All Questions
3
votes
0answers
96 views
Quant/Stat Factor Performance Website/Distribution?
Does anyone know of a decent quant/stat factor website, distribution(public or private) or publication that tracks performance of "many" of traditional quant/stat factors? By that I mean would show ...
2
votes
2answers
218 views
How to implement Maximum Diversification in R?
I am trying to code up the optimization problem for Max Diversification Portfolios.
The main problem I am having is properly translating the objective function in to code and port it in to the ...
2
votes
3answers
242 views
Analyze raw tick data
I'd like to work with raw tick data and naturally this data is unevenly spaced (for example, a couple of quotes are at the same second etc.)
For example
...
3
votes
2answers
166 views
Is vega of Black-Scholes European type option always positive?
We assume we work in the risk-neural measure with a stock which pays no dividend and a continuous discount rate.
For PUT and CALL only: can someone please clarify if what I said is correct?
The ...
2
votes
0answers
39 views
Portfolio insurance with a coherent risk measure (CVaR)
I would like to analysis of portfolio insurance under a coherent risk-measure method (CVaR), How can I achieve that? Is there a way to turn the problem into a linear programming problem? or to ...
2
votes
0answers
55 views
What does it mean to adjust for short-run liquidity in finding risk-free rate of return
Risk-free rate of return should equal the expected long-run growth rate of the economy with an adjustment for short-run liquidity.
What is meant by the last phrase, "adjustment for short-run ...
1
vote
0answers
85 views
Interpolate option volatility in delta space in R
I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
0
votes
0answers
29 views
Is Bitcoin a trending or a ranging market at the moment? [migrated]
Is the Bitcoin market trending or ranging market at the moment? If so how can i determine whether a market is a trending or a ranging market.
Thanks. :)
0
votes
1answer
46 views
BSYM for historical tickers
When looking through Bloomberg's BSYM data ADR and Common Stock data (5/2/13), I was able to find the ticker symbol 'V' associated with Visa but was unable to find any record for Vivendi, which I ...
3
votes
1answer
128 views
How to determine ratios for mean-reverting basket
Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model:
...
-1
votes
0answers
75 views
question about Mean Variance optimization in C# [closed]
I just found (probably) mean variance optimizator on MSDN site with Microsoft Solver 3.0 (see, this link).
Is this valid code/approach to calculate weights of each position in sound of mean variance ...
3
votes
0answers
60 views
RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?
Please, consider the following functions from RQuantLib package:
FixedRateBond()
...
-4
votes
0answers
54 views
Arbitrage: Difference Between Liquidity Taking and Liquidity Making [closed]
Liquidity Taking
If X is trading for 22 USD at Exchange-A and 20 USD at Exchange-B, someone can sell their X at ExchangeA and buy back X at Exchange-B for a 2 USD profit.
Liquidity Making
If ...
7
votes
1answer
123 views
Bond curve extrapolation
What are the best methods to extrapolate bond yields from an existing curve that doesn't extend quite this far?
For example, how would one come about finding a theoretical bond yield for a 40 or 50 ...
4
votes
5answers
501 views
Call vs. Put Option
I have two interrelated questions that have been bothering me for some time. I have read all the stuff online and it still doesn't make sense to me:
Let us assume:
0% interest rate (both hedge ...
0
votes
1answer
109 views
How to calculate unlevered beta
I have derived a firm's cost of equity using the WACC formula (see here), which means that the cost of equity has factored in the firms' debt (i.e. levered beta) and now I need to calculate the firm's ...
-1
votes
0answers
77 views
How to Calculate Cost of Equity using WACC [closed]
How can I calculate the Cost of Equity for a company when I am not given the beta (or enough information to calculate beta) for the company, but I am given the WACC.
Question Facts
The usual ...
-4
votes
0answers
45 views
Wich online Forex Brokers accept connections with black box solutions developed in visual basic? [closed]
Iam about to develop something at visual basic , but i only know that interactive brokers accepts black box solutions. The problem is that to trade forex in a leveraged account they ask a minimum of ...
0
votes
2answers
262 views
How to use PCA for trading
Can anyone give me a few pointers of how to approach using PCA for trading? In particular, it seems to me, PCA is useful for selecting a subset of a portfolio of stocks(or other) rather than trading ...
1
vote
2answers
107 views
Black Scholes Formula for Collar Option
I am wondering if there exists a Black Scholes pricing formula for a collar option?
2
votes
0answers
101 views
Philips-Ouliaris test for cointegration
I'm trying to implement cointegration tests using the R urca package. I've figured out the Johansen test (ca.jo), but I'm having trouble with the Philips-Ouliaris test (ca.po). I have two questions:
...
-3
votes
0answers
62 views
Good source for S&P multiplier [closed]
Where can I find a good source for current and historical S&P multiplier.
Is there a good source to view the aggregated company's profit as a percentage of the GDP?
1
vote
0answers
79 views
analyze strategy performance with given matrix of weights/time and weekly returns in R
I have a matrix of 259 weekly returns, 50 assets and a portfolio composition for each of the 259 weeks. I would like to test the performance of the portfolio during 52 weeks, rebalancing every 12 ...
-4
votes
0answers
59 views
How could covariance help with pattern prediction? [closed]
Could someone give me a "high-level" explanation how I could use the technique of covariance to implement a pattern recognition technique?
I have used autocorrelation in the past for detecting ...
0
votes
0answers
65 views
Volatility of a rolling window strategy
What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
-3
votes
0answers
63 views
Calculating Earnings Per Stock from Financial Statements [closed]
Given the Earnings Per Share formula:
EPS = Profit – preference share dividends / weighted average of ordinary stocks outstanding
How does one calculate the ...
1
vote
0answers
59 views
How to measure if variance is greater at a certain time of day?
I'm not very fluent in the quant vernacular, so perhaps the nature of my question will be better illustrated as a hypothesis.
One market has closed and another market elsewhere on Spaceship Earth is ...
2
votes
1answer
125 views
How to measure contango?
Is there any unit of measure for the magnitude of the contango (or backwardation) for futures, so you can compare the contango of many symbols.
2
votes
0answers
85 views
Error term/Innovation process in ARCH/GARCH processes?
I am wondering about the distribution of the error term/innovation process in a ARCH/GARCH process and its implementation, I am not sure about some points. The basic assumption is
...
2
votes
2answers
144 views
Time Varying Volatility
If stock returns ($r_t$) are not auto correlated why is that the squared term of the returns (volatility) exhibit serial correlation? Does heteroskedacity, by its nature, imply that time varying ...
1
vote
1answer
69 views
How does one use the Johansen cointegration test in a linear time series model?
How does one use the Johansen cointegration test in a linear time series model?
Should I only use normalized coeffients for interpretation? Or, once I know that the variables are cointegrated, do I ...
2
votes
0answers
50 views
Is there an appropriate sequence to tests during model diagnosis?
How should one order (sequence) the following tests?
Stationarity test
Johansen cointegration test
Normality/Histogram test
Autocorrelation test
Heteroskedasticity test
Multicollinearity test
...
8
votes
1answer
236 views
reasonable asymptotic elasticity in utility maximization (paper by Kramkov / Schachermayer)
I'm working through this paper by Kramkov and Schachermayer. I have a question about the proof of Lemma 3.6.
$\mathbf{Question}$ Why is the inequality $(3.13)$ true, i.e.
$$\lim\sup_n ...
2
votes
1answer
73 views
Implied dividend estimation
I am looking at two different ways of estimating the expected / implied dividends from market data.
1. Dividend futures
I know that this asset class is not very liquid and might not be ...
-3
votes
0answers
76 views
Daily Abnormal Return [closed]
I have a portfolio like this,
Date / Ticker / Return of stock / Return of market/
1/1/11 AAPL -0.001 -.011
1/1/11 DELL -0.013 -.011
1/1/11 IBM ...
2
votes
1answer
132 views
What exactly is an ISO order?
I have been looking this up and I feel like I keep running into different definitions. My understanding is that an ISO order is one which will get filled with the displayed quantity in a particular ...
0
votes
0answers
11 views
Calculating Profit Ratio (Gross Margin) [migrated]
When looking at a company's income statement to calculate the Profit Ratio (Gross Margin)
PM = Net Profit / Sales
Do you include "other" sales revenue in the ...
2
votes
0answers
86 views
How replicate data using PCA
I have a set of date covering petrol prices.
My example has two columns where each row represents a sequential date.
...
-1
votes
0answers
14 views
What does it mean when someone says “FTSE closed at xxx today” [migrated]
I'm a complete "noob" in the field of finance/economics. However, I have been advised to learn the basics so I have sat down and started reading about various stuff.
Now, I always hear on the TV or ...
-1
votes
0answers
14 views
IB Order Execution [migrated]
A few weeks ago I started to trade American stocks. I have an IB account. Yesterday, I encountered a strange situation. I'd appreciate if someone could explain it. (I'm using the IB API.)
9:30:56 I ...
2
votes
1answer
83 views
Hedging differences between equity and index options?
Suppose we hedge an index option using futures on that index. How would the hedging strategy be different if the underlying could be traded directly (from a risk point of view)?
1
vote
0answers
112 views
How does Hanson's Market Maker (LMSR) work?
Implementing Hanson's Market Maker states:
If the market maker wants to quote a "current price", he can. The
current price for outcome 1 is:
$$
\mbox{price1} = ...
-1
votes
0answers
58 views
Literature in Quantitative Finance [duplicate]
I'm now reading a book by B. Mandelbrot about fractals and finance. It's very interesting to see a different approach from BS—the different step made by the author and how he dealt with usual ...
3
votes
1answer
81 views
What is the difference between convertible bond and bond with warrant?
One site suggested the difference is that the warrant in the bond with warrant is a fixed price on company stock. E.g. for a \$1000 bond, you can buy 500 shares at \$2 each. And that convertible bonds ...
5
votes
1answer
188 views
How to simulate correlated Geometric brownian motion for n assets?
So I'm trying to simulate currency movements for several currencies with a given correlation matrix. I have the initial price, drift and volatility for each of the separate currencies, and I want to ...
2
votes
2answers
146 views
Trading days or calendar days for Black-Scholes parameters?
Black-Scholes requires volatility estimated in trading days. How does this affect other parameters? Specifically, should the time-to-expiration also be in trading days? And how does this affect the ...
3
votes
2answers
95 views
Transformation to reduce standard deviation without changing median
Consider some negative skew and high kurtosis return time-series $X_t$. I do not know the functional form of the pdf of $X_t$ and have about 150,000 data points.
Suppose that I was to create an ...
4
votes
5answers
412 views
In Black-Scholes, why is $\log{\frac{S_{t+\triangle t}}{S_t}} \sim \phi{((\mu - \frac{1}{2}\sigma^2)\triangle t, \sigma^2 \triangle t)}$?
Namely, I dont understand why the mean is $(\mu - \frac{1}{2}\sigma^2)\triangle t$ and not just $\mu \triangle t$. I am aware that it is supposed to represent a lognormal distribution, but I guess I'm ...
2
votes
2answers
158 views
Calculating Geometric mean
I need to annualize daily returns for about 120 firms for over a period of 10 years. I chose to calculate the geometric return because 1) it is the actual return 2) to avoid the asymmetric effect of ...
3
votes
5answers
148 views
Convexity adjustment for a forward swap rate
I recently heard that for a forward swap rate (for example, the fixed rate of a swap that will start in one year and end in five years), I need to do a convexity adjustment in order to get the right ...
