1
vote
1answer
76 views

Bond Spread Drivers

I have some work to do on the drivers of government bond spreads - ie. across terms (not across governments) of the yield curve, say 5yr and 20yr bond spreads from the same government issuer - and am ...
0
votes
0answers
36 views

Java Implied Volatility Solving

After using RQuantLib and RCaller from Java I am desiring a bit more speed on my implied volatility calculations (for anyone who has used this knows it is quite slow). I need to price a large number ...
2
votes
1answer
85 views

American Swaption Pricing with Monte-Carlo method

I want to price an American swaption but I am not sure about what I am doing. Tree methods and PDE discretization seem difficult to adapt to a swaption. I am trying a Monte-Carlo approach. (in ...
0
votes
2answers
57 views

Dv01 of Eurodollar futures contract

Can anybody please explain in layman terms why the DV01 of a eurodollar futures contract is 25? I can mathematically calculate in different ways, but not able to convince myself, especially how is it ...
1
vote
0answers
141 views

Black Scholes well coded Python

I have some trouble with the following code. Some jump and a decentered path are present but it's not the case, normally for Black Scholes diffusion ! Is anyone see a problem in my code ? ...
3
votes
3answers
61 views

Budget Constraint in Sharpe Ratio Optimization

I am a math student and I am trying to understand the budget constraint in Sharpe Ratio optimization for portfolio design. Recall the budget constraint requires that the sum of the portfolio weights ...
4
votes
3answers
231 views

Sampling problem in portfolio optimization

In a summary I am trying to do the following Bond Subset 1 : Get list of USD Bonds --> Filter out Bonds which have YTM > y% DUR > 10 Y etc. .. This gives us Bonds which we are interested in. So ...
0
votes
0answers
33 views

What are the theta and vega of a forward starting plain vanilla european option with no dividend?

I am reading through Hull's book asking myself this question to understand exotics. I currently believe that theta should equal 0 until the forward start time, $t_*$, if the call pays no dividends. ...
0
votes
2answers
74 views

Why long power and short gas for Merchant power plant

Merchant power plant is one that can be turned on whenever you want. Suppose it is generating electricity from natural gas and we have a spark-spread option. Why is that the person who owns plant is ...
1
vote
0answers
36 views

If we modify duration, should we modify bond price? Options Futures and Other Derivatives

In Example 4.5 of Section 4.8 on Duration of Options, Futures and Other Derivatives (p.92), a bond's price and duration are computed assuming continuous compounding where the bond yield is y = 12%. ...
3
votes
1answer
64 views

Pricing of a simple contingent claim

Earlier I had the question (5.11 Tomas Bjork): $$ \frac{\partial F}{\partial t}+\frac{1}{2}x^2\frac{\partial^2 F}{\partial t^2}+x = 0 $$ $$ F(T,x) = ln(x^2) $$ And solve it using Feynman-Kac. The ...
1
vote
0answers
48 views

Why is the LIBOR-market model free of arbitrage?

Recently I have been reading a lot on the market models. One thing that keeps escaping me - why is the Libor-market model (LMM) assumed to e free of aritrage in continuous time ? To me this means ...
1
vote
1answer
53 views

Differenced Brownian Motion covariance

I am having some difficult showing what the following equals, where $x$ and $y$, $x>y$, distinct times: $\mathbb{E}[\Delta W_x \Delta W_y]$ where each $\Delta W_t = W_t - W_{t-1}$. I have ...
0
votes
0answers
16 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. Thanks. Chase CB
3
votes
1answer
77 views

Beta and Frequency of Data

Why are the betas of individual securities essentially the same whether we use daily or weekly data when calculating?
3
votes
2answers
71 views

CVaR/VaR Ratio as alpha goes to 1

I am having trouble taking the following limit of CVaR/VaR for a normal distribution as alpha approaches 1: $\lim_{\alpha \to 1} \frac{\mu + \sigma \frac{\phi^{-1}(\alpha)}{1-\alpha}}{\mu + \sigma ...
0
votes
2answers
96 views

Accessible HTF? (Slippage reduction)

I designed an strategy that operates with 30-second bars on e-mini SP500. It works fine in the back-testing and the out-sample, also performs well in every walk-forward test I have tried. But, when ...
1
vote
1answer
39 views

Convolution copula?

Using copula formulation for the following probability: $$\mathbb{P}(X\leq x,y_{1}\leq Y\leq y_{2})=\mathbb{P}(X\leq x,Y\leq y_{2})-\mathbb{P}(X\leq x,Y\leq y_{1})$$ ...
0
votes
1answer
57 views

What open source trading platform are available

I would like to compile a list of open source trading platforms. Something that would give an overview and comparison of different architectures and approaches.
1
vote
1answer
36 views

Delta of a standardized at-the-money 30-day put option

The plot below depicts the delta of a standardized at-the-money 30-day put option on the S&P500 tracker SPY over a 14-year period. This is data from OptionMetrics and standardized prices are ...
1
vote
1answer
68 views

HJM simulation problem

I'm trying to simulate a 3-factor HJM model. I got the algorithms from Glasserman book. In my case, I have $3$ maturity:$ 0.25y, 0.5y, 0.75y$. So my time grid is: $t_0=0,t_1=0.25,t_2=0.5,t_3=0.75$. ...
3
votes
1answer
157 views

quantiative risk measure how they are implemented in R and their use

So far I have just theoretical knowledge of risk measure and never used them in application. Therefore I have some basic question how risk measures are used in reality and how they are implemented in ...
2
votes
1answer
63 views

Discounting based on instrument type

Suppose we have an asset $A$, and we have modelled the cashflows for this asset to be $\{C_{1},\ldots C_{k}\}$ which occur at time $\{T_{1},\ldots T_{k}\}$. Now the present value of the asset can be ...
0
votes
1answer
83 views

Debt vs. Equity?

What determines whether an investment should be made using debt vs. equity? For example, startups are often financed with equity, while mortgages are always financed using debt. What characteristics ...
-5
votes
0answers
30 views

What was the average annual return on the developing world equity market in 2012?

I am looking for a reliable source for the above question. Thanks.
1
vote
2answers
84 views

Harnessing small correlations for reliable profit

It is said that Edward O. Thorp was able to harness small correlations for reliable financial gain. I've seen some strategies based on strong correlations which did not seem particularly reliable. ...
2
votes
1answer
98 views

Are there Python algorithmic trading libraries supporting forex?

I know about zipline and ultrafinance, but as far as I know, they don't support fx trading. Which libraries do?
2
votes
0answers
46 views

Bond (yield curve) dynamics in the Forward-LIBOR-market-model

The standard Libor-Forward-Market-Models provides a way of modelling the evolution of forward rates in time. However the model does not seem to be well suited for the modelling of zero-bonds. But ...
0
votes
0answers
61 views

Avoiding negative spread in pairs trading

I'm constructing money-neutral spread by this formula: Spread = log(P1) - log(P2), where P1 and P2 is prices of two instruments But sometimes spread can get into ...
2
votes
0answers
42 views

Calculate interest rate swap curve from Eurodollar futures price

So I was reading Robert McDonald's "Derivatives Markets" and it says Eurodollar futures price can be used to obtain a strip of forward interest rates. We can then use this to obtain the implied ...
0
votes
0answers
19 views

modelling with Meixner process

I failed to evaluate the integral of v(x)e^x over real numbers (i.e, from -infinite to +infinite) with respect to dx where v(x)=2d exp(2(pi+b)x/a)/abs(x)(1-exp(2pi.x/a)) for x<0 and v(x)=2d ...
1
vote
2answers
79 views

hedging with known volatility

Suppose we have a stock $X$ at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How ...
0
votes
1answer
48 views

Are power contracts traded on any stock market?

Are power contracts traded on any stock markets ? What about OTC markets ? I ask about the derivatives where payoff is some exponential function of difference between strike and spot price.
0
votes
0answers
24 views

Developing an Android App. Need free volatility data [duplicate]

I'm currently developing an android app that requires volatility data. Any idea where can I get it for free? I tried Yahoo Finance API and they don't seem to have volatility data. Thanks
0
votes
0answers
36 views

EMM in incomplete markets

The simply put question is as follows: do we need to restrict ourselves to EMM exclusively when pricing European contingent claims (=option payoffs) even if markets are incomplete? In particular, a ...
1
vote
1answer
28 views

Integration in the context of modelling with the Meixner Process

I failed to evaluate the integral of $\frac{e^{ax}}{x\sinh(bx)}$ with respect to $x$ from negative infinite to positive infinite, What techniques can I use to evaluate the integrals of such kind for ...
2
votes
3answers
110 views

How can the Wiener process be nowhere differentiable but still continuous?

Taking a class in financial derivatives (book we use is Tomas Bjork´s Arbitrage theory in continuous time) but can´t understand the exact meaning of how the Wiener process is defined. In the book one ...
2
votes
1answer
154 views

Black-Scholes derivation assumption contradiction

In many books and derivations of the Black-Scholes PDE one sees that $$\Pi=V-\Delta F \Rightarrow d\Pi=dV-\Delta dF$$ which implicitly assumes that $d\Delta=0$. Somewhere down the road one then ...
6
votes
1answer
112 views

How do you calibrate a poisson arrival rate process?

Many papers in the microstructure literature assume an order arrival rate of the form $\lambda^a(\delta) = \lambda^b(\delta) = Ae^{-k\delta}$ That is, an order that's placed $\delta$ away from the ...
2
votes
1answer
108 views

Divergent or Convergent Strategies? Which is the way to go?

Consider first the simple convergent strategy to invest some amount $X$ in a game, if you win you simply take the winnings and keep playing a subsequent game. In the case of a loss, you believe in ...
1
vote
2answers
63 views

Simple question about expected value of brownian motion

I would appreciate some help with the math in this paper : High Frequency Trading in a Limit Order Book Specifically, I would like to understand how the authors calculated the expected value of price ...
1
vote
0answers
91 views

Derivation of a ML estimator

I have the following likelihood function: I'm given this information about the $\Omega$ matrix ($\boldsymbol{1}$ is a $T \times 1$ vector of ones): I would like to be able to show that the ...
1
vote
1answer
18 views

Different range price data on one chart

I'd like to evaluate 3-4 instruments on one price chart. For example: Stock A: 90,05 90,15 90,25 90,09 Stock B: 0,0045 0,0049 0,0039 0,0040 Stock C: 1998,1 1998,7 1998,8 1997 I try to use: ...
1
vote
1answer
75 views

Simple pricing example confusion

This it taken from "Heard on the Street", Section B. Consider a market with $0$ risk-free rate, no transactions costs etc. The IBM stock costs \$75 and does not pay dividends. Design a security ...
4
votes
0answers
133 views

Graduating Quantitative Finance (please don't move it to meta immidiately)

Seeing how very few actually read the Quant Finance meta I intentionally post it here on the main site. To the more powerful admins: could you leave it here for a day or two and move it to meta ...
0
votes
1answer
122 views

Trading spot volatility

I am reading a paper that very briefly talks about some volatility arbitrage strategies. It's so brief that I do not exactly understand how it works. It says one of the strategy is based on "short ...
1
vote
1answer
50 views

Price volatility and yield volatility

This question is a bit confused, but please bear with me. Now and then I see people use the terminology "price volatility" and "yield volatility" in connection with bond options. I understand the ...
3
votes
1answer
119 views

How to price this option without using BS framework

We have a stock at price 1 dollar which pays no dividend. Also we assume zero interest rate. When the price hits $H$ dollars for the first time where $H>1$, we can exercise the option and receive 1 ...
-1
votes
0answers
38 views

GARCH Models and Wavelets(SWT) in Matlab

I just need to know is it possible to fit and forecast the GARCH,EGARCH,AGARCH,GJR-GARCH models with wavelets (Stationary wavelet transformer Db5, LEVEL 4) in Matlab. I tried to fit the standard GARCH ...
0
votes
0answers
64 views

Bloomberg ticks is difference from Reuter ticks?

when I using Bloomberg excel plugins to retrieve the ticks and compare with Reuter RDF data, for some UK equity stocks in same days, the number of ticks and sum of total value is difference, why will ...

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