# All Questions

5k views

### When the Inverse Correlation between the SPX and VIX breaks down

As we all know the S&P and its implied vol, the VIX, generally move in opposite direction. To a large extent, the correlations makes sense. IV is one of the main drivers of the price of options, ...
217 views

### What's the first time-integral of price called?

In general I'm wondering about the names of time-derivatives of price. E.g. in physics the first few time-derivatives of position are: f(x) = displacement f'(x) = velocity f''(x) = acceleration ...
274 views

### Quality of GAINDATA timestamps

Does anyone have a view on the quality of the timestamping of GAINCAPITAL's free historical data. There is non-FX data there and I wonder if the timestamps are in sync?
223 views

### Desired portfolio volume

I am working on a toy model, in part of which an investor has to decide (based on some utility theory) how much money to invest in a given portfolio. For simplicity, assume that the portfolio is ...
735 views

### R Outputs from Johansen test. Linear combination still not stationary?

I am trying to see if house price is cointegrated with interest rate, per capita income and rental vacancy rate and got the following output from ca.jo in R: ...
152 views

Let you have the following mean reverting process: $\text{d}x_{t}=a(\theta-x_{t})\text{d}t$, where the diffusion term is absent, that is this process is not stochastic. Let you know the value of $\... 0answers 162 views ### Is it random walk? I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3): $$cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0$$ for all$f(\cdot)... 1answer 182 views ### Add transaction costs to prediction An algorithm predicts price movement by some certainty and it invests proportional to the confidence level. Predictions range from -1 to +1, -1 meaning sell for a value of ... 1answer 356 views ### What are the differences between CFD and SSF? What are the intricate differences between SSF and CFD? The similarities are that both take into account interest and settled daily thus looks more or less the same pima facie. 4answers 734 views ### How to prove that markets are incomplete under the Stochastic Volatility model? Has anyone ever formally proved that Markets are incomplete under the stochastic volatility model? I know that if there are more random sources than traded assets, then the market is incomplete but ... 0answers 176 views ### Market Exposure and Hedging Normally the Market exposure associated with your stock/portfolio is your delta for that stock/ portfolio. Basic idea of hedging involved here is buying/selling respective futures depending upon ... 0answers 104 views ### Overnight Index Swaps Just a very quick general question regarding the OIS market. Is it common place on termsheets to state a PV Notional and additionally a FV notional, if so what is the purpose of this and does market ... 1answer 914 views ### Profiting from price discrepancies between stock exchanges Here is an interesting video by Nanex: http://www.youtube.com/watch?&v=rB5jJuMP84E Perhaps some of you have already seen something similar. It is an animation of the order routing. It shows 1/2 ... 1answer 204 views ### Grokking Stochastic Oscillator for Stocks In software, I'm trying to implement the Stochastic Oscillator (see here), and I'd like to figure out a few things. Let's say I use standard inputs 14, 3 and 3. If my 14 is for intraday ticks, what ... 0answers 138 views ### How to simulate a Geometric Binomial Process with state/tie dependent increments? I want to simulate a geometric binomial process with state/time dependent increments. So the model is given by \begin{align}R_t=\frac{X_t}{X_{t-1}}\end{align} \begin{align}P(R_t=u)=p(X_{t-1},t) \... 1answer 299 views ### Covariance of brownian motion and its time average It's a question pertaining to the correlation of a log asset process (following BM) and its time average, to put it into form, if $$X(t)=\mu t+\sigma W(t)$$ then$\bar{X}(t):=\frac{1}{t}\int_0^tX(... 1answer 515 views ### Distribution of profit/loss for retail traders in FX I've heard that 90% of retail investors in FX lose money. I want to analyze this in more detail. Question: Is there some literature that describes the statistics of profit/loss for retail traders in ... 0answers 58 views ### mean variance minimizer I need to use the lagragian multiplier to find the minimal martingale measure from the set of equivalent martingale measures. i formed the lagragian as L =$L(u(t,S(t)),\lambda) = E_\mathbb{P}[\...
292 views

Here I have this question (i) state Ito's formula (ii) hence or otherwise show that $\int^t_0B_s dB_s = \dfrac{1}{2}B^2_t -\dfrac{1}{2} t$ (iii) define the quadratic variation $Q(t)$ of Brownian ...
153 views

### pricing of heat rate-linked derivative

It's a simplified model. Suppose $U_t$ is a random variables subject to Lognormal($x_1$, $z_1^2$)distribution. $V_t$ is a random variables subject to Lognormal($x_2$, $z_2^2$)distribution. Suppose ...
2k views

### Parameter estimation of Ornstein–Uhlenbeck and CIR processes

I would like to estimate Ornstein–Uhlenbeck process' parameters via Kalman filter. My process is the following one: $\text{d}x_{t}=\alpha(\theta-x_{t})\text{d}t+\sigma\text{d}W_{t}$ I'm interested ...
2k views

### RQuantLib, Hoadley and Bloomberg YAS: fixed rate bond pricing differences?

I'm trying to price a fixed rate bond one year from now on. The bond is the PEUGOT 7 ⅜ 03/06/18, whose ISIN code is FR0011439975. I'm using such a specific example because in this way everyone can ...
572 views

### knowing the order of GARCH model

I want to ask if there is a situation to know the order of GARCH(p, q) from the result. For example, in the case of AR(p), one can know the value of p by plotting pacf(). In case of MA(q), one can ...
1k views

### backtesting options strategies in R

I would like to backtest an options strategy in R. I require the ability to delta hedge and rebalance to options in the portfolio at different frequencies (daily, monthly,etc.) What packages are the ...
705 views

### How does the CME set margin requirements on commodity Futures

I am trying to model margin requirements on various commodity futures, however it doesn't seem that the CME has released the formula they use to set these performance bonds. I am sure that they use ...
500 views

### When calculating CIP between EU and US, which interest rates data to use?

I am wondering which data to use to test the Covered Interest Rate Parity between Europe and the United States. Recap that for the CIP to hold, it should mean that F/S = (1+r)/(1+r*) where F = the ...
441 views

### Proxy for Expected Economic Growth

Can anyone help me understand how expected economic growth is usually measured? I've read several papers that talk about using breakeven inflation as a proxy for expected inflation, and then the ...
6k views

### Forecasting using rugarch package

I want to do one step ahead in-sample forecasts. My data can be found here. This is just a data frame with the date as the rownames. I specify my model and do the fit and show the plots with ...
4k views

### Best way to store hourly/daily options data for research purposes

There are quite a few discussions here about storage, but I can't find quite what I'm looking for. I'm in need to design a database to store (mostly) option data (strikes, premiums bid / ask, etc.). ...
1k views

### How to normalize technical indicators for machine learning?

I'm using around 130 technical indicators for 100 different companies. Each company's stock price moves in a different range, see FTSE 100. In addition, each technical indicator moves in a different ...
884 views

### Risk-free rate for ex-post evaluation of investment strategy

When evaluating the strategy ex-post using e.g. Sharpe ratio, what should one use as the risk-free rate? Let's suppose I am using a 1Y sample of weekly returns, sampled between 2012-01-01 and 2012-12-...
967 views

### Relationship between European, American options volatility

Suppose, if the price of a European option (say a put) can be shown to be monotone in volatility (say for any maturity), does it follow that American options has to be monotone in volatility? ...
344 views

### Rate Distortion Minimization in a Python Clustering Algorithm

I'm attempting to solve for $\hat{k}$ clusters, such that the rate distortion is minimized, as described here, however, the answers that I am getting from my algorithm are not following the "Jump" ...
515 views

### Hedging credit risk using Put equity options

I am looking for some paper or similar which deal with this topic: hedging bankruptcy on firm's debt using Put options written on that firm's equity price. This should be based on the assumption that ...
436 views

### How to test the efficiency of Exponential Moving Averages as a trading startegy? [closed]

I would like to know how I can test the efficiency of Exponential Moving Averages when it comes to forex trading. Can i have any papers that point to the efficiency of this strategy? Thank you. :)
294 views

### Event studies using revenue data vs. measuring abnormal returns

This may be a silly question, but does there exist a methodology for examining the impact of "events" on companies that are not publicly traded? I suppose it would look at abnormal revenues rather ...
584 views

### rugarch: Joint estimation leads to different results

I want to fit an ARMA-GARCH model to my data using rugarch package in R. First of all, I look at the acf and pacf: ...
309 views

### Quant/Stat Factor Performance Website/Distribution?

Does anyone know of a decent quant/stat factor website, distribution(public or private) or publication that tracks performance of "many" of traditional quant/stat factors? By that I mean would show ...
3k views

### How to implement Maximum Diversification in R?

I am trying to code up the optimization problem for Max Diversification Portfolios. The main problem I am having is properly translating the objective function in to code and port it in to the ...
1k views

### Analyze raw tick data

I'd like to work with raw tick data and naturally this data is unevenly spaced (for example, a couple of quotes are at the same second etc.) For example ...
889 views

### Is vega of Black-Scholes European type option always positive?

We assume we work in the risk-neural measure with a stock which pays no dividend and a continuous discount rate. For PUT and CALL only: can someone please clarify if what I said is correct? The ...
87 views

### Portfolio insurance with a coherent risk measure (CVaR)

I would like to analysis of portfolio insurance under a coherent risk-measure method (CVaR), How can I achieve that? Is there a way to turn the problem into a linear programming problem? or to ...
97 views

### What does it mean to adjust for short-run liquidity in finding risk-free rate of return

Risk-free rate of return should equal the expected long-run growth rate of the economy with an adjustment for short-run liquidity. What is meant by the last phrase, "adjustment for short-run ...
469 views

### Interpolate option volatility in delta space in R

I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
431 views

### BSYM for historical tickers

When looking through Bloomberg's BSYM data ADR and Common Stock data (5/2/13), I was able to find the ticker symbol 'V' associated with Visa but was unable to find any record for Vivendi, which I ...
547 views

### How to determine ratios for mean-reverting basket

Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model: \$\log(A)=\beta_b*\log(B)+\beta_c*\log(C)+\...
200 views

### RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?

Please, consider the following functions from RQuantLib package: FixedRateBond() ...
1k views

### Bond curve extrapolation

What are the best methods to extrapolate bond yields from an existing curve that doesn't extend quite this far? For example, how would one come about finding a theoretical bond yield for a 40 or 50 ...