3
votes
2answers
853 views

How to remove outliers in financial times series?

I have a bunch of time series; i need to clean them before modelling. So far I just know the “filtering/smoothing” method : -Ex: moving average methodology (filter the data with a moving average ...
6
votes
2answers
2k views

Strategies for Liar's Poker

This question is only tangentially related to quantitative finance. Scott Patterson's book The Quants describes how a quant at Kidder Peabody figured out a strategy to playing Liar's Poker in the late ...
17
votes
4answers
3k views

Local Volatility vs. Stochastic Volatility

Are there any empirical observations or practices when to prefer Local Volatility Model for pricing over Stochastic Model or vice versa?
7
votes
2answers
566 views

Estimation of Empirical Expected Shortfall of a heavy tailed distribution

Assume that you have a portfolio for which you have estimated a parametric model to the underlying instruments, but the distribution of the portfolio as a whole is too complicated to compute ...
0
votes
1answer
241 views

Calculating the Sum of Squared Deviations between two Normalized Price Series

How can I calculate the sum of square deviations between two normalized price series according to (Gatev et. co 2006)? My normalized price series of stocks $X$ and $Y$ consist of the cumulative total ...
1
vote
1answer
85 views

ISDA: Interpreting a date specified as x business days prior to another date with a business day convention of 'NONE'

I've got an interest rate swap, it has a right-to-break with a bermudan exercise schedule. For each exercise, the settlement date is specified as an already-adjusted business day. The "last ...
0
votes
1answer
139 views

First Exit Time Based Volatility

I'm hoping that someone could help better explain why $\sigma$ (equation 2.19) must be multiplied by $\frac{4n}{4n + 1}$. Obviously all the math is there. Perhaps someone can make this easier to ...
1
vote
1answer
211 views

Control variate for Heston model

Does anyone have suggestions for potential control variates for vanillas in a Heston model? I've tried black scholes with implied volatility, average volatility and long term volatility all without ...
2
votes
1answer
394 views

Quasi Monte Carlo in Matlab

I want to use Quasi Monte Carlo to try and improve the convergence of a simulation I am running. The random numbers are simply to produce the observation errors for a standard linear regression ...
7
votes
3answers
2k views

Why banks borrow from each other

I was reading on the topic, and would like to be sure that my understanding is correct. For the benchmark I would consider American banking system as I've mostly used sources such as FRS and Federal ...
1
vote
1answer
638 views

Price of a down-and-out call in terms of European call

If $EC(S_0, K, \sigma, r, T)$ represents the price of a European call option with strike $K$, expiry $T$, initial price $S_0$, volatility $\sigma$ and where the constant interest rate is $r$, then I ...
1
vote
1answer
240 views

Lattice Boltzmann method for pricing options

I'm looking into whether there is ANY information out there regarding the implementation of the Lattice Boltzmann method for pricing options (or other financial tasks). I am very new to the world of ...
3
votes
2answers
316 views

Lookback option explicit formula using Black Scholes

I would like to compute the time-0-price for a lookback option using Black Scholes formula, the explicit formula is given by ...
3
votes
1answer
495 views

How should we select efficiently orders parameters in time series modelling?

A common way to select orders parameters (ex: to choose the number of AR terms to be included in the model ) in time series modelling is to rely on some Information Criteria (AIC, BIC, Hannan ...
8
votes
1answer
390 views

Inflation modelling

I am trying to price an option on the Spanish CPI. The option is a European call with a single observation date. However, I am fairly new to inflation modelling, so there are two areas in which I ...
1
vote
1answer
179 views

what is considered material information? [closed]

I'm trying to understand what is considered "material" information held by an executive of a company. There is company information that an executive (say insider) will know that a public investor will ...
4
votes
2answers
414 views

Expected value of Black-Scholes

(Apologies for any formatting mistakes) Within the Black Scholes model, given that you are estimating the volatility from historical data - and all other parameters assumed exact - one usually ...
6
votes
2answers
234 views

Co-integration constraints of coint(X,Z) given coint(X,Y) and coint(Y,Z)?

The Augmented Dickey-Fuller Test can be used to measure how well ranked certain pairs are against others for co-integration. So then say we have a known co-integration between ...
2
votes
1answer
175 views

How did we get $W_g=W_b$ from $\dfrac{U'(W_g)}{U'(W_b)}=1$?

My question is from Nicholson-Snyder's text , E-book here. My question is here, from page 217 of the book. (I can't post image as my reputation is not enough.) How did we get $W_g=W_b$ from ...
30
votes
6answers
45k views

Where to download list of all common stocks traded on NYSE, NASDAQ and AMEX?

I have a very basic data question: how to get a list of all common stocks traded on NYSE, NASDAQ and AMEX? I would need to be able to get the approximate list of common stocks as is available in ...
1
vote
1answer
642 views

Components of an index in a specific date

Objective: Get a list of all the companies that were ever part of an index (e.g.: FTSE100) in a given period of time (scale: years/decades). Method I have in mind: 1) Create an empty list k. 2) Get ...
2
votes
0answers
61 views

How to interpret CME's specification regarding grains options expirations?

Looking at the contract specifications for Soybean Meal and Soybean Oil (same for Corn, Wheat, and other major stuff I checked) serial options on CME I see the following expiration rule: the last ...
6
votes
5answers
4k views

Predicting Price Movements on a Betting Exchange

On a betting exchange the price (the odds that an event will happen expressed as a decimal, 1/(percentage chance event occurring) of a runner can experience a great deal of volatility before the event ...
4
votes
1answer
313 views

Is Cubic spline Interpolation on swaption Volatility arbitrage free?

If I use interpolation technique such as cubic spline to estimate volatility of Swaption with different strike,(with a given forward rate, swap and option maturity) will this be arbitrage free? What ...
0
votes
1answer
71 views

Liquidity and Prices

Do fewer transaction costs and higher liquidity relate to lower market prices? Are there any good resources that deal with these topics in more detail?
0
votes
1answer
893 views

Is there a difference between crossing network and ECN

Is there a difference between a crossing network and an ECN? The wikipedia page for Crossing Network says that ECN is a type of crossing network. But crossing network has the smell of a semi-legal ...
1
vote
1answer
294 views

Liquidity seeking algorithms open source implementation

Are there any free online liquidity seeking algorithms? Possible an open source implementation? Not looking for anything state-of-the-art, but just to get an idea how they work.
3
votes
1answer
635 views

Normality assumption in Sharpe ratio

I have read that the Sharpe ratio imposes a normality assumption, but I fail to see how. Standard deviation is statistic for any type of distribution. Anyone have any ideas?
0
votes
1answer
97 views

How does a cross trade pose a problem to the retail investor

How does a cross trade pose a disadvantage to the retail client. In this explanation It says: ...
10
votes
5answers
6k views

Earnings and valuation data sources online

Are there any free/cheap sources for historical data on company earnings and valuations? I can get historical price data from Google and Yahoo, and it looks like I can get about five years of ...
0
votes
0answers
43 views

Rational expectation meaning

What does rational expectation (RE) mean in agent-based modeling context? What are the relationships between RE and expectation and outcome?
1
vote
1answer
108 views

Inferring signals in absence of sign of principal components (PCA)?

PCA seems to be very popular in dimension reduction applications and for extracting the top PCs which explain the data. One such application in futures is on the term structure to obtain the level, ...
4
votes
2answers
322 views

Is there a contradiciton between option prices being martingales and the use of options for speculation?

It seems like there is a contradiction between the fact the option pricing is risk-neutral and the large amount of option trading that is done for speculation. Since the option is risk-neutral, a ...
1
vote
0answers
69 views

Clarifying the way in counting number of weeks for calculating historical weekly volatility in Bloomberg

I would like to confirm the way to counting number of weeks for calculating historical weekly volatility in Bloomberg. Given an option with issue date from 14/1/2014 to 13/1/2019, is the proper way to ...
1
vote
0answers
87 views

Approximating the PDE price of an option with a binomial model

I'm trying to replicate, with a binomial model, the price of an option obtained with a PDE. It doesn't really work, so I was wondering, if there are some caveats when doing that. The PDE model use a ...
2
votes
2answers
371 views

Calculate Daily Returns for Sharpe Ratio

For the purposes of Sharpe ratio, I calculate a trading strategy's daily returns using realized P/L only: $$ \frac{K(t + 1) - K(t)}{K(t)}, $$ where $K(t)$ is the cash balance after market close on day ...
0
votes
1answer
253 views

Expected payoff and weighted average price

Settings Let you're trading a security whose probability to be equal to $S_{T}$ at time $T$ follows a p.d.f. like the ones in the picture below. (That is just an example found with Google images, ...
4
votes
1answer
585 views

Is there any open-source library, implementing “exchange” to be used for algorithms running on the same computer?

Question: Is there any open-source project/library, which can act as a "local exchange" for agents (algorithms), running on the same computer? Clarification: by "local exchange" I mean, that the ...
17
votes
6answers
2k views

Why are options trades supposed to be delta-neutral?

I'm reading Natenberg's book, and he says that all options trades should be delta neutral. I understand that this prevents small changes in the underlying price from changing the price of the option, ...
0
votes
1answer
141 views

What is the realized volatility's estimation error?

Given an estimation procedure and real data, how would one compute the mean squared error? What value represents the "true" realized volatility in the case of calculating the Mean Squared Error in ...
0
votes
1answer
196 views

Where can I find monthly/weekly historical data for gold and silver [duplicate]

Preferably in monthly or weekly denomination, for at least 20 years. Preferably in Excel format, but csv, or other format is fine too. I try to google but couldn't find anything, maybe I just wasn't ...
3
votes
0answers
240 views

What R-packages for SOCP problems are there?

Currently, I am looking deeper into the topic of second-order cone programming. Could you suggest packages that solve SOCP-problems in R? With your answer, please provide a short description of ...
7
votes
0answers
2k views

Volatility-Based Envelopes

I am following an article by Mohamed Elsaiid (MFTA) about Volatility-Based Envelopes - a quite new technical indicator he has introduced, that is being used by Bloomberg. My goal is to get a simple ...
0
votes
1answer
594 views

How can I calculate the Cumulant-Generating Function in Matlab?

Let $M(h)$ be the moment-generating function, then the cumulant generating function is given by $$K(h)=\text{ln}M(h)=\\ =\kappa_1h+\frac{1}{2!}h^2\kappa_2+\frac{1}{3!}h^3\kappa_3+\ldots$$ where ...
2
votes
0answers
161 views

Correlation between idiosyncratic residuals and forward returns

The classic mean-reversion strategy is to calculate an "expected return" (alpha) by computing the raw return for each security and then remove the part which you think is market driven. Statistically ...
5
votes
2answers
1k views

Mass Market Data Source

My current project requires large amounts of historical and real-time market data (1m or 5m bars for various products, mostly US futures for as far back as available). This data will be analyzed by ...
13
votes
3answers
5k views

Free market data (delayed or snapshot)

I know there are similar questions but I don't think there are any identical ones. Basically, I'm looking for one of these two things. Delayed market data feed. A tick by tick feed, but delayed by ...
-2
votes
2answers
814 views

Market Data For Project

I'm looking to find a service that will allow me to download historical data on stocks, bonds, options, futures, indices, etc and also to pick up new files either on a daily or weekly basis. I've been ...
2
votes
2answers
4k views

Cointegration tests

I'm trying to figure out how to perform cointegration tests in R between 2 time series. I'm using po.test from the package ...
3
votes
0answers
60 views

FTAP in the model independent case, paper by Schachermayer

I have a question about the following paper by Beatrice Acciaio, Mathias Beiglböck, Friedrich Penkner, Walter Schachermayer. At the very beginning of the paper, on page 3, there are two definitions ...

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