# All Questions

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### Can Hurst exponent be used to characterize nonlinear dependence in time series?

It appears to me that the answer is no, because Hurst exponent measures persistence in terms of autocorrelation, which is a linear measure. So even if a time series of asset returns is driven by ...
460 views

### How to compute interest rate futures spread ratio?

I am confused on how to compute the spread ratio. For example, this is example I came across with my broker - Consider 2 contracts Bobl and Euribor. The DV01 of Bobl i 44.8 and Euribor is 25. To ...
278 views

### Does Ito/Malliavin calculus have any applications helpful for direction based trading?

I'm an aspiring computer scientist who want to move into algorithmic trading at some point. At the moment I'm mostly focusing on courses in machine learning/data analysis etc. but I've noticed that ...
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### Historical data on short rates

I would like to backtest a short-equity strategy. I'm looking for historical data on the availability of shares and cost to short certain stocks. Does anyone know of such data being available ...
108 views

### Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?

The bonds which Greece has paid had been valued by market as junk once, just before there payment. Given that the observed market value is the net present value of the instrument, why were they so ...
322 views

### Computing FX forward delivery dates

I'm looking for a precise definition of how FX outright delivery dates are computed. Chapter 1 of the book 'Foreign Exchange Option Pricing: A Practitioners Guide' (this chapter can be found here) ...
201 views

### Question on OptionMetrics: “Strike Price times 1000” differs too much from Index price

I have a question regarding the strike price that is given on OptionMetrics. My goal is to primarily retrieve options prices of a specific maturity with strike prices that are 20% in-the-money, ...
272 views

### NYSE Early Close Rules (July 4th and Dec. 25th)

Does the NYSE provide a list of rules for determining when to close at 1:00 for a holiday? I have found a list of upcoming half-days here but I would like to know the rules so that I don't have to ...
1k views

### Interpolating FX forward points

When computing an FX forward rate for an expiry that is not explicitly quoted, it seems to me that a reasonable way to do it is log-linear interpolation of the two nearest outright forward rates, ...
1k views

### Data source for historical Share Outstanding totals for individual stocks?

Data is normally adjusted for splits/reverse splits, etc. The current shares outstanding is usually available. Is there a data repository that captures the shares outstanding for any point in the ...
477 views

### ROC: difference between discrete and continuous?

Using the ROC function in the R package TTR, there is a choice between continuous (the default) and discrete, but with no guidance on which you choose when. In the code the difference is: ...
1k views

### How to define the objective function for a custom optimization problem?

I would like to find the allocations that would minimize some user-defined metric (Sortino, minimum drawdown, etc) for a portfolio of assets. How would one go about formulating the objective ...
706 views

### VIX = Vega of S&P500 options?

ok, so let assume I can predict the daily change in the VIX itself (in points) every day. what would be the best way to play this with OPTIONS? well, obviously VIX options, but if I can look at the ...
515 views

### Multi asset option portfolio risk management (greeks and FX exposure)

I am running an options book containing listed options across multiple products. I trade mostly equity and index related options - with a preference for European expiration products. I trade products ...
260 views

### Is there any evidence that an option delta approximates ITM expiry probability?

Several sources (online and offline) that discuss the delta of a listed vanilla option, state that its delta is a (guesstimate?) of the probability of said option expiring ITM (in the BSM framework). ...
480 views

### Strategy Risk and Portfolio Allocation Model (copy from nuclear phynance)

Here is a very interesting question that I found at Nuclear Phynance (original author: Strange); I though it is so interesting that it is worthwhile to ask it here: I have $N$ strategies, across a ...
121 views

### Brent Crude Data

I am trying to locate historical volatility data (5+ years) for Brent Crude? Does anyone know where I might be able to source such data?
427 views

### Can the Heston model be shown to reduce to the original Black Scholes model if appropriate parameters are chosen?

Summary For Heston model parameters that render the variance process constant, the solution should revert to plain Black-Scholes. Closed from solutions to the Heston model don't seem to do this, even ...
277 views

### Benfords law and quantitative finance

Benford's law has been applied in various ways for detecting fraud (e.g. elections or accounting). But what are the most useful applications of Benford in quantitative finance? Are there any? I have ...
272 views

### Backtesting VaR model violation independence

I am interested in hearing about the practitioner state of the art for testing the time independence of a VaR model (i.e. that VaR violations are independent in time). There are a number of tests in ...
350 views

### Long-term vs short-term strategies \ investing

Suppose most investors have very short investing horizons and use appropriate (for them) strategies, but investor X has a very long horizon. He would like to trade some advantages (early withdrawal ...
163 views

### Indexes/stocks with flat implied volatilities

After the 1987 crash, the S&P500 index implied volatility changed from nearly flat to negatively sloped. According to Rubinstein the Black-Scholes model was not so wrong when applied to the ...
373 views

### Why don't options traders use charts? Or do they?

Retail trading platforms typically offer equity charts but only instantaneous quotes on options. It seems like even a few minutes of historical data would be useful when entering an order. Are charts ...
57 views

### Neglect the positive values in negative interest rates modelling?

The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads. Could their volatility / correlation ...
65 views

### Separated software and physical cash flows modelling and pricing to be used with negative interest rates?

The physical cash presence in the final transactions is one of the issues in the presently observed negative interest rates bonds. Such a situation has historically been modelled within the "liquidity ...
55 views

### Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?

Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...
176 views

### Is inverted Japanese style curve persistent when negative rates are real / market - observed?

The time evolution of inverted curves does model / forecast a future recession and not necessarily contains the current liquidity- / credit-related aspect. The historical Japanese style inverted yield ...
170 views

### St Petersburg lottery pricing & short investing horizons

I am a statistician (no solid background in finance). Please forward me to a book \ chapter \ paper to resolve the following general question. Suppose we have a stock with the following monthly return ...
645 views

### Modelling with negative interest rates

For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...
870 views

### What is the meaning of subadditivity in a risk measure?

The subadditivity reads: $\rho(X_1+X_2) \leq \rho(X_1) + \rho(X_2)$ What is the meaning of this condition? I can vaguely accept that one should diversify the investment portfolio. Or, I can ...
250 views

### Question on OIS and fed funds rate

If i am considering the 0-5 year irs spread for the USD market, would it be more accurate to use the fed funds rate or the OIS rate? I believe the OIS rate is calculated based on the fed funds rate, ...
133 views

### How to estimate CAViaR (Engle and Manganelli 2004) using non linear quantile regression?

I am trying to replicate results from Engle and Manganelli (2004). The following is one of their specifications, $q_t(\theta)=\gamma_0+\gamma_1q_{t-1}(\theta)+\alpha|r_{t-1}|$, $q$ is the quantile of ...
308 views

### Basic question about Black Scholes derivation

In the derivation of the Black Scholes equation, the value of the portfolio at time $t$ is given by $$P_t = -D_t + \frac{{\partial D_t}}{{\partial S_t}}S_t$$ where $P_t$ is the value of the ...
226 views

### Sufficient conditions for no static arbitrage

In Carr and Madan (2005), the authors give sufficient conditions for a set of call prices to arise as integrals of a risk-neutral probability distribution (See Breeden and Litzenberger (1978)), and ...
504 views

### Is this a common variation of sharpe ratio?

As an aside on his answer on another question Freddy said: Sharpe ratio is an often cited metric, though I do not like it too much because you are penalized for out-sized positive returns while ...
1k views

### Appropriate method for calculating negative returns on a trading strategy?

I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series? My issue is the appropriate ...
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### portfolio optimisation with VaR (or CVaR) constraints

I would like to optimize a portfolio allocation (maximizing the exposure or the expected return), but with VaR or CVaR contraints. (some parts of my portfolio cannot exceed a certain VaR) How can I ...