6
votes
3answers
463 views

Testing the validity of a factor model for stock returns

Consider the following m regression equation system: $$r^i = X^i \beta^i + \epsilon^i \;\;\; \text{for} \;i=1,2,3,..,n$$ where $r^i$ is a $(T\times 1)$ vector of the T observations of the dependent ...
6
votes
3answers
299 views

Replicating portfolio and risk-neutral pricing for interest rate options

For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
4
votes
3answers
151 views

multiperiod optimization using R

I'm interested in multistage optimization problems. Are there any good R packages around to solve such problems over time? I'm not at all an expert in it, so maybe someone knows a good paper / lecture ...
3
votes
3answers
846 views

Library for interactive financial charts

For my recent project I am looking to build a software capable of visualizing financial charts in a dynamically and interactive matter. The workflow is as follows: I gather data from my data ...
3
votes
3answers
143 views

How to work out weights for a portfolio based on an inverse ratio with positive and negative values?

I am trying to work out how to determine weights for the assets in order to form a portfolio. The ratio I am using is EV/EBIT, hence the smaller the better. The problem is I don't know how to handle ...
2
votes
3answers
166 views

Platform for Quantitative equity portfolio

What are the most popular platforms used for quantitative equity portfolio management/research? I've only used Barra so far for their factor models. Is there any specific feature or model you think ...
0
votes
3answers
78 views

What makes investors risk averse?

There are some regularly-occuring events that coincide with a rise in the implied volatility of an asset. For example, in advance of an firm's annual earnings report, it is typically expensive to buy ...
0
votes
3answers
150 views

How to create a model or formula for evaluating trade opportunities

I want to build a formula to produce a score for a potential trade based on 4 variables, time, return, liquidity of security, and probability of failure. For a set of potential trades I first ...
0
votes
3answers
131 views

How does logging effect Quickfix performance?

I am using .net/c++ version of quickfix. How does logging effect Quickfix performance? If I disable logging to file, can it help to increase performance of quickfix? Thanks,
5
votes
2answers
1k views

How is the default probability implied from market implied CDS spreads for CVA/DVA calculation?

From point 38 on P.17 the default probability can be implied from market implied CDS spreads. "Macro Surface" method is mentioned, but I cannot get any clue of what it is? Where do I get the acedemic ...
3
votes
2answers
191 views

CDS Spread and Par Bond Yield Spread

It is claimed that the credit default swap (CDS) spread should approximate the risky par bond yield or coupon rate spread from the riskless bond on the same entity. This comes about when we assume ...
3
votes
2answers
212 views

Why are interest rates and stock prices positively correlated?

If I've been looking at graphs correctly, there is a strong positive correlation between stock prices (or P/B values) and interest rates over time, i.e. P/B values tend to be high when interest rates ...
3
votes
2answers
917 views

How to use Merton model to calculate default probability with monthly stock prices?

I want to calculate the estimated default probability with only given data the monthly returns for the last 20 years, the risk-free rate ($R_f$), equity value (EV) and the face value of debt ($D$). My ...
3
votes
2answers
413 views

Volatility of a rolling window strategy

What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
2
votes
2answers
209 views

How to price a bond without paper during interview?

I heard that this kind of questions appear a lot in the interviews. Here is one I saw from Galssdoor: Price a bond with coupon rate 3%, yield 9% and maturity 10 years. What is the typical way to do ...
2
votes
2answers
129 views

Logic behind Gordon Growth Model in a DCF analysis?

Sorry, I wanted to ask this on the finance/money forum, but they don't support LaTeX there. Let's say we are valuing a company using the DCF methodology with a 5-year projection period. We project ...
2
votes
2answers
111 views

Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t $ ...
2
votes
2answers
122 views

american option and cash dividends

Can someoe help with this : What is the precise arbitrage argument demonstrating that the price of an american option should be continuous around an ex-dividend date? Thanks
2
votes
2answers
311 views

What open source trading platform are available

I would like to compile a list of open source trading platforms. Something that would give an overview and comparison of different architectures and approaches.
2
votes
2answers
211 views

Pricing an american style option on a bond future

what is the good way to pricing american option on bond future? From bonk fixed income securities 3rd by Tuckman, I understand how to pricing European option on bond future, but I still have no clue ...
1
vote
2answers
63 views

Relationship between Beta and Standard Deviation

I was doing some financial analysis on two firms in the coffee industry. After calculating Beta and Standard Deviation for both firms, I seem to have stumbled on some weird phenomenon. It appears ...
1
vote
2answers
71 views

is there an accepted method for quantifying risk of inaccuracy of nascent trm systems?

Have a somewhat meta question here. I am part of a trading risk management implementation project. I also manage day to day risk reporting to management and the trading desks. Our implementation was ...
1
vote
2answers
190 views

Why is that a risk averse consumer buys the optimum insurance when there is actuarially fair insurance?

I think I understand the fact that when marginal utilities of the same function are equal (a consequence of the actuarially fair insurance), the independent variables in it must be equal -- right? But ...
1
vote
2answers
199 views

List of 2008 NACE Rev 2 codes

Am looking for a simple list of the NACE 2008 rev 2 codes (The European classifications for economic sectors). The official publication is here, but is there an easily accessible list of the actual ...
1
vote
2answers
2k views

How to normalize stock data

Please advise how can i normalize stock prices. Recently, I've been using such formulas: Log prices = Ln(Close(t)) Close(t)-Mean (Close(t)-Mean)/(StdDev) Ln(Close(t))-Mean Is there any other ...
1
vote
2answers
1k views

Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades

We have built an algorithmic trading software and need to calculate the following parameters for each position in our portfolio. Average Price Cost Realized Profit & Loss Unrealized Profit & ...
0
votes
2answers
32 views

Data provider for daily futures settlement prices

Is there a data provider that has historical daily settlement prices for download? I'm interested in a provider that spans multiple exchanges.
0
votes
2answers
111 views

API-based equity screeners?

I know there are APIs from different brokers that allows you to trade and also obtain information about specific companies, but I wonder if there are equity/asset screeners that are API-based and can ...
0
votes
2answers
127 views

Are there providers of delayed market depth data (DOM, Level II, Order-by-Order, etc)?

I have market depth data visualization software, and I want to create a free version for introduction. As far as I know, exchanges allow to distribute their data for free for the end-users, but only ...
0
votes
2answers
157 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, ...
-1
votes
2answers
779 views

Bloomberg interest rate interpolation

I have question about the linear interpolation of interest rates. I am unable to reconcile the Bloomberg methodology for calculating risk-free rate between maturities. In theory it is a straight-line ...
-1
votes
1answer
115 views

Converting time series returns into euro

I am trying to convert various series of returns into one currency (euro). I saw from aprevious post that soemone suggested using conversion factors, where would I find these? Also, given that the ...
-2
votes
1answer
103 views

Elliott wave priciple applied to any Time Series

I'm strongly interested to computing Elliott Wave to any given Timeseries. Does anybody tried? Is there any phython library to do that? I'm looking for an algorithm taht if I give to it a time ...
-3
votes
1answer
90 views

What's the disadvantage of ARMA-GARCH model?

I want to ask why ARMA-GARCH is more and more popolar, and what's the advantage of this model.

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