0
votes
1answer
27 views

generate matrix in Matlab [on hold]

Is there any builtin function (or code) in matlab to generate Pairwise Comparison matrix (for Analytic Hierarchy Process - Decision Making) or Positive reciprocal matrix which aji= 1/ aij ? Many ...
0
votes
0answers
14 views

How would MTM an interest only currency swap affect its valuation?

Not sure how a central clearing house that marks an interest only currency swap between two parties to market everyday would effect the currency swap's price. Any ideas?
0
votes
0answers
11 views

Transaction costs estimate for investment strategy

I'm examining a strategy based on profitability. I sort UK stock into 10 portfolios based on their gross profits-to-total assets ratio. Then, I create long-short portfolios by subtracting the high ...
3
votes
1answer
57 views

Information on Weather Derivatives

I am looking for relevant information on the organization of the Weather Derivatives market. How is it organized? How information is shared? Where can we find historical database? I am aware of the ...
1
vote
0answers
41 views

Libor Market Model Calibration

Currently I am doing a research on the plain vanilla multi-curve framework Libor Market Model meaning that no stochastic volatility is involved. I had the idea to calibrate to the swaption market. In ...
0
votes
1answer
54 views
0
votes
1answer
59 views

RiskMetrics VaR Volatility Sample Size

RiskMetrics calculates volatility using an exponentially weighted moving average. For a decay factor of 0.94, they advise a sample size of 74 past returns. Does this mean the entire calculation should ...
0
votes
2answers
84 views

Price of an equity

An equity has a value of 100 Euros, and pay a dividend of 5 Euros in 6 months. The interest rate of 6 months is 5% and the interest rate for 1 year is 6%. I would like to compute the value of the ...
0
votes
1answer
25 views

ABS vs covered bonds vs CDO [closed]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
1
vote
2answers
39 views

Differences in EIOPA S.06.02.0x QRTs (Assets D1 in 2016)

As per the COMMISSION IMPLEMENTING REGULATION (EU) 2015/2450 (published 31DEC2015) I can see that S.06.02.01 QRT relates to Quarterly (or annual if exempt) quantitative templates for individual ...
-1
votes
0answers
16 views

Application of PVAR in macro economic modelling

I'm looking for a model that can best explain the elasticity of non-performing loans to macroeconomic variables and bank specific variables (panel data of a single country). Is PVAR a good choice?
1
vote
2answers
69 views

Black Scholes Constant Implied Volatility

I hope someone can clarify my ideas about the constant implied volatility in the classical Black Scholes framework. As well known, market practitioners quote the prices of vanilla call and put ...
3
votes
1answer
80 views

Modeling Financial Assets

Let $\tilde{W}_t := (1+R)^{-t}W_t$ and $\tilde{S}_t := (1+R)^{-t}S_t$ be respectively discounted wealth process and discounted asset price. Then, show that $$\tilde{W}_t = w_0 + ...
0
votes
0answers
35 views

Risk-Neutral Probabilities

Consider one period Arrow-Debreu model with $N = 2$ and $M = 4$ show in Figure: Find all the possible risk neutral probability $\pi$. What I am confused about is how $D_1$ and $D_2$ have an up and ...
3
votes
2answers
87 views

Vega in a “constant volatility” Black-Scholes world?

A little confused, I consulted the Wilmott forums for guidance on how I can interpret vega/vomma. Another user's post reminded me that the Black-Scholes model assumes that the underlying has constant ...
0
votes
0answers
29 views

Arbitrage free price

I could not find much information on this question: what is an arbitrage free price in trinomial model? If there is, is there any way of replicating a call option under this model? Although I have ...
0
votes
0answers
25 views

Market standards

Having a high quality pricing models is one of the main expectation of people working in finance, in fact the pricing models delivered should be proved to be accurate, following the latest market ...
0
votes
3answers
50 views

Looking for an algorithm to generate (dummy) share price data

Is there an easy-ish way I can generate "dummy" share price data for the purposes of data visualisation techniques etc.? Essentially I want to have something like the "Adventure Works" of price data. ...
0
votes
0answers
26 views

Calculating share price [closed]

How to calculate the share price if the Earnings and Dividend per share grows by 5%. The next years's dividend is 10$ and the market capitalization rate is 8%. Are these details enough to calculate ...
0
votes
0answers
31 views

For a square-root process (CIR), how to verify the characteristic function of the transition density?

I am trying to solve a financial mathematical question. I derived PDE (a) for the characteristic function as follows. But, I don't know how to verify the following characteristic function of the ...
0
votes
2answers
110 views

Discrepancy between binomial model, Black-Scholes and Monte-Carlo Simulation

I try to use Monte-Carlo Simulation to price a 10-year call option. Based on below parameter, S = 1, X = 1, volatility = 80%, T = 10, risk-free rate = 0.22% The option value based on Monte-Carlo ...
1
vote
1answer
51 views

Portfolio optimization

first I just hope that this question is in the right place. I have started working on portfolio optimization and the formulation of the problem and their solution : For example in the Markowitz ...
0
votes
0answers
11 views

Modified average swap

I have an instrument that is a swap over the SMK6 that at expiry (it has only one cashflow) pays the difference between the average daily Price of the underlying and the actual Price. The average ...
0
votes
0answers
51 views

Risk-neutral probabilities

I will use this theorem 3.2 from the book "Quantitative modeling of Derivative Securities" by Marco Avellandea: Theorem 3.2 - Assume that there is no arbitrage, i.e. there exists a risk neutral ...
3
votes
1answer
104 views

Example of options that cannot be priced with least-square Monte Carlo

Can you give some example of options that cannot be priced with least-square Monte Carlo? Intuitively, this is any option for which a payoff depends on a previous exercise decision. It's relatively ...
0
votes
0answers
20 views

How to appropriately measure volatility in assets with different execution dates?

Let's say I have two assets and I am hedging them with going short on two other assets. Let's say that asset 1 is expected to expire in one day and asset two is expected to expire in two days. Let's ...
0
votes
1answer
46 views

For a call option, what is the real-world probability of expiring in-the-money?

In the Black-Scholes world, the risk-neutral probability of expiring in-the-money is given by N(d2). Can I just replace the risk-free rate by the drift rate to obtain real world probabilities? Thank ...
0
votes
0answers
18 views

Building PD model using Moody's Historical default rates

I want to build a Probability of default model using moody's cumulative default rates. I was trying to calculate the average default intensity rate and from there I dont know where to go. Example : ...
0
votes
1answer
46 views

Matlab code for equally weighted portfolio

I have daily returns of 10 stocks. I need to construct an equally weighted portfolio that goes long in the 3 highest returns and short in the 3 lowest returns. The portfolio needs to be re-balanced ...
4
votes
1answer
59 views

Determining the implied volatility for options with bid/ask prices below the intrinsic value

I need some help in understanding the Black-Scholes option pricing model. In my data there are several deep itm European index put options that have an ask price below the intrinsic value. ...
5
votes
1answer
103 views

Is trading mean reversion of small principal components of prices profitable?

Many have told me that it is a good idea to look at the third principal component (PC) of yield curve movements, as well as third and fourth PC of G10 currencies. They claim these PCs represent ...
0
votes
0answers
17 views

VEC GARCH (1,1) for 4 time series

I have to estimate a VEC GARCH(1,1) model in R. I already tried rmgarch, fGarch, ccgarch, mgarch, tsDyn. Has somebody estimated a model like that? ...
3
votes
0answers
73 views

Ridiculous Bond Prices under Vasicek Model

Has anyone played with the parameters of the Vasicek model and observed the sometimes ridiculous bond prices it implies? E.g. with the right parameters, a 30-year zero is priced at $147,327. To be ...
0
votes
1answer
75 views

Open interest and short selling

Open interest of SPY: https://finance.yahoo.com/q/op?s=SPY+Options If someone sell short a contract the open interest adds up or down? The open interest on yahoo finance is a reliable Information of ...
0
votes
0answers
9 views

How to get currency denomination of security from yahoo finance API

I'm trying to write a portfolio program and it would be nice if it could auto detect what the currency denomination of the ticker is without needing user input.
0
votes
1answer
68 views

Who Uses American Options?

...in other words, why would a person want to have the right to exercise an option early? What advantage does that really give you? Are Euro-style options not good enough for some people? Who are ...
0
votes
0answers
31 views

Hedging portfolio of options with different underlyings

Suppose i have call options for 90 of the 100 stocks of NASDAQ100. How can i hedge the risk using NASDAQ futures? Also, how can I get rid of the residual risk?
3
votes
0answers
38 views

How does a Broker-Dealer lend shares to other Broker-Dealers?

Is it possible to find out how a OTC Broker-Dealer in thinly-traded equities lends shares for short-sales to other Broker-Dealers. Which platform or process is involved?
3
votes
1answer
96 views

Spectral and distortion risk measures

Is there any difference between the spectral and distortion risk measure? Or is it just a different name for the same kind of risk measure?
1
vote
1answer
40 views

How to measure if investors are diversified in a stock market?

My question is related to this question but it is not the same. Consider the US stock market. How can I tell if people trading in this market hold properly diversified portfolios? Is there some ...
5
votes
1answer
84 views

Modelling EUR/USD with Ornstein-Uhlenbeck + jumps?

I'm trying to simulate a process as close as possible to EUR/USD of the ten past years. I've used a Ornstein-Uhlenbeck process: $$d X_t = -\theta (X_t - \mu) d t + \sigma d B_t$$ with the ...
5
votes
2answers
75 views

Is it possible to deal with non-normal distribution in Black-Litterman model?

Suppose that I know that the normality assumption about my data is unrealistic (as it is very frequently): is it possible to apply any distribution that I judge the right one to the Black-Litterman ...
1
vote
0answers
28 views

Determining rate of interest

If I have trade prices of 10Y futures contract (ZNH6) is it possible to derive the interest rate from it? Or is there a better way to obtain historical 10 year rates?
1
vote
1answer
37 views

Deriving a 3M libor curve from 6M libor swaps and 3M-6M libor basis swaps

If I had a set of 6M Libor instruments and another set of 3M-6M basis swap instruments, how would I derive the 3M Libor curve? Just bootstrap the 6M curve and the basis curve and add up the zero ...
1
vote
1answer
29 views

Are Variances generally stable for any given instrument?

My hesitation, as I look at getting into forecasting based on observed variances, is the nagging question - if variances are not constant per-instrument, is it any good to use the last month or year's ...
-1
votes
1answer
68 views

Black_scholes formula for a butterfly option

Im wondering if I can apply Black-Scholes formula to valorate a butterfly option, i.e: $$B(T)=Vcall(S(T)-K,0)+Vcall(S(T)-K',0)-2Vcall(S(T)-K'',0)$$ with $K<K''<K'$, just evaluating each call ...
0
votes
1answer
42 views

Monetary Policy and the Yield Curve PART TWO

The Fed has a number of tools/targets with which they manage monetary policy. I'm looking to refine a concise summary of them and looking for guidance/correction/validation. Think I understand these ...
0
votes
1answer
30 views

Equitable Allocation

This questions borders on the actuarial side of things but the general solution should have relevance in several situations. Suppose we have a set of $k$ people who will retire in $\{n_1,...,n_k\}$ ...
0
votes
0answers
37 views

How to backtest Value at Risk Models using Conditional and Unconditional tests?

I am trying to carry out backtesting on a number of Value at Risk figures i obtained using var/covar, historical, and monte carlo simulation. The two methods im using are the Kupiec test ...
1
vote
1answer
34 views

About the Feller Condition in Heston Calibration

I have noticed when reading (many) articles about Heston Calibration that not all (few actually) do care about the Feller condition. Below is a compilation of calibration results from some different ...

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