# All Questions

257 views

### Growth of Order Book size during day

I am trying to find market-structure research on how the size / depth of the order book changes during the day for equities. I would expect it to get deeper and deeper and bigger and bigger ...
233 views

### Industry convention to track trading performance against market indices?

I come from a programming background and not am no quant by career so this is probably a newbie question for you guys. I have written some code to pull daily closing values for market indices (DOW/...
29 views

### Historic market cap/outstanding shares [duplicate]

Is there someway to get the historic market capitalization/outstanding shares of stocks traded in US exchanges ?
27 views

### explanation for preference of volatilities in option premium quotes [duplicate]

could any one suggest an explanation for why premium in option markets (currency or otherwise) are quoted as volatilities rather than (premium/abs(spot price - settlement price)) or some other ...
104 views

### Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?

Does someone know if there is a strong solution for this SDE : $$\frac{dS_t}{S_t}=\sigma(S_t)dW_t$$ where $$\sigma(S)=\begin{cases} 1\;\;\;S>1\\2\;\;\;S\leq 1 \end{cases}$$ $S_0=1$ and $W_t$ is ...
91 views

### Risk neutral measure in exponential levy model

Is there a method of finding a risk-neutral measure for assets driven by the levy process? I understand there is the esscher transform but I think it tends to transform the processes into ...
593 views

### garchOxFit in R

Could someone please help me with trying to get the Ox interface to work in R. I followed the steps outlined in this paper (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1752095), but I get the ...
170 views

### How to price an option with two volatilities?

Imagine you have two volatilities, the second which is "activated" when the stock crosses a barrier called $p_b$. The present price is $p_1$. ($p_b>p_1$). This can be used to price options after a ...
394 views

### what is a reasonable beta in CAPM?

I want to predict expected returns for assets using a CAPM, to calculate unexpected (unpredictable, idiosyncratic, non-systemic) returns in portfolios. My CAPM estimated on monthly total gross ...
290 views

### How to design back-testing (validation) for such modified Vasicek model?

Consider a classical Black Scholes model , $$\frac{dS}{S} = \mu dt + \sigma dW$$ , where $dW$ is a Brownian motion, that $W(t_1) - W(t_0) \sim N(0, t_1 - t_0)$. The back-testing strategy is straight-...
304 views

### Estimating early exercise boundary for American put

I am trying to estimate the early exercise boundary for an American put option. I can find the put value through the Longstaff-Schwartz LSM method. How do I obtain the early exercise boundary within ...
274 views

### Why are indifference equations in mean-variance portfolio theory convex shaped

As the title suggests why is the indifference equations in mean variance portfolio theory convex shaped? Indifference Equation: https://en.wikipedia.org/wiki/Indifference_curve A graph:
5k views

### Duration of a floating rate note

I have the following C# code for calculating the modified duration of fixed coupon bonds: ...
440 views

### How to choose a rolling window type and size?

I'm developing a trading strategy which takes into account certain parameters (e.g. avg spread, weighted price, etc). Of course, these parameters can be calculated over different window types (i.e. ...
136 views

### Basket option density in BS model

Let X and Y be two GBM’s, they have each a univariate log-normal distribution for some time t, that is $X_t\sim{LnN(µ_x, σ^2_x)}$, $Y_t\sim{LnN(µ_y, σ^2_y})$ and $Z_t=[X_t,Y_t]\sim{ MvLnN(μ, Σ)}$ ...
257 views

### Measuring and proxies for leverage in the financial system

It can be argued that the leverage - reflected by how much collateral people or firms need to put down to borrow and might lose if they fail to pay the loan back - used in the financial system is one ...
194 views

### Black-Scholes in Delphi [closed]

when trying to implement the Black-Scholes formula in Delphi, I've found this: http://www.espenhaug.com/black_scholes.html I've checked the results against option-price.com and found they are ...
841 views

### How to calculate VaR/CVaR for private equity, hedge fund, and alternative investment portfolios?

What is the best method for calculating VaR/CVaR for private equity, hedge fund, and alternative investment portfolios? I have only historical monthly return for them.
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?
348 views

### Smoothing Term Curve

Assume that we have current month term curve and the curves from the two previous months. The current curve may be shifted from the average of the previous two curve by some value (a parallel shift). ...
369 views

### Time-varying correlation via state-space representation and Kalman filter

Let a linear time-varying mode like this one: $y_{t}=\alpha_{t}+\beta_{t}x_{t}+\epsilon_{t}$. You can also suppress the constant term to simplify this example: $y_{t}=\beta_{t}x_{t}+\epsilon_{t}$. ...
279 views

### Modified Duration of Overnight Index Swaps

Is the modified duration of an overnight index swap zero or close to zero?
640 views

### What is the significance of Relative Risk Aversion

I know that the relative risk aversion is defined as $$R(c) = cA(c)=\frac{-cu''(c)}{u'(c)}$$ where $u(c)$ denotes the utility curve as a function of wealth $c$. But I do not understand the intuition ...
501 views

### Why is the mean time-dependent in the Hull-White interest rate model?

In the Vasicek interest-rate model, the interest rate reverts to a constant mean. This makes sense to me. In my conception, the mean ought to be time-invariant, since interest rates don't follow an ...
194 views

### Trend in Cointegration relationship

I was estimating a long-run relationship of exchange rate and purchasing power parity. The residual of the long-run relation which should be $I(0)$, but it is only $I(0)$ when I introduce trend in ...
2k views

### IMM dates in excel

I need to get the IMM dates in excel. IMM dates are defined as the third Wednesday of every March/June/September/December.
75 views

### Real value of small numbers of shares of company stock

What is the real value of a single share of company stock? Let's ignore the "the value is what someone is willing to pay for it" angle. At some point, there has to be a real inherent value to ...
188 views

### How do you handle order tracking (without unique Lot ID's)

Hypothetical Trade: I buy 10,000 shares of ASTC using a broker API. The order is filled in 4 similar lots; ...
737 views

### Does Fama French Three Factor Model Work out of Sample (after 1993)?

Does anyone know if the Fama-French three factor model has been re-examined empirically after 1993, when the original paper was first published? I am asking because there seems to be considerable ...
832 views

### Backtesting - can you buy/sell at open and closing prices?

In backtesting (nasdaq stocks), I make the assumption that I have the ability buy/sell each day at the opening and closing prices. Is this realistic?
9k views

### Derivation of the tangency (maximum Sharpe Ratio) portfolio in Markowitz Portfolio Theory?

I have seen the following formula for the tangency portfolio in Markowitz portfolio theory but couldn't find a reference for derivation, and failed to derive myself. If expected excess returns of $N$ ...
473 views

### options pricing using vwap

This is a question about why options prices do not take volume into account. The popular option valuation formula "black-scholes" certainly does not account for this and I don't suggest that it does. ...
121 views

### how to make a distribution model tolerable of trend?

I'm building an model on different loans' NPL rate. The problem is NPL rates are always affected by the market. When NPL rates move in trend, my model will fail the back-testing. Assuming $x(t)$ is a ...
168 views

### Estimate weekly, yearly quantities from finite samples

I'd like to estimate from a daily prices serie $P_t$ with $N$ observations a quantity such as the variance of the weekly returns. I will use $\ln\left(\frac{P_{T+5}}{P_T}\right)$ assuming 5 days in a ...
205 views

### Converting time series returns into euro

I am trying to convert various series of returns into one currency (euro). I saw from aprevious post that soemone suggested using conversion factors, where would I find these? Also, given that the ...
94 views

### Why is there no closed-form equation for XIRR?

Everything I have read about XIRR (e.g., as calculated in Excel) says that there is no closed-form equation and it must be calculated by iterated approximation. Could someone give a brief ...
106 views

### Do some option pricing models allow for misspecification and what does it mean?

This is to some extent a theoretical question and maybe we can work together to produce some input and output. Diverse option pricing models are reported to be misspecified in various studies. One ...
132 views

### Calculating company-level market capitalisations from share quantities and values

I want to calculate company-level market cap values for stock exchanges listed by Bloomberg. I gather this can be calculated as the product of share price and the total of shares in circulation. But ...
183 views

### A question on Ito

If we know the dynamics of $S$, then we can estimate the value of $S$ at a time point, $t$. Here, I have a question concerning how to solve for $S_t$ by Itô because I obtained different results by ...
435 views

### Order book depth views preferences: order-by-order vs. total aggregated volume by price levels

Which is best? Or is it irrelevant? Hi! Considering Level 2 Data (Market Depth), I want to understand the advantages to have all the order book on an order-by-order basis (or tick-by-tick basis) ...
47 views

### Is there a different test to check stationarity? [duplicate]

I am using the KPSS test to check stationarity of a financial time series. I would like to know if there is another test to confirm the stationarity. Any advice?
449 views

### Shrinkage Estimator for Newey-West Covariance Matrix

I like to apply the Newey-West covariance estimator for portfolio optmization which is given by $$\Sigma = \Sigma(0) + \frac12 \left (\Sigma(1) + \Sigma(1)^T \right),$$ where $\Sigma(i)$ is the lag ...
742 views

### Black--Scholes hedging argument

I'm trying to understand the standard hedging argument to derive the Black--Scholes PDE. There's one aspect of the derivation which I can't get passed and I'd be very grateful for some clarification ...
490 views

### Value-at-Risk formula when using skewed-t distribution

I am trying to find a formula for the skewed-t VaR. For example the VaR formula for a t-distribution is $$\sqrt{\frac{df-2}{df}} \times \Sigma{t} \times \mbox{quantitle}(t-\mbox{dist}, 0.01) + \mu$$...
2k views

492 views

### How to look for fractals/harmonics patterns in time series?

I want to build trading systems based on two things: 1)Fractal Theory 2)Harmonics Pattern I have read the book : The Misbehavior of Markets: A Fractal View of Financial Turbulence By Mandelbrot ...

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