All Questions

15
votes
3answers
1k views

What is the necessary level of Econometrics-Know-How for a quant

It seems quants increasingly use econometric models at work. As someone who has sold his soul to probability theory and stochastical analysis I would like to catch up. What are the econometric tools ...
0
votes
0answers
37 views

URL with SEC data

Do you know a URL where i can find the CIK of a listed company PLUS ON THE SAME URL the filing dates of 10-Q or 10-K documents? So i can create this url ...
0
votes
0answers
35 views

how to collect tips amount during GDP calculation?

Let's say Tom had lunch in a restaurant and paid \$50 for the bill, he also give waitress Mary \$5 as tip. \$50 would be calculated as the service industry while calculating GDP, there's bills to ...
2
votes
1answer
118 views

Best practice approach for calculating the PE-ratio

I am trying to calculate the historical PE ratios of a stock, but which date should I use to get the stock price in calculating the PE ratio? My current approach is to use the stock price of a day ...
4
votes
2answers
328 views

Plain Vanilla Interest Rate Swap

I'm trying to build an intuitive understanding of the following $\textit{The price of the replicating portfolio at time $t$ of the floating rate receiver is}$ ...
1
vote
1answer
179 views

How to hedge a forward contract

I was asked this in an interview and I messed it up lol. This might actually be really basic. Let's say I signed a forward contract to buy NASDAQ at 4000 one year from now. How can I hedge this cash ...
1
vote
2answers
1k views

Sharpe Ratio, annualized monthly returns vs annual returns vs annual rolling returns?

I would like to calculate the Yearly Sharpe Ratio on MSCI World index I have monthly values of the index that falls back up to Jan/1970, hence about: 44 years, 528 months In order to calculate ...
3
votes
1answer
174 views

What return equation is Engle referring to in his Nobel lecture?

Engle comments in "Risk and Volatility: Econometric models and Financial Practice" that If the price of risk were constant over time, then rising conditional variances would translate linearly ...
1
vote
0answers
145 views

What's the link between EURIBOR3M futures volatility and rates volatility?

If I am not wrong, EURIBOR3M futures with maturity $T$, whose price is $F_{T}$, are quoted like contracts which express the underlying forward rates, $r_{T}$, as $$r_{T}=\frac{100-F_{T}}{100}$$ Now ...
2
votes
0answers
62 views

Triangular Arbitrage formula [closed]

i have 3 currencies AUD, USD and EU I am trying to work out the mathematical formula to work out if there is a spread/arbitrage opportunity as well as the maximum amount that can be conducted ( for ...
2
votes
1answer
58 views

How come the existence of ARCH effect is not a violation of Random Walk Hypothesis 3?

An ARCH (autoregressive conditional heteroscedastic) (1) model is: $r_t=\mu +a_t$, where $a_t=$return residual, and $\mu$ is the drift of the stock return $a_t=\sigma_t\epsilon_t$, where ...
0
votes
0answers
63 views

What is the arbitrage opportunity in Arrow-Debreu One Period market Model

The one period market model is made of 4 securities(A, B, C, D) and has 4 future states. Assume the market model is complete. and the state prices are (-2, 2, 4, 8). Given that I dont know the payoff ...
1
vote
2answers
290 views

Bloomberg Alternative for Quant Fund

Is there an alternative to Bloomberg for someone who only needs historical data (stocks, futures, indices) as well as what Bloomberg calls 'reference data' - i.e. what is the multiplier of ESU4, what ...
1
vote
2answers
200 views

Reading XBRL Data from the SEC FTP SITE

After I ftp into the SEC Edgar site (ftp.sec.gov) I am able to pull the appropriate financial statements (i.e., 10-k, 10-q, 8-k, etc.) onto my local computer. However, when I go to open these files, I ...
0
votes
1answer
39 views

What is shorting a asset that has negative price. Can anyone give me an example? [closed]

What is shorting a asset that has negative price. Can anyone give me an example?
3
votes
1answer
84 views

Time-Varying Volatility and Conditional Likelihood

Engle's comment in his seminal paper "Risk and Volatility: Econometric models and Financial Practice" mentions that I had recently worked extensively with the Kalman Filter and knew that a ...
1
vote
0answers
42 views

How do bond futures affect effective rate when used to hedge a bond's duration?

I'm trying to wrap my head around what happens to the net interest received when an invester goes short a bond future to fully hedge the duration of his long position in an actual bond. Does it ...
0
votes
1answer
345 views

S&P's Sovereign Ratings: Clarification on Definitions and Symbols

Similar to a question I asked earlier on, but I am now looking at S&P's sovereign ratings. Here, as in the case of Moody's, a few things are unclear to me in terms of the definitions used by ...
0
votes
0answers
35 views

swaps valuation

I am asked to solve the marking to market value(MtM) of a swap, unfortunely i´m having big troubles finding the solution, it´s a 5.5% (vs. LIBOR) 10-year swap, The notional is 500 mio USD and LIBOR ...
2
votes
1answer
215 views

Moody's Sovereign Ratings: Clarification on Definitions and Symbols

I'm working with sovereign ratings at present. With regard to Moody's there are a few things unclear to me in their definitions. Both questions refer to the sovereign rating history in Bloomberg CSDR ...
0
votes
0answers
44 views

Transaction costs of lending and borrowing

What are the transaction costs of lending and borrowing? How financial intermediaries reduce transaction costs of lending and how they reduce costs of borrowing? Thank you!
9
votes
3answers
2k views

Is there an intuitive explanation for the Feynman-Kac-Theorem?

The Feynman-Kac theorem states that for an Ito-process of the form $$dX_t = \mu(t, X_t)dt + \sigma(t, X_t)dW_t$$ there is a measurable function $g$ such that $$g_t(t,x) + g_x(t, x) \mu(t,x) + ...
2
votes
0answers
167 views

Does Bakshi, Kapadia and Madan (2003) VIX building approach underestimate volatility?

From a paper that shortly addresses an alternative approach to VIX-like index building: To test this approach, I've built a fake book of B&S options with constant volatility equal to ...
2
votes
0answers
81 views

Derivation of variance of Zhou (1996) volatility estimator

Does anyone know how to derive the Variance of Bin Zhou's volatility estimator (Theorem 1) in 'High-Frequency Data and Volatility in Foreign-Exchange Rates' (1996) Zhou 1996 Any help would be ...
3
votes
1answer
93 views

Minimum Variance Hedge Ratio in Binomial Framework

In order to find the minimum variance hedge ratio when holding a portfolio of vanilla call options and hedging with stock, you can do an OLS regression. In a binomial model framework, given ...
0
votes
1answer
78 views

Pricing options with two assets

I'm studying for a test and am stuck on this practice question: With interest rates equal to 0, two different stocks $S_1$ and $S_2$, both valued at \$1 today, can be worth \$2 or \$0.50 at some ...
3
votes
2answers
118 views

How to Calculate a Monte Calo VaR estimation error

I'm performing a Monte Carlo to calculate value at risk (with a 3 dimension risk factor) Now, I would like to calculate the error of the estimation of the VaR with respect to the number of simulations ...
3
votes
1answer
146 views

what was the quant role in the 2008 crash?

this is a complex topic that interests me, have researched myself, & is debated heavily in the media and there is lots of writing, even entire books/documentaries. maybe somewhat surprisingly, ...
3
votes
0answers
179 views

How are quants able to verify whether their calculated prices are any good

This question is related to the discussion on Model Validation Criteria However it appeard to be very high level to me and I would like to go more into detail. Not working at a pricing desk the ...
0
votes
1answer
54 views

How does buying back stock affect a company's credit spread?

How does buying back stock affect a company's credit spread? Would it cause it to get smaller? Any clarification would be appreciated.
3
votes
2answers
246 views

Price an option and find a replicating portfolio

I got stuck on the following question whilst learning about basic option pricing. A stock is valued at \$75 today. An option will pay \$1 the first time the stock reaches \$100 in value, which it ...
1
vote
3answers
371 views

What are some of the best quantitative finance websites? [closed]

Not looking to start a debate. Just want to learn more about the field and am looking for some websites with high quality, informative content.
1
vote
2answers
399 views

where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
0
votes
2answers
116 views

Practical equity options pricing

To price a vanilla option, the following information are required : Strike price; Underlying price; Volatility; Maturity; Dividends rate; Repo rate; Interest rate; The strike, underlying price, ...
1
vote
2answers
214 views

Risk management of options

Your client would like to buy a digital call option. the digital call option pays the buyer in one years time (i.e at maturity ) N=1m SGD, if the SGD USD spot rate at maturity is above a prescribed ...
0
votes
0answers
23 views

How to rightfully balance the share of the organization between departments after variable changes?

This is an abstracted version of the problem I'm facing and I have to tell you first, my question might not be precise and or even correct, so I hope you understand and in that case can improve the ...
3
votes
1answer
94 views

Summary statistic for the average probability of default?

I have the following scenario: Let $X_i$ denote the event where some institution $i$ 'defaults' (don't worry about the exact definition of a default here, it is not relevant to the question at hand). ...
2
votes
3answers
91 views

how to back out levels from a forecast of differenced series

I have a non-stationary series of bond yields $x_{t}$ that are logged and differenced $$y_{t}\equiv ln\left(x_{t}\right)-ln\left(x_{t-4}\right) $$ From that, I get a series of forecasted values ...
4
votes
0answers
98 views

Finding the dynamics of a dividend paying asset under arbitrary numeraire

Assuming I have a dividend paying asset $S$ with dividend process $D$. Now I would like to use the bank account process $B$ as numeraire and determine the dynamics of $S$ under the the corresponding ...
1
vote
1answer
178 views

Directional View of Volatility

What is an option strategy that someone could employ to simply go long/short volatility?? Assuming I want 0 delta(0 gamma if possible) risk in my option position, how do I take a directional view on ...
1
vote
2answers
156 views

why is the BNS model the way it is

what I am puzzled about is, why dont we instead of having \begin{equation} dX_t = \sqrt{V_t} dB_t - (\frac{1}{2} V_t^2-r-\lambda\Phi(\rho)) dt - \rho dZ_{\lambda t}\nonumber \end{equation} we just ...
0
votes
1answer
184 views

How do I simulate stock prices for a 10 asset portfolio, over a period of 10 years in MATLAB? [closed]

If I have given vectors for return and volatility (i.e. I have two 1x10 vectors), and I assume at first that their correlation is 0 (meaning my covariance-variance matrix is just diagonal), how do I ...
1
vote
2answers
166 views

Basket Option weight sensitivity calculation

I am looking to find/estimate the "greeks"/option price sensitivities/derivatives for a basket option situation. In specific the change in price of a put option associated with a change in weight of a ...
12
votes
1answer
270 views

Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
5
votes
1answer
115 views

Model calibration to illiquid assets when pricing options with long maturities

Let us assume one is interested in pricing an option with a very long maturity (up to 20 or 30 years) on a liquid underlying. The market won't have liquid quotes for the higher maturities. Still you ...
1
vote
1answer
161 views

binary tree options pricing model with dividend value - How should I discount the option at?

the expected value of the option given the next period up, down values is: $ Pexp = (p Price_{next, up} + (1 - p) Price_{next, down})/R$ where p is defined as $p = \frac{\exp(-r \times \Delta t) - ...
0
votes
0answers
118 views

Hull's method for the optimal hedge ratio: why?

To illustrate my question, let's assume that the owner of one unit of asset (unit spot price variable S) needs to sell this asset at time T in the future. In order to hedge against a possible fall ...
4
votes
1answer
90 views

Korean Bond futures market: is there a fundamental difference between 3yrs, 5yrs and 10yrs contracts?

I would like to model Korean government bond futures. So far I know two concepts (just a short, incomplete description) cash-settled futures (e.g. Australia): The average yield of a basket of bonds ...
0
votes
0answers
49 views

Realized volatility Create index from individual stock data?

I am about to estimate realized volatility on high frequent stocks. I am aware of the implications of the model (e.g. microstructure etc.) But what I dont know is how I can create an index to estimate ...
2
votes
2answers
129 views

What information about the stochastic process is available from path-dependent options?

Assume the stock follows a process, which is defined by the following stochastic differential equation $$\frac{dS}{S}=r(t)dt+\sigma(S,t)dW,$$ so that the stock price process has local volatility. ...

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