would MTM an interest only currency swap affect its valuation?

Not sure how a central clearing house that marks an interest only currency swap between two parties to market everyday would effect the currency swap's price. Any ideas?
0
votes
0answers
11 views

Transaction costs estimate for investment strategy

I'm examining a strategy based on profitability. I sort UK stock into 10 portfolios based on their gross profits-to-total assets ratio. Then, I create long-short portfolios by subtracting the high ...
3
votes
0answers
33 views

Information on Weather Derivatives

I am looking for relevant information on the organization of the Weather Derivatives market. How is it organized? How information is shared? Where can we find historical database? I am aware of the ...
1
vote
0answers
37 views

Libor Market Model Calibration

Currently I am doing a research on the plain vanilla multi-curve framework Libor Market Model meaning that no stochastic volatility is involved. I had the idea to calibrate to the swaption market. In ...
0
votes
1answer
50 views
0
votes
1answer
55 views

RiskMetrics VaR Volatility Sample Size

RiskMetrics calculates volatility using an exponentially weighted moving average. For a decay factor of 0.94, they advise a sample size of 74 past returns. Does this mean the entire calculation should ...
0
votes
2answers
78 views

Price of an equity

An equity has a value of 100 Euros, and pay a dividend of 5 Euros in 6 months. The interest rate of 6 months is 5% and the interest rate for 1 year is 6%. I would like to compute the value of the ...
0
votes
1answer
25 views

ABS vs covered bonds vs CDO [on hold]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
1
vote
2answers
36 views

Differences in EIOPA S.06.02.0x QRTs (Assets D1 in 2016)

As per the COMMISSION IMPLEMENTING REGULATION (EU) 2015/2450 (published 31DEC2015) I can see that S.06.02.01 QRT relates to Quarterly (or annual if exempt) quantitative templates for individual ...
-1
votes
0answers
16 views

Application of PVAR in macro economic modelling

I'm looking for a model that can best explain the elasticity of non-performing loans to macroeconomic variables and bank specific variables (panel data of a single country). Is PVAR a good choice?
0
votes
2answers
59 views

Black Scholes Constant Implied Volatility

I hope someone can clarify my ideas about the constant implied volatility in the classical Black Scholes framework. As well known, market practitioners quote the prices of vanilla call and put ...
3
votes
1answer
76 views

Modeling Financial Assets

Let $\tilde{W}_t := (1+R)^{-t}W_t$ and $\tilde{S}_t := (1+R)^{-t}S_t$ be respectively discounted wealth process and discounted asset price. Then, show that $$\tilde{W}_t = w_0 + ...
0
votes
0answers
34 views

Risk-Neutral Probabilities

Consider one period Arrow-Debreu model with $N = 2$ and $M = 4$ show in Figure: Find all the possible risk neutral probability $\pi$. What I am confused about is how $D_1$ and $D_2$ have an up and ...
3
votes
2answers
77 views

Vega in a “constant volatility” Black-Scholes world?

A little confused, I consulted the Wilmott forums for guidance on how I can interpret vega/vomma. Another user's post reminded me that the Black-Scholes model assumes that the underlying has constant ...
0
votes
0answers
29 views

Arbitrage free price

I could not find much information on this question: what is an arbitrage free price in trinomial model? If there is, is there any way of replicating a call option under this model? Although I have ...
0
votes
0answers
23 views

Market standards

Having a high quality pricing models is one of the main expectation of people working in finance, in fact the pricing models delivered should be proved to be accurate, following the latest market ...
0
votes
3answers
45 views

Looking for an algorithm to generate (dummy) share price data

Is there an easy-ish way I can generate "dummy" share price data for the purposes of data visualisation techniques etc.? Essentially I want to have something like the "Adventure Works" of price data. ...
0
votes
0answers
26 views

Calculating share price [on hold]

How to calculate the share price if the Earnings and Dividend per share grows by 5%. The next years's dividend is 10$ and the market capitalization rate is 8%. Are these details enough to calculate ...
0
votes
0answers
30 views

For a square-root process (CIR), how to verify the characteristic function of the transition density?

I am trying to solve a financial mathematical question. I derived PDE (a) for the characteristic function as follows. But, I don't know how to verify the following characteristic function of the ...
0
votes
2answers
105 views

Discrepancy between binomial model, Black-Scholes and Monte-Carlo Simulation

I try to use Monte-Carlo Simulation to price a 10-year call option. Based on below parameter, S = 1, X = 1, volatility = 80%, T = 10, risk-free rate = 0.22% The option value based on Monte-Carlo ...
1
vote
1answer
49 views

Portfolio optimization

first I just hope that this question is in the right place. I have started working on portfolio optimization and the formulation of the problem and their solution : For example in the Markowitz ...
0
votes
0answers
11 views

Modified average swap

I have an instrument that is a swap over the SMK6 that at expiry (it has only one cashflow) pays the difference between the average daily Price of the underlying and the actual Price. The average ...
0
votes
0answers
49 views

Risk-neutral probabilities

I will use this theorem 3.2 from the book "Quantitative modeling of Derivative Securities" by Marco Avellandea: Theorem 3.2 - Assume that there is no arbitrage, i.e. there exists a risk neutral ...
3
votes
1answer
97 views

Example of options that cannot be priced with least-square Monte Carlo

Can you give some example of options that cannot be priced with least-square Monte Carlo? Intuitively, this is any option for which a payoff depends on a previous exercise decision. It's relatively ...
0
votes
0answers
20 views

How to appropriately measure volatility in assets with different execution dates?

Let's say I have two assets and I am hedging them with going short on two other assets. Let's say that asset 1 is expected to expire in one day and asset two is expected to expire in two days. Let's ...

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