# All Questions

135 views

### How is a quanto priced?

How would one price a derivative denominated in EUR that pays in USD?
464 views

### Oscillatory time-series forecasting

I was wondering if this mean(160)-reverting/oscillatory time series "SUM" can be considered chaotic & forecastable to some extend short-term? ...
78 views

Why does dividing daily returns by daily range eliminates fat tails and results in an (almost) gaussian distribution? And how could that distribution be exploited to enter trades?
306 views

### VaR backtesting with overlapping time intervals

Of course the issue here is dependence: can it be removed or accounted for (in independence tests too, which of course would be troublesome)? There's a lot of literature on regression in this setting, ...
205 views

### Modeling asset performance to Bitcoin revenue

I'm attempting to model asset performance to Bitcoin revenue, which is a driving force in the Bitcoin community. Question Is there any model, or research being done that tracks "hashes per second" ...
75 views

### Neglect the positive values in negative interest rates modelling?

The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads. Could their volatility / correlation ...
138 views

### Is there a general format for various sources of futures market-data?

I am developing a market-data engine that receives market-data from different futures exchanges. So I need a general format to deal with sources from different exchanges. Protocols like FIX only ...
89 views

### how to identify similar assets based only on a few price samples

Using quantitative finances techniques on limited information, how might one go about finding similar(highly correlated) assets whose public information is available? The only data offered on a list ...
53 views

### Performance of 1X0/X0 funds vs. traditional benchmarks?

Some years ago there was a proliferation of new products touting the ability of active managers to take short bets on securities: 130/30 funds, 150/50 funds, and the like. What is the empirical ...
5 views

### How does a stop loss affect the P/L of a trader

In his book 'Dynamic Hedging', Nassim Taleb writes: Problem: A trader is given a stop loss of 100,000 in any given month (he would have to close his books and go home until the end of the month). ...
26 views

### Calculating R Squared in this Problem

I am attempting to complete a homework problem and surprisingly, I am completely stumped. In one economy the risk free rate is 5%, the risk premium is 7%, and the volatility of the market is 18%. A ...
14 views

### johansen cointegration test eviews interpreation

I am not sure whether i am interpreting the cointegration test correct. This is the test result : Because of the probability of the test i understand that my series are cointegrated of order 2. ...
10 views

### How do you calculate the asset drift rate in the Merton model? (used in N(-d2))

Can I replace it with the internal rentability rate? I only have the financial statements and some market data, but I can't find the expected returns anywhere. The goal is to calculate the probability ...
22 views

### Compare performance buy-and-hold strategies after stock-split

QUESTION: How should I analyze the statistical significance of the difference between two buy-and-hold strategies (or the relative performance) when the samples are not independent? Background: I ...
28 views

### How to create a basket of currency pairs with the lowest correlation in R?

My strategy is designed to buy and sell all assets of a universe and rebalance periodically. It goes either long or short. To limit risk exposure to a single currency I would like the assets in the ...
17 views

### Can Yahoo Finance API work for non-US markets?

I am trying to fetch ticker prices and historical prices for major Asian exchanges (HKSE, SGX etc). I am trying to use yahoo finance API, but it is not returning any data for even SingTel, which is a ...
35 views

### High frequency price forecast model ARMA GARCH or another?

Can you reccomend model for high frequency data (1 second and less) (returns and volatility forecasting)? Most papers use ARMA, GARCH etc in 1 minute and lower time frame. PROBLEM ARMA does not know ...
22 views

### After finding the pair, what next?

Had a question on how do I go about doing pairs trading. I have found some cointegrated stocks. Now the question is what next. From what I understand if two pairs are cointegrated, the distance ...
32 views

### Clean EOD global Equities data provider for backtesting investment strategies

I'm trying to find a good source for global equities for EOD data (historical and forward basis), currently using Bloomberg's back office data, but it is very hard to normalize it for corporate ...
31 views

### Use of implied vol averages for expected underlying returns

When computing a single implied volatility value for a particular asset for use in cross sectional regression models, using daily end of day data. There are a few methodologies I've seen to used do ...
26 views

### Test for NonLinearity

I am doing a regression, returns of stocks(cross section of stock returns at a given time) against some fundamental factors. And look at the residuals to get a normalized view when trying to rank the ...
18 views

### Choosing an optimal dependent variable, regression/model fitting

When I select a certain target variable and model that with either linear regression or some other technique, say naive bayes, I hope to finally arrive at a model which has statistical significance, ...
33 views

### Zero coupon bond pricing under Extended Hull & White

How do you price zero coupon bond in extended Hull & White model by solving the Bond Pricing Equation??
39 views

### How can I convert Yahoo Ticker Symbols into ISIN Codes?

I have a list of all Yahoo Ticker Symbols and I want to convert them into ISIN Codes. I have been researching and found out that finance.yahoo in the US does not ...
19 views

### Multinomial Representation Theorem

In the context of pricing models, the Binomial Representation Theorem (BRT) tells us if we have a binomial price process $S$ that is a $\mathbb{Q}$-martingale (MG), and any other $\mathbb{Q}$-MG $M$, ...
40 views

### Regressing NYSE returns: Lagged intercept term & efficient market hypothesis

By performing the following OLS time series regression, $y_t$ = $\beta_0$ + $\beta_1$*$y_{t-1}$ + $\beta_0$*$y_{t-1}^2$ + $\epsilon$ I cannot reject the null hypothesis that b1=b2=0. However, ...
49 views

### Cointegration and variance of time series

Given that $X_t , Y_t$ are two cointegrated random processes, what can we say about the relationship between variance of the two increments $var(X_{t+h}-X_t)$ , $var(Y_{t+h}-Y_t)$ for a given ...
33 views

### Term Structure and short rates

If I have a term structure/yield curve given by: $$f(t, T) = f(0, T) + σ^2t(T − \frac{t}{2}) + σB_t$$ and want to find the short/spot rate $r_t$, is this simply: f(t,t) = f(0,t) + ...
65 views

### What are the main market anomalies/inefficiencies detected in quantitative finance?

I wondered about the existence of a complete list of the anomalies detected in quantitative finance. Generally, a market anomaly or inefficiency is a asset price and/or rate of return distortion on a ...
15 views

### Pricing formulas for affine stochastic volatility jump-diffusion models

Does anyone know a reference where I can find the pricing formulas for vanilla calls in the affine stochastic volatility jump diffusion class of models such as SVJ and SVJJ? I am looking for ...
15 views

### Value of sequential mutually-exclusive options (A variant on the Secretary Problem)

How much should you offer a potential hire in a signing bonus? Imagine you are interviewing a list of candidates for a particular job. Each candidate has a "lifetime value", and probability of ...
21 views

### FX rollover swaps rates based on LIBOR rates

I am trying to calculate FX swaps overnight rates based on LIBOR rates Example: Libor rate for TRY crosses is 12.00 Libor rate for USD crosses is .19 How do we get to these number? USDTRY swaps ...
44 views

I am using the variance ratio test to check whether my sequence is mean reverting in that test there is a parameter n, How in general I choose this n? or what is the meaning of this parameter? ...
14 views

### Stochastic Optimal Control for ratios

Do you know any good papers on methods of Stochastic Optimal Control and Hamilton-Jacobi-Bellman(HJB) for optimization of different ratios(Sharpe, M2, Sortino, Sterling, etc.)? Meaning that using ...
25 views

### Constant Conditional Correlation GARCH (1,1)

I am a beginner in R and my econometrics background is not very sound either. I want to build a constant conditional correlation GARCH (1,1) model in R and I found the function, the description of ...
20 views

### Annuities problem

First problem is like this: loan amount: 20,000,000.00 First six months: There is no payment but there are interest (grace period) Next six months: payment of 600,000.00 Since 13 month: payment of ...
25 views

### “For any random variable $X$, someone will be willing to buy and someone to sell a financial instrument, whose final payoff is $X$.”

we will assume that for any random variable $X:\Omega\rightarrow\mathbb{R}$, some investor will be willing to buy and some investor will be willing to sell a 'financial instrument' whose final ...
12 views

### Market risk calculation for Fixed income position

I have come across a somewhat strange formula (atleast to me) for Value at Risk calculation for a Bond position. This typical formula looks like below: PnL = Beta * "Some industry Credit spread" * ...
42 views

### Where do I find a good data model for CDS

Tasked with implementing software that deals with CDS's what is the best place to get the data fields required to properly represent one. Found the definition in FBML but seems somewhat excessive: ...
25 views

### comparison of speech signal processing and financial data

I have read that in speech signal processing analysis when voice is segmented in brief temporary segments the series segments transitions from being non stationary to stationary. My question is if ...
38 views

### Binomial function use in Bezier smoothing

I am using the Bezier method to smooth option volatility curves, which utilised the binomial distribution. Is someone able to clearly explain the interpretation of the binomial distribution in the ...
21 views

### Hypothetical actuary working with a life company

If you are an actuary with a life company, how would you show that your capital assessment complies with the rules of Solvency II (or related regulations) that stipulate the minimum of capital that ...
38 views

### Creating correlated Brownian motions from independent ones

This is the exercise from book "Stochastic Calculate for Finance Volume 2", Page 199. Let $(W_{1}(t),...,W_{d}(t))$ be a d-dimensional Brownian motion. $(\sigma_{ij}(t))_{m\times d}$ be an ...
11 views

### use of recurrence quantification analysis for deterministic signal identification and classification

The recurrence quantification analysis (RQA) is a method of nonlinear data analysis which quantifies the number and duration of recurrences of a dynamical system presented by its state space ...
8 views

### How to calculate margin costs for a brokerage account?

I wanted to calculate total margin costs for an account that started with 5,000 cash and held for 6-months? I managed to get some sample rates online . My assumption is that I would borrow another ...
27 views

### Value-at-Risk - Currency Swap

Can someone explain to me how to calculate the VaR (delta-normal-method) for a Currency Swap? Thanks in advance. Regards Alexander
28 views

### Distribution of running maximums of a log normal process

I've been searching for quite some time and would appreciate any guidance! What I'm looking for is the distribution of running maximums for a log-normal process. If anyone is familiar with any ...
25 views

### Difference between Risk avoidance and Risk transfer

I was hoping some could explain the two terms namely, risk avoidance and risk transfer. Also, can a risk be avoided by transferring it?