All Questions

408 views

Is there a name for, or any research on, a system where you try to predict future price by finding a similar price history in the past?

Allow me to explain. You look back from some period to the present. Say a week ago to now, using a per-minute view. You then crawl through your database of past price data, and you try to find a ...
223 views

Consider a credit rating system consisting of three credit states, A, B and D (default) with the following annual credit transition probability: T = [0.7 0.2 0.1;0.2 0.5 0.3; 0 0 1]. For a company ...
176 views

How often do banks update forward points?

My understanding is that forward rates are calculated by comparing interbank interest rates of the 2 currencies for a currency pair, with the points being the difference between spot and the forward ...
385 views

How to choose a risk-neutral measure when the market is incomplete?

I am more of a probabilist than a financial mathematician. I am currently working on the features of American put options under a particular stochastic volatility model. Like most stochastic ...
227 views

Does risk-neutral measure have anything to deal with risk-neutrality in utility theory?

Or simply: why do we call equivalent martingale measures as risk-neutral measures? In the utility or game theory, when we consider a person's preferences to certain outcomes, we often deal with the ...
116 views

Controlling portfolio concentration

I'm working with a heterogenous basket of instruments (in volatility terms). Risk parity allocation seems to be useful for the portfolio( * 1/Volatility). However, there are times when the ...
121 views

Is the volatility of a trader's wealth equal to the volatility of the underlying assets traded?

Assume that a trader trades in several stocks with different volatilities. The return of the trader's portfolio would be the weighted average of returns and the risk would be a function of the the ...
2k views

Value Weighted Return

I recently have started to look at some data from CRSP, and they have a metric called Value Weighted Return (two versions with and without distributions). When I looked it up, it seemed that this ...
172 views

Effects of random-generator-choice on derivative's price

There is a plethora of pseudo-random-generators out there. Some of them are definetly better and some of them severily underperform. My standard tool is Mersenne Twister - when I need to generate ...
1k views

Reading XBRL Data from the SEC FTP SITE

After I ftp into the SEC Edgar site (ftp.sec.gov) I am able to pull the appropriate financial statements (i.e., 10-k, 10-q, 8-k, etc.) onto my local computer. However, when I go to open these files, I ...
2k views

Definition of Return of A Long/short Portfolio

This can either be a silly question or a question with no sure rigorous answer but defined with some convention. Any way, here it is. What is the (industrial recognized) definition of the return of a ...
245 views

Price of Bond given credit state matrix

"Consider a credit rating system consisting of four states, A,B,and D(default) with the following annual credit transition probability: A= [ 0.7, 0.2, 0.1; 0.2, 0.5,0.3; 0,0,1] For a company rated B,...
112 views

SEC XBRL Context Dates

In SEC XBRL financial filings, why do the date ranges for duration contexts not match the context's quarter? e.g. The markup for the context "D2012Q3" may look like: ...
83 views

Standard way to represent trend in an a-dimensional way [closed]

Let us suppose that a factory needs to know when certain products are increasing the profit. This factory produces an huge number of products each with different targets. So the factory need to ...
55 views

What type of interpolation should be used in key rate perturbation models?

When perturbing a key rate in order to assess sensitivity of portfolio value, what sort of interpolation is standard? A book I am looking at says linear, but this seems pretty unrealistic to me--and ...
176 views

Direct exchange data via a Vendor

I am considering the option between using direct exchange connections vs using a vendor like Bloomberg for market data. I am interested in daily data and potentially tick by tickdata. Initially I am ...
301 views

Definition of orthogonality and independence for a stochastic processes

Somehow I can't find the explicit definition of when two processes are supposed to be orthogonal or independent anywhere. I think orthogonality and independence should mean the same thing in this ...
636 views

Difference between VaR and credit VaR?

Quick question: is there a difference between credit VaR and VaR or are they the same thing?
441 views

How is the MA (moving average model) useful?

How is the MA model useful in modeling financial data, for example the stock indices? For example, from what i understand in the AR (auto-regressive) model portion, we can use the ADF test to check ...
1k views

Valuing Total Return Swaps

In my quest for simulated data, I am trying to generate prices for Total Return Swaps by calculating the NPVs of the fixed and floating leg. My problem: Given the fixed leg, how do I set the spread on ...
322 views

212 views

How to perform significance test on transition matrices

Say you have in your hand a transition matrix published by Moody, and you also collected the rating information for a sample of bonds, which you use to form your own transition matrix. How can we use ...
44 views

Characterizing relation “ has no less information than” between information systems represented by Markovian matrices

I crossposted this question on math.stackexchange. Background: Suppose that an investor's utility is both determined by the state and her action taken. A fact of life is that she can't observe the ...