0
votes
0answers
40 views

What is the cheapest way to trade equities using a FIX connection? [on hold]

I would like to connect to an electronic exchange to run some simple statistical arbitrage strategies to trade equities. Of course this must be done from end-to-end electronically, in other words, I ...
11
votes
2answers
790 views

Copula models and the distribution of the sum of random variables without Monte Carlo

There is a vast literature on copula modelling. Using copulas I can describe the joint law of two (and more) random variables $X$ and $Y$, i.e. $F_{X,Y}(x,y)$. Very often in risk management (credit ...
3
votes
1answer
77 views

Portfolio VaR with Copula?

Let the portfolio be given by: $$X=X_1+X_2$$ $(X_1,X_2)$ are dependent through a Copula function $C(u_1,u_2)$, such that the joint distribution is given by: $$F(x_1,x_2)=C(F(x_1),F(x_2))$$ What is ...
-2
votes
1answer
23 views

Modified or Macauley Duration in python

are there any existing python modules that can calculate Modified and/or Macauley Duration of a bond.
0
votes
1answer
31 views

Get market cap by ticker on 1.7.2013?

I have a list of all S&P500 tickers, e.g. AAPL, GOOG, JPM. I would like to get their market cap on 1.7.2013 (I don't have Bloomberg, only free internet). Is there an excel addin or other ...
1
vote
2answers
105 views

Why doesn't Black-Scholes assume the absence of statistical arbitrage?

Both Black-Scholes and binomial model assume that there's no risk-free arbitrage in the market. But that sounds like a very weak condition. If a trading scheme makes you gain 100 dollars with 99% ...
0
votes
2answers
88 views

Is the volatility for these two SDEs the same

$$ (1) \ \ d\left(\frac{1}{S_t}\right) =\frac{1}{S_t}\left(\sigma^2-r\right)dt +\frac{1}{S_t}\sigma dW_t $$ and $$ (2) \ \ dS_t = S_t rdt + \sigma S_t dW_t $$ How can you prove that?
0
votes
1answer
43 views

Cointegration results interpretation validation?

Here is how I am interpreting results of a Johansen Cointegration Test and Engel-Granger Test for A and B. The results:(Using matlab) ...
1
vote
2answers
154 views

Locked or Crossed Markets

I don't understand why Rule 610 from Reg NMS was introduced: what was the problem with locked markets? I have read that one of the issues is that it forced a market maker (say, from Nasdaq) who ...
0
votes
2answers
67 views

what volatility do we calculate using GARCH model

what volatility do we calculate using GARCH model, Historical vol or Implied vol or Future Vol or Actual vol.
0
votes
1answer
34 views

Implication of the Greeks under jump diffusion model

Consider jump diffusion model proposed by Merton and Kou. As far as i know, most paper only dealt the valuation of option under the jump diffusion model. As i expected, because of the ...
0
votes
1answer
31 views

negative probabilities in the bivariate tree heston model

I am trying to implement the bivariate tree approach for the Heston model by Beliavea & Nawalkha. I currently have the problem that given the specifications in their examples, I always obtain ...
0
votes
1answer
31 views

Why vertical skew is same for puts and calls

What is the reason that the vertical volatility skew graph(decreasing IV as the strikes increase) is the same for the puts and calls? The loose explanation is because of put call parity, but I am not ...
1
vote
2answers
210 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 ...
2
votes
1answer
69 views

Quadratic exponential method (by Andersen) in Heston model

I am having trouble understanding the reasons that led Andersen to define his QE scheme to efficiently simulate Heston Stochastic volatility model (you may check the celebrated scheme here). The ...
1
vote
1answer
112 views

FX Rate dynamics

Let's suppose USD/EUR price in USD follows a GBM with $$ dS_t = rS_tdt + \sigma S_tdW_t $$ What process does EUR/USD follow in EUR?
1
vote
1answer
47 views

Historical Implied Volatility Calculation

I'm trying to calculate implied volatility for the FTSE 100 for the last few years. I have all the end of day data from LIFFE for the last few years. I have combined the data by weighting the ...
0
votes
2answers
187 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
vote
2answers
79 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 ...
0
votes
1answer
46 views

Is the value also log-normally distributed?

Sorry if this is a stupid question. My book assumes many times that $log(1+R)$ is normally distributed, so R is log-normal. But does this also mean that the value process is log-normal? Since ...
1
vote
1answer
39 views

use synthetics for a pairs trading strategy

Let us say I want to pursue a pair trading strategy between stock A(long) and stock B(short). Can I replace this stocks with their synthetic option equivalents and have the same risk reward profile ...
0
votes
2answers
40 views

Shreve book II Question 4.6 Error?

I'm working through Shreve II, and on question 4.6, you are asked to compute $d(S_t^p)$ where $S_t$ = $S_0e^{\sigma W_t + (\alpha - \frac{1}{2}\sigma^2)t}$ I get the answer $pS_t^p[\sigma dW_t + ...
0
votes
3answers
79 views

Downloading most recent stock prices

I would like to download (from Google) the most recent prices for a series of stocks. I have created a portfolio at Google and I can click on "Download to Spreadsheet". That works. But I would ...
4
votes
2answers
416 views

Malliavin Calculus

From a quant point of view, how would you explain Malliavin calculus in few words ? I have the level to take these courses, but won't be able to do it next year, so I want to know what I am missing. ...
0
votes
0answers
19 views

Is the Volatility of the Fx Inverse process same as Fx

Let St = Fx and St(Inverse) = 1/Fx. Do both of these have same volatility and if so how would you prove it?
0
votes
0answers
3 views

Foreclosure Implications on CMO Cash Flows

I have a simple homework project where I am to create some models to value a CMO. Please make any simplifying assumptions necessary to provide an answer. Prepayment is simple to account for. This ...
1
vote
1answer
29 views

Weighting with restrictions, but no clear objective function?

I have 40 shares in an index and I want to weight them based on their market value, define the known value as $x_i$ In the traditional way, the weight of each share is calculated as: $w_i = x_i / ...
-1
votes
0answers
50 views

Why Statistical arbitrage is no logner useful [closed]

Are there any white papers, articles that briefly explain why statistical arbitrage is no longer useful? Should I just buy the book by Andrew Pole?
0
votes
2answers
66 views

Why gamma for ATM option decreases as volatility increases

Why is the gamma for an at the money option less when volatility increases. Intuitively ,I thought that increasing volatility means more uncertainty,hence the option price will be more sensitive to ...
2
votes
3answers
134 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 ...
2
votes
1answer
70 views

Expected Shortfall and Spectral Risk Measure

Not sure I am understanding spectral risk measures correctly. Why is there an equal weighting scheme placed on the tail losses in expected shortfall. Will that no bias the expected value of the loss ...
0
votes
1answer
65 views

What math concepts are used in designing volatility models

What topics in statistics and mathematics do I need to understand thoroughly before I can start to dabble with stochastic volatility models and volatility arbitrage?
0
votes
0answers
20 views

Is it possible for two securities to have the same first 8 characters of a cusip, but differ in the check sum?

CUSIP is a 9 character long identifier. The last digit is a check sum checking the first 8 previous characters. This seems to me that it is not possible for two securities to have the same 8 ...
0
votes
1answer
43 views

Wholesale credit risk management

Trying to read up on "Wholesale credit risk ", can't find any useful references, why the emphasis on wholesale? - Any help greatly appreciated.
0
votes
1answer
29 views

Libor Market Model: numeraire change

I am currently studying the Libor forward market model, and although I get the mechanics behind the main arguments, I still do not have an intuitive idea of what's exactly the objective behind ...
2
votes
1answer
41 views

Overlapping Value-at-Risk Backtest Data an Issue?

My understanding of VaR model back testing is thus: ~~ t: Calculate daily VaR using look back data over n past days t+1: Compare daily return against VaR, record breach if one occurred, repeat ...
2
votes
1answer
37 views

Hedging bond with CDS of different maturity

Say I buy a 10-year bond with a notional of 100k. To hedge my credit risk entirely I could buy a 10-year CDS, also on a notional of 100k. Now, if there are only 5-year CDS trading and no 10-year CDS, ...
7
votes
1answer
250 views

How to price a Swing Option?

I'm working in the commodity market and I've to price Swing Options with MATLAB, preferably with finite element. Has anyone already priced these kind of derivatives? I'm thinking about using the ...
1
vote
1answer
173 views

Eurdollar Futures

Trying to understand the Eurdollar market a little better. I understand it's the market for dollar denominated deposits outside the US (not just in Europe). They are unregulated and not subject to ...
6
votes
3answers
508 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 ...
4
votes
5answers
897 views

Do binary options make any sense?

Reading from "www.nadex.com" - the copy reads "Binaries are similar to traditional options but with one key difference: their final settlement value will be 0 or 100. This means your maximum risk and ...
1
vote
1answer
37 views

How to price an European call on zero-coupon from the yield curve?

It is known that the price of an European call of maturity $T^*$ on zero-coupon of maturity $T$ is given by $$p(0,T)= B(0,T^*)\mathbb E ^{\mathbb Q_{T^*}}\left[ (B(T^*,T)-K)^+\right]$$ where ...
0
votes
1answer
26 views

Total return index for interest rates (EURIBOR 3M)

I would like to calculate a daily total return index for the EURIBOR 3M. • Should I freeze at the beginning of each qurter die rate? (With this methology the developing of the index depends on the ...
0
votes
1answer
26 views

PCA on term structure of interest rates

Interest rate time series seems to be non-stationary whenever test is performed But covariance or correlation matrix is derived from term structure time series which are non stationary and later PCA ...
1
vote
1answer
46 views

When $C(K_2) = C(K_1)$ for call options with the same expiration date

The exercise is to show $C(K_1) \geq C(K_2)$ where C(K) denotes the value of a call option on a stock price S with strike price K. We assume the expiry is the same for both. I have proved this by ...
2
votes
1answer
554 views

How does Hanson's Market Maker (LMSR) work?

Implementing Hanson's Market Maker states: If the market maker wants to quote a "current price", he can. The current price for outcome 1 is: $$ \mbox{price1} = ...
3
votes
1answer
129 views

Different ways of portfolio optimization

There are different ways to optimize portfolios: $$ \max R^Tw\tag{1}$$ or $$ \min w^T \Sigma w\tag{2}$$ and finally using a risk tolerance $\lambda$: $$ \min{(w^T\Sigma w-\lambda R^T ...
1
vote
2answers
39 views

Where to get master list of mutual funds?

I cant seem to find a straight answer anywhere on Google for this. I would like to create a master list of all known mutual funds and their ticker symbol. Is it possible to get this data from ...
-3
votes
0answers
37 views

Need guidence on quant trading [closed]

I am just learning quant trading and i want to trade based around probabilities. What do i need to learn to achieve this goal? Do I need to learn C, SAS, Excel? Also what is the best data feed to ...
0
votes
1answer
29 views

ZSpread in multiple curve framework

how do I calculate ZSpread for a govt. bond in a multiple curve framework? I have not come across the exact details anywhere so I want to verify if I'm right. Below is my understanding, please correct ...

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