# All Questions

74 views

### How to express the volatility of two correlated Ito processes $Wt_1, Wt_2$ expressed in terms of $W_t$?

Having two correlated Ito processes ($W_t^1$ and $W_t^2$ are correlated Brownian motions with correlation $\rho$) $dX_{t} =\mu_{1} dt + \sigma_1 dWt_1$ $dY_{t} = \mu_{2} dt + \sigma_2 dWt_2$ ...
24 views

### Convert 90-Day Tbill to risk free rate on continuous basis

I am trying to use the BS formula to compute the value of a call option. To do that I need the risk free rate on a continuous basis. As far as I know, people typically use the 90 day TBill as a proxy ...
77 views

10 views

### Exchange ratio (stock swap ratio) during a merger/acquisition

Good morning to all, The question is homework-related but I've done the research already. The task is to guesstimate how much money will a known company A pay if it wants to acquire the known company ...
31 views

### Excess, Residual and Active Return

in CAPM. What's the difference between these different types of returns? Active return Excess return Residual return
60 views

11 views

### Modeled as the driftless geometric Brownian motion with instant increments [closed]

Consider a stock S currently trading at price S0. The future evolution of the stock price (St) t≥0 is modeled as the driftless geometric Brownian motion with instant increments: dSt = σStdWt, where ...
11 views

### A generalized Brownian motion [closed]

A company’s cash position, measured in millions of dollars, follows a generalized Brownian motion with a drift rate a=0.1 per month and a volatility rate b = 0.4 per month. The initial cash position ...
46 views

### Isn't Black's approximation for American options inconsistent?

I have came across a formula suggested by Fisher Black (Fact and fantasy in the use of options, FAJ, July–August 1975, pp.36) for approximating the price of an American call written on a ...
28 views

### What is the effect of mean-reversion on an upper barrier knock-out call option?

Consider a mean-reverting normal model for an underlying $dX^{(1)}_t=-\kappa X^{(1)}_tdt+\sigma^{(1)} dW^{(1)}_t$, for fixed time-independent constants, $\kappa$ (mean-reversion) and $\sigma^{(1)}$ ...
44 views

33 views

### What are the top 30 high frequency trading firms in forex domain globally? [closed]

I am looking for top 30 high frequency trading firms,especially on forex globally, but its really difficult to get any info as nothing is out there. Can anyone enlighten me on this?
54 views

I am thoroughly reading my first academic literature and I have found myself overwhelmed by terms that have been generalised in my studies. The extract is from "The Beauty Contest and Short-Term ...
39 views

### Perpetual American options

Formulate and solve the free boundary problem for the perpetual American options with the following payoffs. a.) $(S - K)_{+} + a$ where $a > 0$ b.) $(K - S)_{+} + a$ where $a > 0$ ...
38 views

### given someone's past investing history, is there a way to calculate his risk aversion?

given someone's past investing history, is there a way to calculate his risk aversion? Say, we know this client's investment history for example his past return, is there a way to calculate his risk ...
308 views

### Thoughts on how quantitative hedge funds use machine learning to invest in the stock market (algorithms, examples of data, etc.)

I believe there are several post on this general topic but I thought I would start my own thread. I'm a former fundamental hedge fund investor (i.e. modeling a company's financials, forecasting the ...
25 views

### Evaluation of Bayesian GARCH

I am using the bayesGARCH package to estimate Bayesian GARCH models and I was wondering how to evaluate them in terms of precision of forecast or at least the quality of the model. I have encountered ...
20 views

### FX Counterparty Risk Modeling

We are building PFE model for FX derivatives including but not limited to outright and barrier options. For counterparty risk purpose, we are assessing whether black karasinski would be good for fx ...
17 views

### Comparison of quality across different fundamentals data sources?

There are a variety of different mechanisms and rules used by each fundamentals data provider to standardize and report company fundamentals. For example, the transformation of reported statements to ...
59 views

### Calculation of Bond Carry from Synthetic future prices

I have only government bond yields with different maturities. How can I obtain sythetic future prices on bonds? After obtained the future prices, I am supposed to compute the return and carry returns. ...
26 views

### is mean and variance sufficient to determine the following question?

consider this question: I want to buy AAPL, and I could buy it from 3 brokers. I have their historical quote. Is there any statistic other than mean and variance I could use to determine if one broker ...
29 views

### Regime switching model getting data

I am trying to find a dataset (oil prices, S&P index, DAX returns etc.) in order to visualize the high volatility and low volatility periods in a plot. So far, I have not found a dataset that has ...
47 views

### Automate selection of BIC-minimizing ARIMA(1,0,X) model

I want to estimate an ARIMA(1,0,X) model. The MA(X) in the model is selected to minimize BIC. I have the following code employing the function auto.arima from ...
14 views

### Hedging non-deliverable forward

For a non-deliverable forward, the payoff at maturity is $N(1-\frac{F}{S_T})$, where $N$ is the notional, $F$ is the forward rate predetermined at $t=0$, $S_T$ is the spot exchange rate at maturity ...