All Questions

85 views

Relation between IV and SD

In option pricing, volatility naturally appeared through the Black-Scholes (BS) model where it was a coefficient for the linear diffusion term $\sigma S\,\mathrm dW_t$, and as such represented the ...
50 views

Find the order selection in ARMA model (q & p )

I write a ARMA model in Matlab and before i calculate the predict value with the error i set the order selection (p,q) to some random value but how To determine the number of AR and MA lags
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Does the correlation of matrices have explanatory power when building a pattern recognition model?

I'm using 8 different variables (with daily observations) with the purpose to compare different months across the historical data. For that purpose I calculate the correlation between each month and ...
25 views

finance - using CAPM [on hold]

The risk-free rate is 4%, and the expected return on the market portfolio is 12%. Using the Capital Asset Pricing Model: a. What is the risk premium on the market? b. what is the required return on ...
106 views

Optimal Portfolios

In modern portfolio theory, one famous problem is the Markowitz mean variance optimal portfolio, defined by solving ...
9 views

finance using beta and std [on hold]

LGM Company has a standard deviation of 42% per year and a beta of 0.10. ACO Company has astandard deviation of 31% a year and a beta of 0.66. Which investment (ACO or LGM) would be safer for a ...
201 views

Is it possible to model general wrong way risk via concentration risk?

General wrong way risk (GWWR) is defined as due to a positive correlation between the level of exposure and the default probability of the counterparty, due to general market factors. (Specific wrong ...
131 views

Stress Testing Methods

I'm working on the following task: Given quarterly data: a time series representing the 1-year realized (10 years of data) rates of default on a portfolio of mortgages a slew of ...
90 views

A model to stochastic hazard rate and CDS spread term structure

I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at $s$, maturity $T$ and recovery function ...
39 views

is Sum of P&L equal to portfolio value

For a portfolio containing FX options, would the sum of P&L for each option be the portfolio value?
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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 ...
57 views

LMM. Calibration to swaptions by Brigo and Morini. Volatility of swaption that matures at T=0

I'm reading Brigo D., Mercurio F. Interest Rate Models - Theory and Practice (Springer, 2006)(ISBN 3540221492) and also a source article on LMM cascade calibration to swaptions by Brigo and Morini. I ...
10k views

There is a concept of trading or observing the market with signal processing originally created by John Ehler. He wrote three books about it. Cybernetic Analysis for Stocks and Futures Rocket Science ...
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Do people hedge with leveraged ETFs intraday? How?

Seems that the answer to the first part should be yes, but haven't seen any references or examples. E.g. suppose I want to hedge XLF position with FAZ. Do people use close to current returns, or just ...
43 views

Calculating short/long order percentages?

I have a feed in real time that lists the ask and bid orders. Each order consists of a value and a quantity. I want to calculate the percentage of short orders from the total orders in terms of ...
33 views

General elements of a MFE helpful for going into HFT? [closed]

I know that Financial Engineering Masters programmes can vary, sometimes significantly, in terms of content covered, but I was wondering what topics generally covered in these programmes would be ...