# All Questions

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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 ...
53 views

### 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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### 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 ...
31 views

### calculating long short portfolios currency exposure

I have calculated the currency exposures of a long short portfolio simply by summing the weights of each stock. However I was told that I need to incorporate the dollar borrowing (short dollars), I ...
53 views

### Optimize a trading strategy created in excel with R

I have created quite a complex back test in excel spanning 15 years with 17 parameters. I would like to optimize the parameters which would give me maximum return given a maximum draw-down percentage. ...
12 views

### EMTA Guidelines

Does EMTA guidelines are only for Non-Deliverable trades? IF yes, then why this is applicable for Deliverable Option trades? EMTA Site - http://www.emta.org/ndftt.aspx
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### Replicating American call option

Consider a two-period binomial model for a risky asset with each period equal to a year and take $S_0 = 1$,$u = 1.2$, and $l=0.8$. The interest rate for both periods is $R = .05$ a.) If the ...
22 views

### Event Study - Event Induced Volatility for One Firm

Normally, in a stock price event study, we assume that the daily variance in the estimation period is the same as that during the event window. The event-induced volatility literature (eg, Boehmer, ...
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### Forward Exchange Rate Data: Germany x US

Would anyone know where I can find historical forward exchange rate data between germany and US, yen and US to download? In Bank of England website i already found. Thanks
17 views

### First coupon CDO tranche

I am interested in Tranches on Credit Indexes. Let $T$ be the trade date, let $t_1<T<t_2$ be the accrual dates surrounding the trade date. I would like to know which option is correct ? A) ...
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### How are ETF fees deducted? What happens if you short an ETF?

When I buy an ETF, the ETF issuer wants a certain management fee (expense ratio). How is this usually paid? I've read that this might be deducted from dividends - is this the case? How does it work ...
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### Two-period binomial model for American option

Consider a two-period binomial model for a risk asset with each period equal to a year and take $S_0 = 1$, $u = 1.5$, and $l = 0.6$. The interest rate for both periods is $R = .1$. a.) Price ...
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### Modeling Interest-only Mortgages

First post on this forum - happy to be here. Please give feedback if this is off-topic so I can more meaningfully contribute moving forward. Can we infer a range of future all-in costs for I/O ARMs ...
24 views

### PnL Explained Using Scenario(Full Reval Model)

I was wondering if any quant guru can help . How to calculate the PnL explained using full reval aka scenario based = > t - (t-1) approach for linear instrument. I am finding difficulty to understand ...
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### How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: ...
23 views

### 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 ...
14 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 ...
118 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, ...
13 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 ...
30 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 ...
29 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? ...
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### 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 ...
35 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, ...
33 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 ...
19 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 ( ...
35 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 ...
13 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: ...
17 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: ...
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### 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 ...
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### 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) - ...
34 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 ...
29 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) ?
29 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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### Bootstrapping p values in linear regression in R

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), ...