# All Questions

94 views

### Increasing Market Depth

Are there any sure-fire ways to increase market-depth that people have experience with? Has much research been done/published on this subject?
167 views

### Example code for “Gauge Invariance, Geometry and Arbitrage” paper

This paper describes an algorithm for computing arbitrage opportunites using a gauge connetion. Has anyone written a python program or C++ or C# program that shows how to follow the steps outlines in ...
60 views

### Inferring the maximum drawdown depth for a different sample size

Let's say there's a trading system that has a 10 % chance of getting a maximum drawdown >= 50 % over a sample of ...
203 views

### reinsurance pricing equivalent to option pricing

Is it true that pricing a reinsurance contact is equivalent to pricing an option. Basically a reinsurance just cuts off the risk exposure of the insured institution to a threshold say $K$. So if we ...
276 views

### Has there been success in applying Mandelbrot's ideas to financial markets?

More specifically, I am looking for recent research papers that have harnessed Mandelbrot's ideas too successfully predict asset prices. I have read many papers about wavelets, and I would like to ...
177 views

### Portfolio optimization with absolute position constraints

I'm looking to optimize a portfolio maximizing expected return for a particular risk budget, but with absolute constraints on the individual instrument positions. I've been experimenting with QP, ...
431 views

### Definition of gearings, spreads and curve in RQuantLib's Floating Rate Bond function

Consider the RQuantLib package function FloatingRateBond(). This takes as inputs gearings ...
254 views

### What structural model does Reuters use for default probability?

When using Reuters, for each listed company there is credit tab that shows relevant information in terms of credit default. There is also rating class as well as one year default probability. It is ...
952 views

### Japan day count conventions

I am after a good comprehensive resource on Japanese day count conventions. By that I mean, is actual/360 or actual/365 used for pricing various options, forwards, futures, etc.
149 views

### Currency forwards implied interest rates

I am calculating implied interest rates using covered interest rate parity theorem. I am looking at the Australian US currency pair. When evaluating day counts, should I be using Actual/365 for ...
99 views

### How do I take an unbiased, sector neutral sample from a stock index?

I am looking to take a cross sector subset of a larger stock index universe. What steps to I take to assure that sector representation is as equal as possible to help smooth out my variance(while ...
124 views

### Black (1976) model: boundary conditions with non-convergence of spot and forward prices

Let's suppose we have a futures contract F in a market where the relation $$F(t,T)=S(t)e^{r(T−t)}$$ doesn't hold. What are the the boundary conditions for the derivation of the Black (1976) formula?...
5k views

### Seagull option strategy - clear example

It looks like the subject of seagull option strategy is not as clearly explained as for other strategies (butterly, bull,bear spread). Thus, can someone provide a clear example of what you buy and ...
433 views

### Bond futures - calendar spread pricing

I am looking on literature and models on pricing a bond futures' calendar spread. assuming the basket of deliverable bonds is the same and the ctd is the same, what are the factores determining the ...
105 views

Is there any good research on the price elasticity of trading in financial markets? Things like optimal fee structures and the like?
612 views

### What is the difference between the methods (listed in content) in pricing convertible bond?

To price the convertible bond, one of the models is the bond plus equity option method. That is, the value of convertible bonds is evaluated by finding the value of the straight bond and the value of ...
497 views

### VaR Calculation - Covariance matrix is not positive semidefinite

This is a basic question. I have three assets, equally weighted, and all the mutual covariances are -1. Then, the covariance matrix looks like - ...
596 views

### How to compute a sector's volatility within a portfolio?

Assume I have a large portfolio of equities spread across three sectors. I am attempting to compute the volatility of these sectors within the portfolio considering the cross correlations among the ...
1k views

### Covariance of a GMV portfolio with any asset

Why is that the covariance of a global minimum variance (GMV) portfolio in the efficient frontier with any asset is always the same?
465 views

### Black (1976) model: relationship between spot and forward prices

Does the Black (1976) model require the existence of the relation $F(t,T)=S(t)e^{r(T−t)}$? I studied the derivation of the Black-Scholes formula. However, although I know the Black formula, I've ...
100 views

### DCF of Arbitrary Dates Cash Flows

I am having a problem understanding discounted cash flows. I appreciate your patience and help. Lets say I have a bond that I want to price. ...
146 views

### how to extend lognormal model so that $\sigma$ is correlated to $\mu$?

Consider a log-normal model, $dx / x = \mu dt + \sigma dW$, where $W(t)$ is a Wiener process. Let's say $\mu$ and $\sigma$ change with time, slowly, so we note them by $\mu(t)$ and $\sigma(t)$. ...
711 views

### Testing Valuation, Size and Momentum (proprietary factors) from 1988-2013: No evidence of driving cross-sectional returns

I am currently testing whether three proprietary factors - Valuation, Size and Momentum - explain cross-sectional returns. A sample of 3000 securities was tested using Fama-MacBeth two-pass ...
477 views

### VSTOXX Implied Volatility Calculation

What is the industry consensus (if it exists) about implied volatility calculation for options on VSTOXX (OVS)? I've experimented with the following approach: Standard Black-Scholes VSTOXX futures ...
5k views

### relation between asset's and equity volatilities - merton model

In terms of Merton credit risk model need to find the initial value of counterparty's assets and the volatility of the assets. Both value are not directly observable thus we have to approximate them ...
7k views

### What is the difference between the Interactive Brokers demo account and a personal paper trader account?

I'm interested in testing my trading strategy using the Interactive Brokers API for Trader Workstation. A demo account is provided to play with TWS for free, but if I fund a real account I will be ...
109 views

### What is the difference between full and only futures?

If you look at instrument name for listed on various futures exchange you often see Gold Only1214 Gold Full1214 What is "Full" and "Only" mean? The price listed is the same and I cannot find a ...
856 views

### Interest only loan formula [closed]

Forgive me I am not good at economics, I have following values. amount I want to lend. the current bank interest rate. the amount of years the loan will be for Please tell me the formula to ...
207 views

### Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output

Let the usual state-space linear model (without constant term for the sake of simplicity): $y_{t}=\beta_{t} X_{t}+\epsilon_{t}$ If we use Gaussian Kalman filter to estimate $\beta_{t}$ we get $P_{t}$...