# All Questions

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### Volatility Smile Approximation

Does anyone know what type of model is used to model the skew and IVs inside Thinkorswim platform for its volatility smile approximation? I am trying to replicate but do not know where to start. Any ...
57 views

### Quantum Computing for Quantitative Finance

It's been a while that quantum computing is looked as the next step in computational science. I somewhat always tought we were decade aways from it's happening but it appears I was wrong: ibm-quantum-...
50 views

### Discount factor taking into account yield curve shape

I have always been told that the discount factor formula is just: $$DF(T) = \frac{1}{(1+L_{t_0})^T}$$ where $L_{t_0}$ is the LIBOR rate on one period (the first one I guess) and $T$ the number of ...
37 views

### 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 ...
68 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 ...
17 views

### 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 ...
25 views

### Cash Flow for Operating Cost, Sheldon Ross Question

In his An Elementary Introduction to Mathematical Finance, 3rd Edition book, pg. 55, Sheldon Ross has a question - A company needs a certain type of machine for the next five years. They ...
21 views

### How can you find change in working capital and capital expenditures without a balance sheet?

I'm working with the following information trying to work through a valuation exercise and I'm absolutely stuck. How can I find ∆WC and CAPX with this information?
32 views

### arbitrage proof question

prove the condition $D<R<U$ is equivalent to the absence of arbitrage: R = risk free investment rate of return. U and D are returns corresponding to the upward/downward price movements of a ...
66 views

### Pricing a Vanilla swap between coupons; What rates to use?

Vanilla Swap question. Entered into a 5Y fixed for floating HUF swap. Fixed is annual coupons, Float is semi-annual coupons. 1 month later I want to price it. I set up my future values for Fixed ...
66 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
51 views

### 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 asset ...
16 views

### 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) ...
29 views

### Calculation of IRR [closed]

How do we calculate IRR if I have an investment that allows me to buy into 10% of a company @1m and the first year is a negative cash flow of 200,000 but the subsequent years till year 10 is a ...
73 views

### Generating random yields

I would like to test different methods for fitting a yield curve, like the Nelson-Siegel, cubic splines etc. I would like to generate random yield to maturity data, that somehow reflects the common ...
41 views

### 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 ...
74 views

### BSM Model - Actual probability

Actual probability of exercise of put option under BSM model is: PD = N(-d2(u)) (using expected return of stock, u) Risk-neutral equivalent is ...
70 views

### 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 an ...
74 views

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### Local volatility grids - Monte carlo - Implementation [closed]

I read the paper "Monte Carlo pricing with local volatility grids" (authors: D.F. Abasto, B. Hientzsch and M.P. Kust) and I would like to know if anyone on this forum had a chance to implement it as I ...