All Questions

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Marginal Distribution using GARCH model

I have n return series. I fitted AR(1)-GARCH(1,1) to each return series. Then used PIT(residuals) to transform the residuals to uniform. Then I fitted n dim copula to the data. I simulated 1000 points ...
19 views

what do metrics and indicatives mean in the finance context? Like trading of MBS products

it's often heard in my daily work as a programmer in an investment bank, supporting mortgage backed securities desks (passthrough, agency cmo, cmbs, etc). My take is that the terms describe the ...
10 views

How to calculate price in non-competitive bidding that bidders will receive?

Following bids are received in treasury bond auction. Notified amount is Rs.20,000Million. No amount devolves on the RBI/PDs. No. Of bonds/ Price(Rs.) 46/ 110.185 45/ ...
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Distribution of AR and MA polynoms roots in ARMA/ARMA-GARCH models

I have another noob question. So, for example, I have ARMA(2,2) model: $$x_{t} = \phi_{1}x_{t-1} + \phi_{2}x_{t-2} + e_{t} + \theta_{1} e_{t-1} + \theta_{2} e_{t-2}$$. So, I have 2 polynoms: 1 - ...
26 views

What is the difference between a three month return and a quarterly return?

I am looking at VGENX, and this product has first-quarter and three-month returns of 7.8% and 20.3%, respectively, according to zacks.com. I take it as the three month return is calculated taking into ...
18 views

Using Put Volatilities to Estimate Firm Leverage/Credit Risk

This paper by Hull, Nelken and White uses implied volatilities in structural credit risk models to back out a market-implied leverage ratio. CreditGrades has a similar implementation using equity ...
113 views

Trouble verifying roll rate model

I found this paper on roll rate analysis via a google search. I would post a link, but every page is stamped with "CONFIDENTIAL" at the bottom (humorous since it is easily found). In a nut-shell, ...
11 views

How we can use adjusted price in combination with price limit in a stock market?

How we can use adjusted price in combination with price limit in stock market? suppose that we have a price limit in a stock market. For example if yesterday last price is ...
27 views

Performance measure

Can anyone give some intuition behind the relative performance measure that is a percentile raking of trading activity. It indicates the percentage of total activity the investor outperformed the ...
21 views

Methodologies behind shocking a composite index instrument, what assumption distinguishes these?

Suppose I have a composite index (rebalancing or non-rebalancing) that at present time has some base value $B_{\text{base}}$ in some base economy. I am in the process of shocking the economy on which ...
24 views

How can I discover dark pool orders in an order book?

I'm learning order flow. I would like to differentiate between aggregated dark pool volume and aggregated algo trading volume. Is there a way to tell orders coming from a dark pool from algo orders? ...
54 views

Bloomberg Currency Exchange Rate Data (London and New York)

I'm new to Bloomberg terminals (a paper I'm reading uses data from a terminal - my first exposure) and I'm having trouble figuring out how to download a few different time series: (1) daily closing ...
39 views

Leverage and Drawdown

What are the risks of deleveraging a leveraged long/short equity portfolio when going into a drawdown at certain drawdown stops, like deleveraging by 30% when breaching a -5% drawdown, deleveraging a ...
34 views

Bayesian analysis in R: Probability of default, low default portfolios

I want to apply the knowledge of this paper (Bayesian estimation of probabilities of default for low default portfolios, by Dirk Tasche) in R, but I can't find the right bayesian package and functions ...
19 views

Continous-time portfolio allocation optimization for a given consumption rate

I have the following PDE $0 = V_t - c(t)V_x - \lambda^2 V_x^2/V_{xx} + rxV_x + 1/2\lambda^2x^2V_{xx}$ where $t\mapsto c(t)$ is some given function and $r,\lambda$ are given constants. If necessary, ...
29 views

Intraday return and volatility figures some sense check

Some questions about intraday returns and volatility figures. It is with the objective of sense checking. Firstly, for Security A, I am calculating the five minute interval return numbers over 29500 ...
15 views

Making apriori Statements on VaR Backtests with a Garch Modelled VaR

so I want to find out, if its possible to find out for any backtest for the Value at Risk(Kupics POF or Christophersen's Markov Test), if it is possible to make apriori Statements on Testing results ( ...
34 views

Find the PDE for a function that makes it a martingale

Given the SDE, find the PDE for the function $V(t,x)$ such that $V(t,S_t)$ is a martingale. $dS_t = \kappa(m - S_t)dt + \sigma\sqrt{S_t}dB_t$ where $\kappa$,$m$, and $\sigma$ are constants. ...
34 views

Price compounding: Swap versus Governments Bonds

There are different rates curve to compound prices. Since the crisis, regulators tends to favor price compounding with swap curves over IR curves deduced from governments bonds (EU regulators, french ...
12 views

Why use Moody's KMV EDF for one year

If I were to use Moody's KMV proprietary database with expected default frequqncies(EDF) for sectors and countries, along with aggregations for financials and non-financials, significant banks etc: ...
16 views

Multi-factor APT model in practice: non-zero mean factors, observations needed and portfolios

I'm going to build a multi-factor APT model for the Swiss market starting from the work made by Chen, Roll and Ross (to which I will add and test some additional factors). I have some doubts though: ...
6 views

What are appropriate algorithms for forecasting contract schedules to maximize profit?

Imagine a situation where a business negotiates contracts for the maintenance of widgets it sells. Situation Customer buys 20 widgets. Customer negotiates contract for widgets to be ...
21 views

How to calculate the unrealised profit on sinkable bond

How is calculate the unrealised profit on Sinkable Bond when 50% of the bond value already been paid? Is the following method correct: Unrealised P&L = ((Current.Position * Market.Price) - ...
32 views

Marchenko–Pastur, Student distribution and returns

I have a question regarding random matrix theory. I've been studying various papers and I found some confusing definitions of Marchenko-Pastur law. The most clear was the one on wiki: ...
21 views

Valuation Models for Bank Credit Default

What approaches exist for calculating a fair price for a credit default swap for a bank? Most of the traditional valuation models are geared towards industrial firms. Are there any theoretical ...
24 views

How to schedule a sequence number reset in QuickFIX?

What is the recommended way to handle scheduled sequence number resets (initiated by the counterparty once per day) ?
28 views

Cross-sectional Regression: Using calculated coefficient of first regression for a second regression as dependent variable

Hello stackexchange community! I am new to R and econometrics and and stuck in a step of the fama-macbeth (1973) regression, in which risk premia of stocks are estimated with a two-step regression ...
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Pricing function $P(S,t)$ is convex in $S$ for all $t$

I am now reading Alternative Characterization of American Put Options by Carr et all (available at http://www.math.nyu.edu/research/carrp/papers/pdf/amerput7.pdf). There is a theorem called 'Main ...
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Can someone help me with a code how to bootstrap p values in R using Boot or boot package? regCSS30 <- dyn$lm(lag(eval(parse(text="HV")),-30) ~ lag((eval(parse(text="CSS30"))),0), ... 0answers 32 views How do most arbitrage opportunities account for unknown volume at a ticker price? So, from a conceptual level, arbitrage seems quite forward... buy at one place at one price, and sell somewhere at a higher price. However, after doing some initial digging it appears to be not quite ... 0answers 20 views In May of 2005, several large hedge funds had speculative positions in CDO tranches These hedge funds were forced into bankruptcy. This was due to: the correct answer is: Long Mezzanine and Short Equity Tranche position when correlation of Mezzanine tranche decreased. Can anyone ... 0answers 41 views Las vegas method? In one of his winning paper, backward induction for future values, A. Antonov, quant of the year 2016, refer to the American Monte-Carlo method as the Las Vegas method. Is this name used appart from ... 0answers 26 views What I find if I bootstrap a binary logistic regression? I want to describe the direction of some stock returns, using as predictors several independent variables which are uncorrelated. The relation in which I am interested is between the stock returns and ... 0answers 16 views Does the FF 3-Factor model work with unadjusted prices? I am trying to investigate some trading strategies based on the Fama French 3-factor model, for which I assumed I need to use adjusted prices to account for dividends and splits. However, my ... 0answers 24 views Embedding the naive portfolio into economic decision theory I am trying to gain some insights about the vast literature of portfolio optimization and I hope to get some help when it comes to embed the most standard allocation strategies into a coherent ... 0answers 39 views To calculate shift in the shifted lognormal model I tried to calculate the shift for CHF interest rates (tenors with negative rates) using MLE, but as the shift is increased the MLE value increases(or decreases depending on whether positive or ... 0answers 43 views Euler discretization bias, heston model I am performing option pricing using Heston model and Euler discretization. I'm getting the following result: ... 0answers 29 views Inverse Smile Volatility Ibex35 I was analysing ibex implied volatility and when I draw it I found it was reversed: X axis are the strikes and Y axis implied volatilities calculated by BS. The blue line is the spot price. Data ... 0answers 16 views how to specify given model on Eviews? I am still struggling to estimate my model on Eviews. I know it should be really simplistic to do it,but without in depth Eviews knowledge it can be rather tricky. For instance, looking at the ... 0answers 55 views Higher moments arbitrage Is there concrete evidence that statistical arbitrage (historical vs. implied) on higher moments, specifically skewness and kurtosis, can be (significantly) done? Working from this source, the author ... 0answers 58 views Computing Overall Return for A Single Asset Given Inflows & Outflows I am creating a portfolio tracking model in Excel and have run into difficulty on how to track the overall performance of a single asset, given that over time more and less capital (shares) has been ... 0answers 35 views Effect of surprise dividends on options The ETF in question is VDC It pays about$2.5 a year in dividends, but the payout dates are very erratic If I were to go long VDC with options, what would be the best way of doing this to avoid ...
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I've developed/patented a metadata extraction methodology, which we've used to build a variety of alternative datasets for funds. One of the more difficult issues in this field, is getting useful ...
52 views

How to choose the stock exchange to trade a stock?

Let's take an example : Hewlett Packard. The company is listed on both Nasdaq and Nyse. Correct me if I am wrong but as we can trade it on 2 different stock exchanges the price of the stock may ...
37 views

Is this a GARCH Monte-Carlo simulation?

I tried this as a simulation for a GARCH(1,1) model. Is it correct? (I'm not speaking about the code itself, which works, but the underlying idea). Here is plot (of ...