2
votes
1answer
68 views

Arbitrage question

Consider a hypothetical Payment in Kind (PIK) bond of XYZ Corporation. The bond has 2 years to maturity, a face value of $1000, and has an annual coupon rate of 10%. Coupons are paid annually. XYZ ...
1
vote
1answer
31 views

How to identify the orders p and q for ARIMA model using least squares method?

I would like to identify the orders p and q for ARIMA model using least squares method in Matlab. I have got also two data files (one with noise and one without) Previously I identified p and q for ...
0
votes
1answer
23 views

How to effectively hedge a Fixed-Term deal in a foreign currency?

Assume my firm is based in USD and agrees with some counterparty to buy, at time $T$, some quantity $Q$ of asset $A$ for a fixed price $K$. Assume also that $A$ prices and $K$ are denominated in EUR. ...
0
votes
1answer
46 views

A Difference between Local Vol and Stochastic Vol Models

For the purpose of this question a local vol model is a 1d SDE which specifies the price process and we have a contingent claim that depends on those prices (in general, at multiple times). e.g. ...
1
vote
1answer
28 views

simple, intuitive barrier option derivation

Is there a simple integral that gives barrier option prices without having to deal with messy, hard PDEs and change of variables I understand there is a reflection principle such that the simulation ...
2
votes
2answers
80 views

Negative high frequency intraday volatility - Zhou estimator

To estimate high frequency tick data stock intraday volatility, I have read Robert Almgren's notes7.pdf http://www.cims.nyu.edu/~almgren/timeseries/notes7.pdf where he talks about the bias free ...
0
votes
1answer
46 views

Calculating VaR with Monte Carlo simulation

I would like some help here :) I have a problem calculating VaR with the Monte Carlo Simulation. I have followed then next steps, is this a right way to calculate VaR or I need something more? ...
1
vote
1answer
38 views

Why we consider second derivative w.rt price but only first derivative w.r.t time and volatility

What is the reason (better if it is intuitive, and not too math heavy), that when we talk of Greeks, we consider second derivative with respect to price (gamma), but only first derivative with respect ...
3
votes
1answer
78 views

Why must a replicating portfolio be self-financing?

If I have a trading strategy such that at each time $t$ I own $\Delta_t$ units of stock $S_t$ and $\psi_t$ units of bond $B_t$, it is a replicating strategy for some claim with time $T \geq t$ payoff ...
0
votes
1answer
40 views

Best way to scan 1000 stocks? [closed]

I am trying to identify the stocks which gap up during a period, and then get the relative information, such as volume on the day and the prices before and after that day. I'm just experimenting and ...
1
vote
0answers
19 views

Value-at-Risk Calculation with respect to the Capital Requirements

I want to calculate the Value-at-Risk at date $t$ in such a way that I minimize the capital requirements given as \begin{align} \text{CR}_{\,t+1\,:\,t+250} = \sum_{h=0}^{249}\max\left( ...
0
votes
1answer
17 views

Where to get historical daily settlement price of each VSTOXX futures contract

I'm doing some analysis on VIX and VSTOXX futures and require historical prices of each contract as a result. VIX info is free to download on CBOE website: ...
0
votes
0answers
17 views

Can Yahoo Finance API work for non-US markets?

I am trying to fetch ticker prices and historical prices for major Asian exchanges (HKSE, SGX etc). I am trying to use yahoo finance API, but it is not returning any data for even SingTel, which is a ...
5
votes
1answer
81 views

Why Must Dividends Be Reinvested to Use Risk-Neutral Pricing?

Assume the price of a stock $S_t$ paying continuous dividend $a$ satisfies $$ dS_t = S_t\left((\mu - a)dt + \sigma dW_t\right). $$ The risk-neutral pricing formula states that if $\mathbb{Q}$ is any ...
4
votes
2answers
143 views

R package for portfolio

In the context of modern portfolio theory, one often wishes to minimise $\mathbf{w}^{\mathrm{{\scriptstyle T}}}\boldsymbol{\Sigma}\mathbf{w}$ subject to $\mathbf{w}^{T}\boldsymbol{\mu}=c_{1}$, ...
2
votes
1answer
84 views

Density of Geometric BM via Fokker-Planck

Attempting to derive density of a GBM (which we know is log-normal) the long way, using the Fokker Planck-equation. Can't figure out where I went wrong - would appreciate a few sets of extra eyes! ...
1
vote
2answers
84 views

Estimate simple option price without a calculator

I have been to two different interviews for jobs related to option trading, and both time I have been asked a question, which is pretty basic, and still I could not answer it. If you have an European ...
0
votes
1answer
22 views

Order Book vs Wallet Updates

Good morning, i am in the middle of developing my own stock exchange system and have implemented limit orders (basics) matching. The system is just a DIY solution for my own purposes and for fun ...
-4
votes
1answer
41 views

Can not understand options pricing [closed]

As we are seeing here http://www.theoptionsguide.com/strike-price.aspx Relationship between Strike Price & Call Option Price Relationship between Strike Price & Put Option Price I do not ...
1
vote
2answers
95 views

How can I make this portfolio self-financing?

$a_t S_t$ = number of shares ($S_t$ is stock price at $t$), $S_0 = 1$ $b_t \beta _t$ = saving account value , $d \beta_t = r \beta_t dt$, $r=$ interest rate So the value of the portfolio: $$V_t = ...
13
votes
5answers
698 views

Is R being replaced by Python at quant desks?

I know the title sounds a little extreme but I wonder whether R is phased out by a lot of quant desks at sell side banks as well as hedge funds in favor of Python. I get the impression that with ...
0
votes
0answers
35 views

High frequency price forecast model ARMA GARCH or another?

Can you reccomend model for high frequency data (1 second and less) (returns and volatility forecasting)? Most papers use ARMA, GARCH etc in 1 minute and lower time frame. PROBLEM ARMA does not know ...
1
vote
1answer
44 views

Why is the black-scholes model arbitrage free when σ>0?

I want to show that: if $σ$ is positive then there is no arbitrage in the model, even if $r > µ$. Whilst I have satisfied this for $ r > \mu$, I cannot see why the conditioning on $\sigma>0 $ ...
0
votes
1answer
33 views

Negative time value european options

I have a basic question for which I feel like I should have found the answer by googling it, but I didn't get a definitive answer, so here I am: Can the time value for a plain vanilla (European) ...
5
votes
2answers
129 views

Why dynamics of local volatility is wrong?

In Dupire's local volatility model, the volatility is is a deterministic function of the underlying price and time, chosen to match observed European option prices. To be more specific, given a ...
-3
votes
1answer
54 views

Show that the equation solves the Black-Scholes PDE

I have the solution as given Based on this, I have to show that this solves the Black-Scholes formula It means that I should take the partial derivatives of the solution above and then receive the ...
2
votes
1answer
40 views

Why can a CDS indices be used as a bond market index?

I don't understand why the iTraxx indices family, which are credit default swap indices, are in practice often used to gauge the bond market. How are CDS prices related to bonds prices ? And what ...
3
votes
0answers
50 views

Computing Value at Risk for portfolio in R

I know how to compute VaR with long positions using PerformanceAnalytics. What about a portfolio consisting in two equities A and B, 100 USD long positions in each, and 2 stock options for the same ...
1
vote
1answer
32 views

Z-Score calculation for a win-loss streak

I am trying to find the correlation between wins and losses by applying Z-Score according to formula attached below. I put them in an array by assigning 1 to wins and -1s to losers. I am trying to ...
-2
votes
0answers
43 views

How much does Axioma risk model cost?

does anyone know the pricing scheme of Axioma's risk models? I heard that they are much cheaper than Barra, which can easily go above $100k per year per country/region. PM is welcomed. thanks
1
vote
1answer
40 views

Cointegration tests: how do you accurately test the necessity of time trends in the Johansen and Engle-Granger Test?

Is there a correct and up to date procedure? I just run the equation in VEC form and test the significance of the time trends? What are the possible problems that I should be aware of?
0
votes
2answers
54 views

Why does the short rate in the Hull White model follow a normal distribution?

Consider Hull White model $dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$ when we solve the SDE above we have $r(t)=e^{-\alpha t}r(0)+\frac{\theta}{\alpha}(1-e^{-\alpha t})+\sigma e^{-\alpha ...
1
vote
0answers
34 views

Short volatility strategy using strangles

For a short volatility strategy using option strangles, is it better to target a fixed premium to earn? Or a fixed vega? Objective is to maximise the return/risk (sharpe) of the strategy. Any help ...
1
vote
0answers
16 views

Show that in an arbitrage-free and non-redundant market a certain set is compact

Some notation: We consider a financial market with $d+1$ assets, the $0$-th asset is considered the risk-free asset, the others are the risky ones. The vector $\overline \pi \in \mathbb R^{d+1}$ ...
0
votes
0answers
22 views

After finding the pair, what next?

Had a question on how do I go about doing pairs trading. I have found some cointegrated stocks. Now the question is what next. From what I understand if two pairs are cointegrated, the distance ...
1
vote
2answers
65 views

Why is volume a totally independent variable from price?

In Martin Pring's book "Technical analysis explained", when talking about volume, he asserts that it is "a totally independent variable from price" Why is this?
0
votes
0answers
10 views

Will I be chased for debt If I move out of UK? [migrated]

Hie, I am an International Student studying in the UK. I took some loans about £3000 while I was studying here. Since the government has abandoned PSW visa for graduates its likely that i am moving ...
2
votes
1answer
69 views

The source of “Cost of hedging” in the Black Scholes model

I am trying to get some intuition for the fact that a Black-Scholes price for an option is equal to the cost of replicating the option. Say the interest is 0. The option is obviously still worth ...
3
votes
2answers
85 views

Fractional Brownian motion

In Mandelbrot(1968)'s paper, the fractional brownian motion, denoted by $B_{H}(t,\omega)$,(t>0) is defined by $$B_{H}(0,\omega)=b_{0}$$ ...
2
votes
1answer
53 views

Why Variations of order higher than two vanish for Brownian motion?

Let $W_{t}$ be a Brownian Motion. Verify that variations of Brownian Motion of higher order, say, of order three, vanishes. I try to prove that ...
6
votes
3answers
150 views

Application of Control Theory in Quantitative Finance

I have recently completed an MSc in Control Systems from a top university. It seems to me that control theory must have an application within quantitative finance. I would like to apply my degree ...
1
vote
0answers
41 views

Filtering my own orders from a UDP multicast market data feed

I am wondering what is the policy practiced by most exchanges from different market segments (FX, equities, futures, etc.) about the privacy implications of order identification in their market data ...
1
vote
0answers
17 views

Budget Constraint in Duffie's book

On Page 5 of Duffie's Dynamic Asset Pricing Theory, the budget-feasible set is defined as: $$X(q,e) = {e+D^T\theta \in R_+^s:\theta \in R^N, q\theta \leq 0}$$ Compared to Kerry Back's presentation of ...
-1
votes
1answer
65 views

Building a personal computer for automated trading/analysis…what bottlenecks could I run into?

I've been trading forex and programming (I'm in college), but want to get into automated trading and analyzing data real-time to make decisions (and learning more about stats and math as a hobby). I ...
0
votes
0answers
32 views

Clean EOD global Equities data provider for backtesting investment strategies

I'm trying to find a good source for global equities for EOD data (historical and forward basis), currently using Bloomberg's back office data, but it is very hard to normalize it for corporate ...
0
votes
0answers
31 views

Use of implied vol averages for expected underlying returns

When computing a single implied volatility value for a particular asset for use in cross sectional regression models, using daily end of day data. There are a few methodologies I've seen to used do ...
1
vote
2answers
79 views

A good way to calculate the realised daily volatility

Currently, I am confused about the calculation of realised daily volatility. Assume I have daily returns, for example, FTSE, then I need to estimate the daily realised volatility. I read some ...
0
votes
0answers
26 views

Test for NonLinearity

I am doing a regression, returns of stocks(cross section of stock returns at a given time) against some fundamental factors. And look at the residuals to get a normalized view when trying to rank the ...
0
votes
0answers
18 views

Choosing an optimal dependent variable, regression/model fitting

When I select a certain target variable and model that with either linear regression or some other technique, say naive bayes, I hope to finally arrive at a model which has statistical significance, ...
2
votes
3answers
96 views

For $B_t$ a Brownian motion what is the probability that $B_1>0$ and $B_2<0$?

Let $B_t$ be a Brownian Motion. What's the probability that $B_1>0$ and $B_2<0$?

15 30 50 per page