3
votes
1answer
41 views

Standard term for the components of a distribution waterfall?

I'm writing software for calculating distribution waterfalls. When displaying the results of a particular calculation, I want to show amounts that correspond to specific provisions in the relevant ...
2
votes
2answers
86 views

American vs European Options on equity index options

I have a question regarding the usage of European vs American Options. According to Professional Risk Mgr Handbook 2010, American-style options are used mostly on equities whereas European-style ...
1
vote
1answer
55 views

What Exactly is Expected Return

Consider the following plot, courtesy of this page: Regarding the $y$-axis, how does this "expected return" relate to the "instantaneous expected return" in a geometric Brownian motion (GBM)? E.g., ...
2
votes
1answer
73 views

Wrong discount factors when finding Nelson Siegel Svensson model parameters

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non- Linear Optimization problem to do this. Some of the code I have written is below and this is where my ...
3
votes
1answer
54 views

Proving Derivative Property of Moment-Generating Function

In Shreve II, exercise 1.8, he walks the reader through proving the derivative of a moment-generating function $\phi$ is equal to the expectation $\mathrm{E}[Xe^{tX}]$; i.e., $$ \phi^\prime(t) = ...
3
votes
1answer
111 views

Are all stocks and stock indexes just white noise

In the paper Super-Whiteness of Returns Spectra from Erhard Reschenhofer of University of Vienna it is commented the following "Until the late 70’s the spectral densities of stock returns and stock ...
5
votes
2answers
144 views

Is there any research on pyramiding techniques of entering/exiting a trend?

I am looking for any research about optimal strategies for gradually building (scaling in) positions inside a trend as well as optimal gradual exit strategies on pullbacks/reversals to minimise ...
2
votes
2answers
64 views

How to discretize a GBM under P- and Q-measures?

Under the P-measure, a geometric Brownian motion can be specified using the following SDE: $$dS_t=\mu S_tdt+\sigma S_tdW_t^P$$ and its Euler discretization is $$S_{t+\Delta t}=S_t + \mu S_t \Delta ...
0
votes
2answers
62 views

Spot price and volatility has a correlation of -1, why?

A stock option trader taught me yesterday that the correlation between the spot price of asset X and the variance of asset X is approximately -1. Can anyone give me a explanation why this is true?
4
votes
0answers
81 views

Momentum - Statistical Argument

In their seminal paper Jegadeesh and Titman (1993) develop a statistical model to infer where moment comes from. In practice they setup the following: $r_{it}=\mu_i + b_i f_t +e_{it}$ ...
0
votes
0answers
12 views

Consumption Based Asset Pricing

I am working on some consumption based asset pricing models. I am modelling consumption growth in several different ways. An obvious one is to model consumption growth as an AR(1) process: $g_{t+1} = ...
2
votes
0answers
66 views

How would it be possible to use Dynamic Programming to search a space of investment strategies to find an optimum?

As my question states, the problem I am having is finding a sensible way to search a large space. Any help or insight that could be provided would be hugely appreciated. Currently I am trying to ...
1
vote
2answers
117 views

What are some examples of non-solvable SDE where Monte Carlo discretization is necessary

Reading Glasserman - "Monte Carlo Methods in Finance" it says in the introduction to Chapter 6 - Discretization Methods, that moste models arising in derivatives pricing can be simulated only ...
2
votes
1answer
74 views

Fit linear model to higher moments of CAPM

How can one fit a linear model to the higher moments of CAPM in R? Fitting a linear model to the second moment (classical CAPM) would be ...
1
vote
1answer
39 views

Negative adjusted strike in Levy's Asian option approximation?

In Edmond Levy's 1992 paper, he introduced a moment-matching method to approximate the price of an Asian option assuming GBM for the underlying. It suggested that, if some monitor points are already ...
0
votes
0answers
36 views

Issues with +100 symbols in Quantstrat, Erratic Trades

I've tested my code against individual symbols and very small groups of symbols. I'm finding the more symbols I add the fewer trades I get. For instance, if I just include the first five symbols, all ...
0
votes
0answers
38 views

Forecast of ARMA-GARCH model in R

I managed to forecast a GARCH model yesterday and run a Monte Carlo simulation on R. Nevertheless, I can't do the same with an ARMA-GARCH. I tested 4 different method but without achieving an ...
0
votes
1answer
33 views

How to scale $\alpha$, trading costs in a standard portfolio optimization problem

In the usual "portfolio optimization problem under linear constraints". Let me define the terms here. $$ \text{Find } w^*=\underset{w}{\text{argmax}} \ \ r^Tw - \lambda w^{T} \Sigma w - ...
0
votes
0answers
9 views

What are commercial impact models and transaction cost analysis models out there for simulation?

I have heard that ITG, LiquidMetrix, MarkIT and TradingScreen has good Transaction Cost Analysis (TCA) research. I wonder which firm one would choose to have an impact model formula inside his ...
0
votes
0answers
18 views

Optimize Kelly Criterion in these circumstances for Binary Options

For simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds, the Kelly bet is: f* is the fraction of ...
4
votes
1answer
83 views

justification of square root process

In finance, many stochastic processes $X(t)$ are defined via \begin{equation} dX = \text{(some drift term)} dt + \sigma X^\gamma dW_t \end{equation} with $\gamma = 1/2$ (for instance the Heston model ...
-2
votes
0answers
16 views

Any package to run BEKK-GARCH-X models in R [duplicate]

I tried using a package called mgarchBEKK (or mgarch) to estimate a VECM-GARCH model with a BEKK approach. It seems like the package firstly estimates the VECM model, then uses the residuals (Epsilon ...
0
votes
1answer
42 views

What is some book that is complete and easy but hard enough to serve as prerequisite for asset pricing and portfolio choice theory?

What is some book that is complete and easy but hard enough to serve as prerequisite for asset pricing and portfolio choice theory by kerry back? I wonder how come a beginning graduate textbook is so ...
0
votes
0answers
15 views

Where to download Earnings Conference Call transcripts?

Is there any places (like EDGAR) that I can download Earnings Conference Call transcripts in bulk? Thanks.
3
votes
1answer
99 views

Computation of Expectation

This question has so long preoccupied my mind.Please help me to solve it. Question: Assume $X_t$ described by the following stochastic differential equation $$dX_t^{\,\alpha}=\alpha X_t^{\,\alpha} ...
0
votes
2answers
48 views

How to get list of all symbols in fred database?

I am trying to query every single series in the fred database using r. I have checked out both the quantmod and fImport packages, and they work fine, though it seems that quantmod fits my use a bit ...
2
votes
3answers
124 views

Intuitive Explanation for Volatility Smile for Equity

I am trying to understand the intuitive reasoning for why volatility is more for deep OTM/ITM put/call then ATM..(why Simles for equity) Why ATM will not have more volatility as deep OTM/ITM option ...
1
vote
4answers
165 views

Why square root of volatility in Heston model?

Why do we model it as sqrt root of v(t)? Is that because we don't want the volatility to go negative? If this is the case, can we model it as square of v(t)?
0
votes
1answer
16 views

What P&L netting should one use when a strategy has trades in two different geographic locations?

I am familiar with the FIFO methodology of netting buys and sells to obtain a realized P&L and outstanding position. Suppose there's a strategy which runs in two different places A, and B and ...
0
votes
0answers
20 views

Settlement/Spot/(bid ask spread) ratio

Are there any studies on the average difference or ratio between Settlement (execution price) and the Spot price dependant on lot size. I'm looking for a function such as ...
-3
votes
2answers
38 views

Approximating the IV of an underlying from Individual Options IV

Is it possible to get a calculation of IV from the volatility on components of the options chain? EG I have this data: ...
2
votes
1answer
76 views

Evaluation of the semi-closed Heston pricing formula for call options

I'd like to know, how the integral part of the semi-closed Heston pricing formula for call options can be simulated for a given set of model parameters. Monte Carlo simulations shoud work for this ...
5
votes
2answers
150 views

How does one estimate the probability of the Fed increasing its benchmark rate based on Fed funds futures?

How was this 67% probability calculated from Fed funds futures? Fed funds futures show a 67 percent chance the central bank will increase its benchmark rate by year-end from virtually zero, ...
2
votes
2answers
92 views

How to interpret Realized Volatility and TSRV using R

I am looking at some high frequency data and I would like to know how to interpret and compare Realized volatility (RV) and Two Scale Realized Volatility (TSRV). References below. Given X is the log ...
0
votes
1answer
31 views

Does it make sense to interpret autocorrelation and box test on 5 data points?

I am trying to see if after I trade a stock the price movements at 2, 5, 7, 10, 30 and 60 seconds after exhibit any autocorrelation. Below I have the returns from my trade price to the trade 2,5,7,10 ...
0
votes
0answers
58 views

Monte Carlo, convexity and Risk-Neutral ZCB Pricing

I've built a simplistic Excel monte carlo model to price a zero-coupon bond, but it came up with a slightly unepxected result so I wanted to confirm whether my maths is just a little rusty or my model ...
0
votes
0answers
31 views

Performance analysis for a changing portfolio

I am trying to do a performance analysis of an investment in five different funds (A to E). I am investing a fixed amount at each fund (say 10m in A, 20m in B, 10m in C, 20m in D, 10m in E) but the ...
2
votes
0answers
63 views

Calculating Net Annualized Return on LendingClub historical data

I am interested in the formula LendingClub provides as their measure of "Net Annualized Return": $\big(1 + \frac{\sum_{i=1}^N{((I_i + L_i - S_i - C_i + R_i) / P_i) ...
-1
votes
1answer
19 views

What is wrong in my investment calculation [closed]

I am thinking to start investing monthly and i am trying to calculate my investment using excel with a compound interest of 5% monthly plus addition of certain amount. First month investment is 10000 ...
1
vote
1answer
64 views

Geometric Brownian Motion - Why Sqrt(dt)? [closed]

I was going to simulate a geometric brownian motion in matlab, when I recognized that I didnt fully understand the underlying Wiener process. Following the instuctions here I am starting from the ...
0
votes
1answer
17 views

Intrepreting the Capital Market Line plot

I am looking at plots of the Security Market (SML) line and Capital market line (CML). The X axis is the beta for the SML and Standard deviation for CML; the y axis is labeled with excess return. ...
1
vote
4answers
69 views

analytic formula for the value of an American put option

It seems to be a foolish question but I can't take my mind off from , Is it true that there is no analytic formula for the value of an American put option on a non-dividend-paying stock (or a divident ...
0
votes
0answers
20 views

Programmer new to the quant world - learning material request [duplicate]

So I am a programmer in Uni and was looking for all types of resources to learn about quantitative analysis techniques from: Podcasts. Videos. Tutorials. Books. Lectures. Examples. All of these ...
1
vote
3answers
121 views

Latency and Delays across Exchanges

I have recently come across this paper by Battalio et al. "Can Brokers Have it all? On the Relation between Make Take Fees & Limit Order Execution Quality" and realized how little I know about the ...
1
vote
0answers
36 views

Texts on the Generalized Method of Moments

I was looking for a book that could explain me well the Generalized Method of Moments, its mathematical nuances, and even have a look to the empirical side, maybe with some guided exercises with Stata ...
2
votes
1answer
104 views

Real world monte-carlo (P-measure)

Consider the 2 following approaches to pricing a security: Monte-carlo ($\mathbb{Q}$-measure) $\begin{equation} C = \frac{1}{N} \sum_{i=1}^{n} e^{-rT} max(S_i(t) - K, 0) \end{equation}$ Monte-carlo ...
2
votes
1answer
69 views

Vega in Heston / Bates Model

Just a question regarding "convention": Is the Vega in Heston / Bates model the sensitivity with regards to $\sqrt v_0$ or a term of $\sqrt v_0$ and $\theta$ (Long term variance)? Regards
0
votes
0answers
25 views

Broker or source of intraday futures data for a python API?

I am looking for a broker that offers a python API for downloading historical intraday data on futures. So far I have only seen Interactive Brokers and Tradestation. Are there some other brokers ...
1
vote
0answers
44 views

Why is CSA currency OIS rate used in discounting instead of local currency OIS?

I have been struggling to understand the logic behind cross currency OIS discounting (where cash flows happen in different currencies than the collateral is paid). I will illustrate my question ...
4
votes
0answers
108 views

Markov-Switching Multifractal and FX Rates

Is there a better model than Markov-Switching Multifractal (MSM) for detecting regime shifts in FX rates across multiple time horizons? I am especially interested in the different aspects of the ...

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