All Questions

3
votes
2answers
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 ...
3
votes
4answers
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
0
votes
2answers
70 views

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 ...
1
vote
1answer
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 ...
3
votes
2answers
106 views

Optimal Portfolios

In modern portfolio theory, one famous problem is the Markowitz mean variance optimal portfolio, defined by solving ...
0
votes
0answers
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 ...
3
votes
1answer
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 ...
1
vote
1answer
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 ...
3
votes
0answers
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 ...
0
votes
1answer
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?
1
vote
1answer
53 views

Historical Data on $/yen forward exchange rates

Would anyone happen to know where I can find historical forward exchange rate data between the yen and dollar?
0
votes
2answers
61 views

float64 to store price data: is precision sufficient?

I am looking to store equity price data in a hdf5 table. The use will be purely as a historical archive, not as day-to-day data source. Options One option would be to store base10 significand and ...
0
votes
0answers
11 views

Web Based Market Profile Code

I am looking for someone who knows of or has access to web based charting code using Market Profile. Does this exist out there? I would prefer the source code so I can make changes to it. Any ...
0
votes
0answers
31 views

volatility grouping

I was working on risk levels of a combined portolfio (includes options,futures as well as stock). While using greeks we can asses some value of a portolio, but when one needs to assess some kind of ...
2
votes
1answer
182 views

what is a typical way forex brokerages can provide cheap leverage for their customers?

I'm not very well read in the area of high finance but I'm curious how forex brokerages are able to provide the backing for leverage that they can provide to customers. Is it possible to do this ...
0
votes
1answer
14 views

TAQ NYSE OpenBook

Where can I get/buy the TAQ NYSE OpenBook for specific stocks on specific days? I don't need a whole year of all stocks. I just want to enter a day and a stock, so I can download the order book data ...
2
votes
1answer
90 views

Basic question on LIBOR-OIS swap

I'm just starting a pricing class and am a little confused by a statement in a class reading (a fed report). It goes something like this: "A bank borrowing at the 3-month LIBOR rate of 2.10 percent ...
0
votes
0answers
17 views

Sample long/short portfolio profit and loss template

Does anyone have a suggestion of where I might be able to find a profit and loss template for a long/short equity portfolio? Thank you in advance.
0
votes
0answers
21 views

FX Delta Conventions

I'm currently reading Iain Clark's book Foreign Exchange Option Pricing and I got stuck at one sentence in the beginning of Section 3.3 that I feel is important to understand. He writes: FX ...
0
votes
0answers
24 views

Derivation of the formulas for the values of European asset-or-nothing and cash-or-nothing options

The asset-or-nothing European option pays at t = T the value of the stock when at time T that value exceeds or is equal to the exercise price E, and nothing if the value of the stock is below E. So, ...
4
votes
1answer
51 views

BlackProcess' constructor $x_{0}$ argument in QuantLib

I am currently using BlackProcess to price options and I have a doubt related to the $x_{0}$ argument of the constructor: I've figured out it should be the forward ...
5
votes
3answers
155 views

What is the tau parameter in the Black-Litterman model?

Could someone please provide me with a clear and concise definition of the $\tau$ parameter in the Black-Litterman model? It seems one is rather hard to come by. I understand it to be the 'weight on ...
2
votes
0answers
82 views

How to price zero coupon bonds with the Monte Carlo method?

Im trying to calculate monthly ZCB bond prices with a fixed maturity T, over a period of months via Monte Carlo methods. Here is my attempt: For the first month, the price is $P_{t_0}(0,T) = ...
3
votes
3answers
145 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 ...
0
votes
1answer
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 ...
21
votes
8answers
10k views

Digital Signal Processing in Trading

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 ...
1
vote
0answers
35 views

Optional Sampling Theorem Application

Let x, y > 0. Defint eh first passage time of a Brownian motion $W_t$ as $\tau_a$ = min{t $\ge$ 0: $W_t$ = a}. I need to show that E[$e^{-u\tau_x}$$1_{\tau_x < \tau_{-y}}$] = ...
-3
votes
0answers
32 views

Black litterman model [closed]

Please can you recommend an easy introduction to the Black-Litterman model
-1
votes
0answers
19 views

QSTK for Kraken (BTC exchange) [closed]

I'm curious if anybody tried to use QSTK for trading or at least studying Kraken. If so would would you mind sharing the code you adapted (using their API for orders, data source, etc)?
2
votes
2answers
142 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 ...
4
votes
3answers
180 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 ...
4
votes
1answer
191 views

Distribution of Geometric Brownian Motion

Please let me know where I have been mistaken! Let the SDE satisfied by the GBM $S(t)$ be $$ \frac{dS(t)}{S(t)} = \mu dt + \sigma dW(t). $$ Then, the underlying BM $X(t)$ will satisfy $$ dX(t) = ...
2
votes
1answer
85 views

Help with integrating stochastic calculus expression from yield curve model

I am very rusty on stochastic calculus, and I am having trouble integrating the following simple term from a yield curve model: $$z(t)=\int_0^t\exp(-k(t-s))dW(s)$$ Any suggestions appreciated.
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
223 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 ...
-4
votes
0answers
21 views

Why can't authors use better variable notation [closed]

It's frustrating when authors, especially with barrier option pricing where you have a lot of variables, don't just use subscripts instead of arbitrary letters. Why not just denote the initial or ...
1
vote
1answer
39 views

ICE oil Future Markers

i have seen Brent oil future singapore marker many times. however, i wonder what is the reason for introducing different markers in the future market. FYI - LINK
0
votes
0answers
21 views

What is the intuition behind the relationship between herding and trade (or investment) size?

I am studying herding behavior among investors, in particular I found a u-shaped relationship between herding and trade (or investment) size. As such, traders with the smallest or the largest trades ...
1
vote
1answer
61 views

Key Rate Duration for MBSs greater than Key Rate Tenor

Key Rate Durations (KRD) are essentially some fixed income instrument's price sensitivity to a non-parallel shift in interest rates (i.e., a shift at the "Key" Rate). For example, a 10-year bond's ...
0
votes
1answer
16 views

download a specific list of tickers [closed]

I have a list of companies (~500) whose tickers I would like to find. But I do not want to do this manually. Is there an easy way to do this?
2
votes
1answer
93 views

Is there a way to adjust R PerformanceAnalytics function VaR with EWMA or GARCH method?

Is there a way to upgrade R PerformanceAnalytics function VaR with more risk sensitive approaches like EWMA or GARCH? Or is there another R package which can handle the issue?
-1
votes
0answers
33 views

pairs trading strategy return [closed]

i don't understand how the final return is Calculated in this part of the code matlab. r4 is the total return vector 'series' Represents the prices of companies. Specifically I'd like to learn the ...
-1
votes
0answers
26 views

stop loss and a take profit algorithm [closed]

how I can implement a stop loss and a take profit algorithm for pairs trading strategy ? thanks for your cooperation regards
-1
votes
0answers
12 views

transaction costs in pairs trading strategy [closed]

I would like to know what types of transaction costs should I consider for pairs trading strategy and what their percentages are. Thanks to all for the help regards
0
votes
1answer
31 views

Optimal Upper and Lower Bounds

For the following exercise: Give optimal upper and lower bounds on the price today for a product that pays a function of the spot price, $S$, of a non-dividend paying stock one year from now, there ...
2
votes
1answer
77 views

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 ...
1
vote
1answer
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 ...
0
votes
1answer
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 ...
0
votes
1answer
74 views

list of ADR's by volume or market cap

I'm looking for a list of ADR's (for a simulation) that I can screen by either market cap or volume? If anyone knows of a free way to get such a list it would be much appreciated.
-2
votes
1answer
25 views

Question about “short” in this sentence

I was reading an article by David Stockman from (http://davidstockmanscontracorner.com/take-cover-now-they-dont-ring-a-bell-at-the-top/). He uses the word "short" in a way I'm unfamiliar with. If you ...

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