2
votes
1answer
131 views

How PCA is performed in the paper “Markov Models…”

can anyone explain in a bit detail on how PCA is performed in the paper "Markov Models for Commodity Futures: Theory and Practice" by Leif B. G. Andersen. I'm not clear on how the high dimension ...
4
votes
1answer
85 views

Cross Currency Swap pricing

I have seen two methods for calculating the value of a xccy swap - 1) Convert the future foreign payments to the base currency using forward FX rates, net with the base currency payments and ...
1
vote
1answer
33 views

Trinomial model for stock options with deterministic interest curve

I am implementing a basic trinomial model with constant volatility right now. I want to do an extension that does not take a constant riskfree rate as input, but interpolates between different given ...
-1
votes
0answers
27 views

Anyone know how to build worldquant alpha 101 using pyalgotrade?

Anyone know how to build worldquant alpha 101 using pyalgotrade? Could someone give me the sample code? Or how could I start this project? Or there is another tool can simulate the worldquant alpha ...
2
votes
1answer
174 views

kalman filter update equation

Assume that futures price $F(t,T)$ follows the Ito process as described by the following stochastic process $$ln F(t,T)=lnF(0,T)+(Z_1(t)e^{-k(T-t)}+Z_2(t))-(1/4k)[(1-e^{-2kT})(h_1^2+h_2^2))+4h_1h_0(1-...
0
votes
0answers
80 views

Probability of Brownian motion particle touching barrier given path starts at $X_0$ and ends at a known $X_t$

I have been reading Su and Rieger's paper on barriers and from there have been able to work out the unconditional probability of the process $dXt = μ dt + σ dWt$ touching a down barrier $α$ to be $\...
1
vote
1answer
10 views

Roll convention applied to weekend swap maturity date

Suppose a swap is booked with maturity on June 19, 2016 (which is a Sunday). Accruals are adjusted according to the modified following roll convention and follow U.S. holidays. For the last cashflow ...
3
votes
1answer
45 views

Model reference price of Limit order book

first of all, the description of this Stackexchange forum says its for professionals or academics. I'm doing a lot of self studying and with that I was able to understand some white papers but still I'...
0
votes
0answers
40 views

Programming language to compliment Finance degree [closed]

I've read a few questions regarding this, but want some new (more recent) opinions. I'm in the process of pursuing a degree in Finance, complimented with some Math and a sprinkle of Computer Systems. ...
1
vote
0answers
28 views

Outlier removal, issue with TSO function

I'm trying to detect outliers within a financial time series which represents the ratio of cash distributions to equity holders as a percentage operating earnings for the period. Visual inspection ...
0
votes
1answer
51 views

The difference between the binomial model and monte carlo simulation

In my project I have focused on the least squares method by Longstaff and Schwartz to find the lower bound of the American put option. I also focused on the dual method to find the upper bound of the ...
3
votes
0answers
69 views

What is the most stable, non-trivial dependence structure in finance?

The highest rated answer to the question on What concepts are the most dangerous ones in quantitative finance work? is this one: Correlation Correlations are notoriously unstable in ...
1
vote
0answers
32 views

Where can be found the tick size list for stocks traded in NASDAQ and NYSE?

Answering this question is relevant to assess the quality of a time series in order to observe whether the data vendor applies some rounding to the data or is more decimal are present than the actual ...
1
vote
1answer
47 views

How to convert Jensen's Alpha from monthly to quarterly observations

I am being puzzled while calculating jensen's alpha for single stocks. I have monthly returns data and have calculated alpha for each stock on a monthly basis (used 36-month rolling window for beta ...
1
vote
1answer
42 views

How should I understand expiration dates?

The following is an excerpt from Introduction to the Mathematics of Finance by Roman: Expiration Dates The last trading day of an option is the third Friday of the expiration month and the ...
1
vote
1answer
46 views

Implied Expected Stock Return from European Option Prices

We can calculate the expected stock return (under the measure $Q$) from at-the-money ($K=S_t$) option prices as: $$E\left(\frac{S_T-S_t}{S_t}\right)=\frac{e^{rT}}{S_t}(C_t-P_t)$$ The result is ...
1
vote
1answer
27 views

NOK NOWA overnight day count

The NOK overnight index NOWA is defined as: Reported interest rates shall be calculated as nominal annual rates for the actual number of days in the year ahead (365 or 366). (The percentage ...
3
votes
0answers
54 views

Kalman vs simple OLS

I am studying how some local and global variables (x and alpha) affects a local variable y have the following regression $y_{it} = \sum_{j} \beta_{ij} x_{itj}+\sum_j \delta_{ij}\alpha_{jt}+\epsilon$ ...
2
votes
0answers
47 views

What is the unconditional variance for a GARCH model?

I want to use a Matlab script to calculate Heston Nandi GARCH prices. I found an appropriate script online and it asks for the "unconditional variance" as an input. How do I calculate the appropriate ...
4
votes
2answers
220 views

Brexit implied probability

It is possible to bet on the Brexit e.g. on this page: https://sports.ladbrokes.com/en-gb/betting/politics/british/eu-referendum/uk-european-referendum/220800266/ The quotes are 8/15 for remain, and ...
3
votes
1answer
97 views

How to derive an option price for an asset with these dynamics?

Assuming my underline asset price follows the process: $$d\ln (F_{t,T})=-(1/2)\sigma ^2e^{-2\lambda(T-t)}dt+\sigma e^{-\lambda(T-t)}dB_t $$ How should I derive an option price formula?
1
vote
2answers
31 views

I need a low volatility asset that gives an interest/dividen [closed]

I have some cash that needs to sit on an account for some time (less then a year, where I will withdraw an amount every month). I need them in a fixed price/low volatility asset that gives an interest ...
3
votes
0answers
34 views

CBOE Index Minute Data

I am doing a small research and looking for a place to purchase historical minute CBOE Index data. I am interested in: VIX - CBOE Volatility Index VVIX - CBOE VIX VOLATILITY INDEX VXV - CBOE VIX ...
2
votes
1answer
44 views

Calculating required funds on Futures trades

I'm coding in python a backtester for trading the Futures markets (equity futures, precious metals, bond futures, etc..). When I open a position long or short, I need to deduct an appropriate amount ...
3
votes
2answers
72 views

How is the Chooser Option's value computed in this example?

In preparation for my finals, I am attempting a question on chooser options. One question asks A European chooser option on an index ETF paying a yield of 3.0% with strike \$64 has a maturity of ...
1
vote
1answer
30 views

How to understand this Risk Parity Algorithm?

I am trying to understand an optimization algorithm to achieve risk parity in a portfolio. I need some help figuring out the notation in the following formula: I found this on THIS paper. I ...
3
votes
1answer
55 views

Drift irrelevance on high frequency data

Let's assume that price of a certain asset follows Brownian Semimartingale process with a drift term and a Brownian-driven continuous part (no jumps for simplicity). In literature it is often stated ...
2
votes
2answers
70 views

Does LIBOR in USD reflect short term interest rates in the U.S.?

The London Interbank Offered Rate (LIBOR) is an indicative average interest rate at which a selection of banks (the panel banks) are prepared to lend one another unsecured funds on the London money ...
2
votes
2answers
113 views

Carr-Madan Formula

Really new to financial Maths. I am currently having problems with the Carr-Madan Formula. $$f(S_T)=f(F_t) + f'(F_t) (S_T - F_t) + \int_0^{F_t} f''(K) (K-S_T)^+ \ d K + \int_{F_t}^{\infty} f''(K)...
1
vote
1answer
23 views

Data of Credit Migration Matrices

Please advise that how to get the data of credit migration matrices There is a paper of credit migration matrices, I would import the data to Matlab or R for credit analysis. https://www....
1
vote
1answer
37 views

How to get all securities in an asset class from IBPy (Interactive Brokers python API)

Would like to know how to request all securities in an asset class using IBpy, the python wrapper for the Interactive Brokers API. For example getting all currency pairs in the class forex ('CASH'), ...
2
votes
1answer
74 views

How to create a synthetic put?

I have been reading into Hull's section on portfolio insurance through synthetic puts. My understanding is that in order to replicate a put we should replicate it's delta. Proceeding, Hull states ...
2
votes
1answer
56 views

Question regarding volatility forecasting using High Frequency Data

Hi guys this is my first question on the Quantitative Finance section of the Stack Exchange network. I am currently reviewing the paper by Professor Alan E. Speight and David G. McMillan 'Daily FX ...
1
vote
0answers
27 views

US Treasury interest rate swaps

I know that Bloomberg will give me the swap rates for Treasury 30's-5's, but I don't have a Bloomberg. Can anyone direct me to a source?
6
votes
1answer
207 views

How were these SDE derived?

Can anyone give me a detailed explanation of how below equations (3) and (4) are derived from (1) and (2)? \begin{align*} \frac{dF_{t,T}}{F_{t,T}} &=\sigma e^{-\lambda(T-t)}dB_t, \tag{1}\\ \ln(F_{...
3
votes
1answer
145 views

What is the benefit of having proximity to the Bloomberg datacenter?

I own and operate a datacenter adjacent to Bloombergs Datacenter in Orangeburg NY. We have had a couple of trading firms come to us due to our proximity to Bloomberg to receive "data" from them ...
1
vote
0answers
27 views

Levered beta with changing equity/debt ratios

I know how to calculate a bottom up levered beta for a privately held and not publicly traded company with Hamada (Proof of Hamada's Formula (Relationship between levered and unlevered beta)) and ...
2
votes
0answers
26 views

Calibration of intensity model

I could use some advice on calibration of stochastic intensity models. I am thinking that the CIR model is most suitable, as it can not take negative values (when feller condition is satisfied). I ...
1
vote
0answers
56 views

Stock market cash flow

I want to understand better cash flow of stock market and it's participants, but could not find any reasonable information online, hope more experienced people here could help. Money IN flow: (1)...
4
votes
1answer
97 views

Understanding Vega calculation in black Scholes model

I am attempting to calculate the Greeks, and I understand their derivation. However when it comes to actually implementing Vega I am a little lost. Vega is defined analytically as: $$ SN'(d_1)\sqrt{T-...
2
votes
2answers
67 views

Importance Sampling for pricing options with longstaff and schwartz

I have been asking this similar question before. However, I really want to be concrete and get and concrete explanation. I have been reading the paper by Moreni and try to implement the same ...
1
vote
0answers
38 views

Using CME DV01 to predict Futures price at 0.00% Yield

DV01 is published at CME Group for the cheapest-to-deliver bond here: http://www.cmegroup.com/trading/interest-rates/invoice-spread-calculator.html. If my goal is to get an approximation where the ...
0
votes
0answers
18 views

What is “swap rate differentials” in relation to currency exchange?

So I'm working on a excel spreadsheet that relates relevant drivers for the FX market. In particular, I was told to look into swap rate differentials. I've read that the interest rate differential is ...
0
votes
0answers
27 views

Sovereign credit default risk

so I'm tasked with trying to calculate the sovereign credit risk based on a 1 year default probability, and I know that Bloomberg already has a model for the 1 year default probability under the ...
0
votes
0answers
11 views

How to build a rating two-year transition matrix?

My question concerns not how to estimate a two-year transition matrix, but how to derive it from raw data. Let me explain... By means of Markov chain I can provide an estimation of a two-year ...
0
votes
1answer
39 views

Sharpe ratio highest amongst efficient portfolios?

I have a hard time understanding why the sharpe ratio corrresponding to the efficient portfolios is the highest possible. In my book, it states that the sharpe ratio of the efficient portfolios is ...

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