# All Questions

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How do I use FixedRateBondPriceByYield() function on maturity date that is earlier than today? I get "non tradable error" when applying on date older than today. ...
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### regression analysis

"A model estimated with a large no. of observations may allow one to reject null hypothesis of zero coefficients for many explanatory variables.Thus we might choose to select a somewhat lower ...
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### Is credit exposure conditional on default?

Credit exposure defines the loss in the event of a counterparty defaulting, and expected exposure is the average of all credit exposures. BUT When adjusting the CVA calculation to account for ...
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### Why is credit exposure higher for a smaller probability of default than for a larger default?

I'm having trouble grasping this concept; I don't see the relevance of the explanation given in the text (Gregory, Counterparty Credit Risk and CVA) either. When expected exposure and probability of ...
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### Luis Torgo - Case Study, Function creates high leverage

I am doing Luis Torgo Case study - Predicting Stock Market Returns and I have a problem when I use the function trading.simulator in the package DMwR ...
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### How we decide the target price for stock

people giving intraday target price of particular share. Most of the times the target is achieved.I am still puzzled how the target price of stock for intraday can calculated. To elaborate my query ...
133 views

### How to predict daily range of forex?

I am trying to predict the intraday moving range of stock/forex (essentially, high-low). Here are some ideas based on what I've been reading recently (do not have quant background, so basic level of ...
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### Why can't marginal CVA be used in pricing?

"Marginal CVA may be useful to breakdown a CVA for any number of netted trades into trade-level contributions that sum to the total CVA. Whilst it might not be used for pricing new transactions (due ...
71 views

### Maximum option leverage?

Since options represent leveraged stock investments, at which strike $K$ does a European option provide maximum leverage? Hereby define leverage as ratio of Delta/Optionprice. You can use ...
73 views

### Tests for Mean Reversion in a Portfolio Rebalancing

On a single time series one can run a Dickey-Fuller test to determine if the asset is mean reverting or at least has been mean reverting during your sample. Is there a way to test for mean-reversion ...
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### Implied rate of a bond question

A 2 year bond, yield 6%. A 1 year bond, yield 4%. What's the implied rate for the bond that starts one year from now?
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### Need help understanding basics of cash flow engineering

I'm studying Financial Engineering, a subject I'm completely new to. I'm using Principles of Financial Engineering 3rd Edition and trying to solve the exercises ...
180 views

### Kurtosis in asset logarithmic returns

Assets such as stocks usually display kurtosis in their logarithmic returns. However, their logarithmic returns in a time interval $n$ are the sum of smaller logarithmic returns in $1/n$ time ...
126 views

### Seeming arbitrage in excess reserves

In the US banks are required to store 10% of their deposits in cash in the form of Fed Funds. Due to misbalance of demand and supply, some banks borrow such cash from others; the volume averaged ...
32 views

### Vendor data aggregation for Options on Futres

Have anyone managed to automate data consolidation between Reuters and Bloomberg for Options on Futures? Are there any common attributes that these vendors share in this particular asset class that ...
45 views

### Real-time Tick Filtering

Is anybody aware of any papers regarding tick/quote filtering algorithms. I'm aware of the Olsen stuff, but I'd prefer something with fewer free parameters.
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### How do you calculate price of non-existant call option on commodity future

I've been stumped on this for awhile now. I'm trying to determine the price of a call option on a commodity futures contract that expires in the future. My issue is that while the future's contracts ...
39 views

### Binary Option valuation problem in R using RQuantLib; also result validation aspect

When I am trying to value Binary Option using RQuantLib I am not getting all the greeks for exctype "american" wheras "european" exctype is fine. What is the problem here ? ...
52 views

### How does tranching cause leverage?

I've read that leverage is created with the tranches of a CDS index because the more junior tranches have more risk than the index. I get that the more junior the tranche the more the risk, but I ...
62 views

### Exchange rate conversion [closed]

If the EUR/USD exchangerate fell by -0,96%, how much has the USD/EUR exchange rate increased? According to the below charts the number would be +0,97% (currently) but I cant figure out how these ...
43 views

### Multiperiod return formulae with dividends

I have a question about returns when dividends are 'paid'. Firstly, will write down some definitions: Let $P_t$ be the price of an asset at time t. Assuming no dividends the net return over the ...
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### What do you do with low r-squared when calculating high-frequency beta

I am calculating a high-frequency beta. For example I have 90 days of data of the S&P and GOOGLE and I have 10-minute percent returns for each instrument. Each day has 34 10-minute percent returns ...
19 views

### Reconciling forecasted growth of components and sum

I'm working with a very basic basic forecast model using Compound Annual Growth Rate and I need to reconcile the forecasts at different levels of detail. Suppose I have two business lines with ...
26 views

### Quantlib FuturesRateHelper triggers not a valid IMM date error

I'm beginning to use QuantLib with python swig, and trying to build a EUR yield curve, please apologize if this is a dumb question, 1st time user of that library :) I face this error which frankly I ...
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### What is an estimated rise in the interest rate of the 10-year Treasury in this scenario?

Suppose that the Federal Reserve had raised interest rate by 0.25% last week 17Sep2015. What is an estimated rise in the interest rise of the 10-year Treasury? Which futures contract should one use to ...
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### Stats and Hedge Ratio calculation questions

I did self-study and learnt some concepts to build a multiple leg spread /portfolio for trading but still confuse in some basic concepts. I will be very thankful if you can answer my couple of ...
243 views

### Does Kalman filter always improve over linear regression?

If I have a simple linear regression that has statistical signification but I would like to improve the overall prediction results. Will a Kalman filter be always an improvement or as least achieve ...
85 views

### Risk neutral drift vs real world

I was of the understanding that risk neutral drift was always the risk free rate. A section from Gregory's book on Credit Value Adjustment seems to say risk neutral drifts are typically estimated from ...
92 views

### Why the value of this portfolio is negative? [closed]

Let's assume I buy 1 call with strike 100 and 1 call with strike 120 I sell 2 calls with strike 110 (with same expiration) I wonder why value of this portfolio is negative at $t=0$?
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### Does it make sense to calculate Fama-French betas of a single stock?

Or should Fama-French only be applied to portfolios?
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### Volatility smile risk (negative effect) on dynamically hedged portfolio?

About last week you can see MSFT call & put option appears to be resembling volatility smile. And then I open trade positions on a 4 MSFT long call option contract (all 4 contract with ...
28 views

### Euler discretization error increasing with number of steps? (GBM, Matlab)

I'm trying to see how the Euler discretization error behaves with respect to the number of steps. To do this I'm simulating a geometric brownian motion and comparing it with it's 'exact' solution. ...
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### Is it OK to consider the expected return is zero for stocks when calculating VaR over a short horizon?

I want to implement the approach described in the following recipe for calculating VaR: Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations I was told that I can ...
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### Will rolling-down-yield-curve bond strategy work if interest rates remain unchanged?

Suppose I have 2 strategies; A) Buying A One Year Bond And Holding To Maturity (Buy & Hold To Maturity) B) Buying A 3 Year Bond and Selling After One Year (Rolling Down The Yield Curve) Assume ...
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### Why some exchanges enforce that you send the total quantity (fill qty + open qty) when changing the order size?

Is it to protect against overfills? Can anyone explain in simple terms?
61 views

### Trying to understand the sign of Theta

I guess this a pretty easy question to answer, but I'm not able to get the intuition despite reading the concept a couple of times. So, the Greek Theta is almost always negative, except for when an ...
72 views

### Portfolio insurance strategy with path dependence

I have the following problem. Let us assume that $S_t$, the stock price follows, geometric Brownian moation with parameters $(\mu,\sigma^2)$. We are given an amount of money $M$ and at each point in ...
39 views

### Arbitrage opportunities for Put-Call-Parity [closed]

I am working on option mispricing by using Put-call-parity. I calculate the Put and call theoretical by using put-call-parity, and than make a comparison between actual and theoretical values.My ...
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I have been reading online about the FX carry trade and how this can be profitable (in general). From my understanding, the idea is to be long (lend) the currency with higher interest rate and short ...
suppose I have $N$ models, with returns $r_{n,t}$ over $1,...,T$ periods ($T>>N$). I want to find weights $w_n$ for model $n \in 1,...,N$ such the final model $p$, whose returns will be \$r_{p, ...