0
votes
2answers
164 views

What are some examples of non-solvable SDE where Monte Carlo discretization is necessary

Reading Glasserman - "Monte Carlo Methods in Finance" it says in the introduction to Chapter 6 - Discretization Methods, that moste models arising in derivatives pricing can be simulated only ...
0
votes
2answers
191 views

Geometric Variance

If the arithmetic mean is: $ \frac { \Sigma (x_i) }{n}$ and the geometric mean is $ (\prod (1+x_i) ) ^{1/n}$ The arithmetic variance is $ \frac { \Sigma(x_i-\mu)^2 } {n} $ then what is the ...
0
votes
2answers
971 views

Bootstrap yield curve with QLNet / Quantlib

I am trying to grasp QLNet (C# version of Quantlib, all the functions of Quantlib have the same name and work the same way, so if you just know Quantlib, you can still help me), especially for pricing ...
0
votes
1answer
69 views

Floating-rate bond

How can I extract expectations about future rates from prices of floating-rate bonds? Please, give reference to any articles, if possible. Thank you in advance.
0
votes
2answers
172 views

Countries and/or exchanges which don't allow algo-trading

I am doing a research paper on the effect of algo-trading on capital markets. In order to do this, I plan to do an OLS comparison of Countries and Exchanges who ban algo-trading platforms and those ...
0
votes
1answer
94 views

Briefly stated, why does the function N(x) appear in the European call option pricing model?

I'm aware of the the mathematical formula for the price of a European call option on a stock however I'd like to think about it in an intuitive way.
0
votes
5answers
4k views

Which library shall I use for time series analysis in Java?

I'm looking for a library to do some time series analysis in Java but I can't find anything suitable. I've found plenty of libraries such as Math3 of JSAT but there's much I can you for my problem. ...
0
votes
3answers
190 views

Divergence between binomial pricing and monte carlo simulation for vanilla european call?

I notice a divergence in my own code, but it's evident even in public code: http://www.thalesians.com/finance/index.php/Knowledge_Base/Finance/Option_Pricing_in_Python_and_Simple_English Pricing a ...
0
votes
3answers
96 views

Why is it enough to know the expected present value of cash flow in risk-neutral framework to price derivatives?

Wilmott book states that its enough to know the expected present value of all cash flow in risk-neutral framework to price derivatives. As I know, to obtain arbitrage-free market we need our ...
0
votes
4answers
327 views

Intermarket analysis - related time series?

I'm about to embark on training a neural network on daily forex data, with a view to obtaining a predictive network. I'm also interested in using data other than the forex currency pair data itself, ...
0
votes
1answer
61 views

CAPM as pricing formula

P - price that the asset was purchased. Q - price that it was sold P = Q/(1+r+B(R_m - r)) What is the financial meaning of denominator. Thanks for help.
0
votes
3answers
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 ...
0
votes
2answers
233 views

Disclosure of the liquidity provider identity in ITCH

If you look into the description of Nasdaq ITCH data, you see two types of order entries in the book: Message of Type A and F. Under type F, you will see the identity of the market participant (MPID). ...
0
votes
2answers
290 views

How to compute $\mathbb{E} \left[ (W_s + W_t - 2W_0)^2 \right]$?

The solution to the SDE $$dx_t= -kx_t dt + cx_t dW_t$$ is $$x_t = x_0 e^{\left(c - \frac{k^2}{2} \right)t}e^{-k W_t}$$ with mean $$\mathbb{E} \left[ x_t \right] = x_0 e^{\left(c - ...
0
votes
1answer
73 views

how to extract moments of GB from moment generating function?

I'm searching for the moments of geometric brownian motion using the gmm optimization program. the aim is to make the process y(t) of returns follows a normal distribution Are there any packages in ...
0
votes
2answers
284 views

Stat Arb Equity Pair Position Trigger

I am new to pairs trading and am in the process of constructing the code for backtesting a basic pair trading strategy. While I understand the basic idea behind the pair trading strategy, I am having ...
0
votes
2answers
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 ...
0
votes
1answer
131 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 ...
0
votes
2answers
99 views

Intangible assets as underlying for Futures contracts

How is it possible for a Futures contract to have an intangible underlying? For example, to my knowledge, there exist Futures that have interest rates as their underlying, come delivery date, how is ...
0
votes
1answer
192 views

Cloning Return Streams

How would one go about cloning/replicating returns of a hedge fund or a strategy. That is given a return series of the object to be clone, is it possible to decompose return and reconstruct another ...
0
votes
1answer
706 views

Why is delta-hedging of ATM options near expiry difficult to do? [closed]

Can someone explain to me why the delta-hedging of ATM options near expiry is difficult?
0
votes
1answer
419 views

Does an option's price “ratio” with the underlying security price?

I'm trying to understand option pricing better. Let's say security ABC is \$40, and a 38 PUT option with 40% implied volatility (and 90 days till expiration) is priced at X. If security ABC then ...
0
votes
2answers
1k views

Ultra-High Frequency Trading Help [closed]

Im putting together an Ultra-High Frequency desk and need to answer the following questions for ordering some rack servers to process about 2 GB of data per second. If anyone has worked at a HFT desk ...
0
votes
1answer
46 views

how to derive critical values for augmented Dickey–Fuller test (ADF) using Monte Carlo method?

Can anybody explain in simple terms how the critical value of the ADF test can be derived using Monte Carlo simulation?
0
votes
1answer
32 views

Does the starting currency matter in triangle arbitrage?

Say I have an FX arbitrage opportunity by doing a transaction like: EUR -> USD -> YEN -> EUR It seems to me like the (exact) same profit can be realized by starting the transaction in USD and doing: ...
0
votes
2answers
74 views

Accuracy Rebonato Swaption Approximation Formula among Different Strikes

Can somebody explain me if the Rebonato swaption volatility approximation formula is accurate for only ATM strikes, and if yes why? Can it also be used for ITM and OTM strikes? My foundings: Let $0 ...
0
votes
2answers
91 views

The Difference between Notional and Par Value of a Bond

I have reached a confusing dilemma regarding the par and notional values of a bond. I have been told that the par value of a coupon bond is $100. However, the notional value of the bond is ...
0
votes
1answer
58 views

When and how to use RNN for stock analysis or trading

I am learning about neural network and created some small networks in feed forwarding network myself. I was curious about Recurrent Neural Networks (RNN) and read some papers about RNN in trading. The ...
0
votes
1answer
33 views

Closed-form solution to optimal single assset position sizing with predicted returns

Say that I observe a predictor $w_t \sim N(0,\sigma_1)$ for the returns in a single asset over the next time interval: $$ r_t = \alpha w_{t-1} + z_t $$ where $z_t \sim N(0,\sigma_2)$ is unobserved ...
0
votes
1answer
98 views

Calculating half life of mean reverting series with python

I am currently attempting to calculate the halflife of a mean reverting series using python programming language and the theory of the Ornstein–Uhlenbeck process. I have a series which when plotted ...
0
votes
2answers
40 views

How to interpret the movement of stock index futures, in regards to regular market movements

In the hours before the stock exchanges open for the day, financial news reporters often discuss the latest developments in stock index futures. I'm curious how to interpret the developments they ...
0
votes
1answer
44 views

ACT/360 day convention in swap pricing

The floating leg of a USD swap has present value $$ PV = \sum_{i=1}^N \delta_i f_i p^d(t_i) $$ where the $\{t_i\}$ are the floating leg payment dates, $\delta_i$ is the accrual fraction between ...
0
votes
1answer
58 views

Payoff of a butterfly c++

I would like to price options (call, put,, butterfly) with monte-carlo method, but actually I need the expression of the butterflay payoff; Could you ^please help me !
0
votes
3answers
102 views

Put-Call Parity Application

In the binomial model, how that the Delta of a call option $\Delta^{call}$ and the Delta of a put option $\Delta^{put}$ with the same maturity and strike satisfy $$\Delta^{call}_t - \Delta^{put}_t = ...
0
votes
1answer
64 views

What is the formula that determines when VIX futures expire?

Or a source that will allow me to just get the list of dates into a program, I'm trying to do this in python but I want it to be able to figure out the next expiration automatically, or something like ...
0
votes
1answer
79 views

Open interest and short selling

Open interest of SPY: https://finance.yahoo.com/q/op?s=SPY+Options If someone sell short a contract the open interest adds up or down? The open interest on yahoo finance is a reliable Information of ...
0
votes
1answer
110 views

Price of call/put is convex in $K$ (strike price)

Let $\lambda\in(0,1)$. Then $$C(T, \lambda K_1 + (1 - \lambda)K_2, S, t) \leq \lambda C(T, K_1, S, t) + (1 - \lambda)C(T, K_2, S, t)$$ $T$ - the maturity $K_1$,$K_2$ - Strike prices $S$ - stock ...
0
votes
1answer
48 views

What is the source of the money in a leverage transaction?

An example: I have 1000 dollars, the leverage is 10x, and one stock is 10$. In casual situation I could buy 100 stocks, because I have 1000 dollars, but if I use the leverage I can buy 1000 stocks. I ...
0
votes
1answer
99 views

Log daily returns of multiple securities for multiple time period in R

I have dataset containing daily closing prices of 5413 companies from 2000 to 2014. I want to calculate daily log returns for the stocks as according to dates as log(Price today/Price yesterday). I ...
0
votes
1answer
101 views

How to estimate today's closing price?

I'm working on interday trading algorithm and I have a basic question: How can I estimate today's closing price? I need it to predict tomorrow closing price. Should I use the price few moments before ...
0
votes
1answer
81 views

What is the current state of microstructure/order book analysis?

I know it's a broad question, but I'm curious as to the current state of microstructure analysis, specifically whether there's anything 'actionable' that people have discovered. Would also be ...
0
votes
1answer
42 views

Why is the forward rate used for the underlying in Black's model?

Why is the forward rate suitable for being used as the underlying in Black's model? Thanks
0
votes
2answers
33 views

Why debit and credit impact differently on different type of accounts?

Here is a table that I found in one of the accounting book: ...
0
votes
1answer
60 views

For a Fama-Macbeth regression , How does one predict the returns based on the model?

Fama-Macbeth does a two-step regression i.e a time-series and cross-sectional regression and we estimate betas and lambdas, so how does one predict based on these parameters, which one to choose?
0
votes
1answer
72 views

Duration vs. Convexity Contradiction

A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM. A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
0
votes
3answers
174 views
0
votes
2answers
49 views

Definitive way of figuring out companies with multiple classes of stocks

Is there a definitive way of mapping tickers to companies for companies with multiple listed tickers? For example, GOOG and GOOGL are both Google (or now Alphabet), or BRK.A and BRK.B are both ...
0
votes
1answer
125 views

Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
0
votes
1answer
44 views

Why does the credit exposure of a forward increase with time

According to Gregory, the most obvious driving force behind credit exposure is future uncertainty. He characterizes the credit exposure of a forward contract as increasing with time; where exposure is ...
0
votes
1answer
53 views

Macaulay Duration: Duration for 2 bonds

Using Macaulay Duration, determine the duration of Bond B if Bond A and B (market value of 600 000 dollars and 400 000 dollars respectively) have a duration of 6.7 years and the duration of A is ...

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