0
votes
0answers
61 views

Stock price distribution from options marks

I am reading the following link: on "recovering probability distributions from option prices" - how to subtract influence of stochastic volatility? At the end of the derivation it seems ...
1
vote
2answers
125 views

Modelling and forecasting mixed frequency financial data

I was wondering if someone could provide some guidance to me. I would like to Combine various financial data of mixed frequencies (some daily, weekly, some quarterly) to a composite index. I have ...
1
vote
0answers
47 views

Is this a GARCH Monte-Carlo simulation?

I tried this as a simulation for a GARCH(1,1) model. Is it correct? (I'm not speaking about the code itself, which works, but the underlying idea). Here is plot (of ...
0
votes
0answers
137 views

QuantLib importing in Python

Since I am working with a thesis, QuantLib is a very new thing for me. I have installed and compiled QuantLib, including the QuantLib-SWIG. Everything was compiled and installed using the guidlines at ...
1
vote
1answer
61 views

How to convert bond options strikes to future prices

CME, 10 year Note Call Strike 1300 How to convert this strike to future price? (today's open at 131'100) For example we can take current prices EOD data for example chart on CMEgroup: http://www....
3
votes
2answers
81 views

Security Market Line & Required Rate of Return for Projects

A standard definition of the Security Market Line is as follows: The security market line ("SML" or "characteristic line") graphs the systematic (or market) risk versus the return of the whole ...
1
vote
0answers
68 views

How to calculate cumulative returns with one lag in R

I have a huge data frame with over 1000 column, which are companies(column headers) and in each column I have their estimated return(monthly). The sample period of the data frame in 11 years. I want ...
0
votes
1answer
47 views

Conversion factor and CTD Bond

I'm reading the book 'Options, Futures and Other derivatives' an having a hard time to understand Conversion factor and CTD bond. Conversion factor I understand this as a factor to adjust the ...
1
vote
1answer
88 views

the difference between forward price and future price

In Hull's book 'Options, Futures and Other derivatives', author said that when price of underlying asset S is strongly positively correlated with the interest rate, future price is slightly larger ...
0
votes
0answers
46 views

Can you calculate the current stock price with the Call-Put Parity

Given the Call-Put Parity: $$ C - Ee^{-rT} = P - S(0) $$ Where: $$ C = Max(S(T) - E, 0)\\ P = Max(E - S(T), 0)\\ E = Strike Price \\ S(0) = Spot Price \\ S(T) = PriceAtMaturity \\ r = RiskFreeRate \\ ...
5
votes
4answers
246 views

Statistics for quantitative finance

I am looking for an advanced introduction to statistics. I am currently interviewing for hedge fund positions, and a solid base in statistics would be quite helpful. As a math major I have significant ...
2
votes
3answers
132 views

How to understand nonrandom/random process in Shreve book?

I have been reading Chapter 4 of Shreve's Stochastic Calculus for Finance II. It is easy to understand the simple process, $\Delta(t)$, defined on Page 126, which is just a constant inside a given ...
0
votes
2answers
108 views

Compiling QuantLib example

I have followed the guidlines for installing QuantLib for mac from here http://quantlib.org/install/macosx.shtml and also fixed the flags using the commands: export CXXFLAGS = -stdlib=libstdc++ ...
1
vote
0answers
33 views

How to perofrm a simple GARCH simulation example?

How is it possible to simulate one million of tick data for, say EUR-USD price, using a GARCH model? For example, how do I simulate $X_i$ for $i = 1 \dots 1000000$, with $\text{mean}(X)=X_0 \...
1
vote
1answer
97 views

how to calculate RMSE, MAE, given ugarchforecast results?

Given S&P500 returns for the past 20 years I fitted an ARMA(1,1)-GARCH(1,1) model using the rugarch package, so using ugarchspec() and the ugarchfit(), with different innovations distributions, i....
1
vote
0answers
35 views

Considerations when programming back testing engine

I am at the beginning of writing a back testing engine and wanted to get some Feed back on considerations I should take into account , design ideas etc.
1
vote
0answers
42 views

Quantlib binomial tree

I was trying to price options with the extendedBinomialTree class of quantlib. I actually tried at some point to modify this class in order to optimize it. Normally the drift and diffusion of the ...
1
vote
1answer
32 views

What is the difference between group and inequality constraints in Matlab?

Sorry if this seems stupid. I was wondering what the difference between a group and inequality constraint is in Matlab. As far as I can tell they are the same: From Matlab (http://uk.mathworks.com/...
0
votes
0answers
59 views

VECM model with GARCH (1,1) error in R

I should create a VECM model with 8 lags and with Garch (1,1) error in R but i don't know how to do it and which package to use. The VECM should also have covariates in it. Then I should perform a ...
0
votes
3answers
50 views

buy asset after exercising call options

Suppose that I buy a call option at \$10 for a stock $S_0 = \$100$, $K = \$110$, expiry date $T$. In $T$, $S_T = \$140$, so that I exercise the option to buy and then sell the assets (buy at $\$110$ ...
0
votes
0answers
57 views

Normal Black&Schole model for swaptions isn't working properly

I just wrote two functions in Matlab which calculates the swaption prices based on the Lognormal model and on the Normal model, although I have the idea that the Normal model is wrong because the ...
1
vote
2answers
90 views

Modelling callable bonds in a risk model (historical simulation)

What is a best-practice example on how to model callable bonds in a risk model - I focus on historical simulation (HS). For plain-vanilla bonds the input factors for historical simulation could be ...
1
vote
1answer
48 views

Effect of different maturity options in delta-gamma-hedging

I read about hedging with options and think i got it. However there is a case am not sure how to handle. Is there any exception in the delta-gamma-hedging-(calculaton-)technique? - say: solve an set ...
0
votes
1answer
51 views

Convexity in Markovian contingent claim

Background information: I believe we can use Jensen's Inequality here Show that if the payoff function $V(S_T)$ is a convex function on $S_T$, then the Markovian European contingent claim with ...
1
vote
2answers
66 views

Black-Scholes and Markovian contingent claim

Background information: Proposition 4.1 - For a European Markovian contingent claim, the Black-Scholes price satisfies $$\Theta(\tau,S) = -\frac{\sigma^2 S^2}{2}\Gamma(\tau,S) - rS\Delta(\tau,S) + rV(...
0
votes
3answers
409 views

Quantlib with python on mac?

Is there anyone who knows a good guide to get quantlib working for python om mac? I have tried to search online and have not found any good guidance. I need to use quantlib for a project on python. ...
2
votes
3answers
201 views

Options Data Sources

I am using Option Metrics to study a couple of things related to options. However, Option Metrics is quite limited in terms of scope (mainly it's US equities). I was wondering two things: 1) Are ...
1
vote
0answers
44 views

Vol surface changes as underlying moves

We market make in highly liquid, near term options markets. I want to build a risk report that tells us how our portfolio's greeks will change as the underlying moves. This is for risk management in ...
-1
votes
1answer
71 views

FIX engine for very low latency

We are building a new system where latency is key. Either commercial or opensource, our goal is to have an easy to implement fix engine where low latency is key.
-3
votes
1answer
77 views

Master thesis in Finance in search of topic concerning investor sentiment and financial crash

Is there any good idea that combines low volatility, risk aversion level of investors and prediction of financial crash ? Is there any literature?
0
votes
0answers
24 views

Video Analysis Platform

I own a data analysis company which is currently bulk extracting metadata from historical market video and audio files, and creating alternative/historical datasets around commodities, S&P 500 ...
1
vote
0answers
37 views

Problem with overlapping data when testing futures market efficiency

In my case non-overlapping data would represent the scenario where futures prices (3 months) do not correspond to the futures spot prices in terms of delivery date. For example, futures settlement ...
1
vote
1answer
70 views

Strategies to merge bid, offer and trade price time series into a single price time series?

I'm doing intraday analysis on low volume stocks. There are just a few trades every day, but a whole host of bids and offers. In order to reduce the sparsity of the time series data I'd like to ...
0
votes
0answers
30 views

Generating random numbers from the skew-t distribution

in another question I was trying to replicate density plots using random numbers coming from the skew-t distribution of Hansen (1994). Now I need to obtain a series of random numbers coming from this ...
1
vote
0answers
31 views

Under which conditions the minimum variance portfolio involves no short selling?

If $\rho_{12} < 1$ or $\sigma_1 \not= \sigma_2$ then $\sigma_v^2$ representing the variance of the portfolio with weights $(w_1, w_2) = (s, 1-s)$ as a function of $s$ attains its minimum value at: ...
1
vote
1answer
30 views

instantaneous forward rates vs forward LIBOR rates

HJM describes the behavior of instantaneous forward rates while BGM describes the behavior of forward Libor rates. From concept perspective, I understand forward libor rate are like forward Libor rate ...
2
votes
0answers
64 views

VAR models for log-returns?

I am wondering if Vector Autoregression (and other autoregressive models) is a sound modelling for the daily (not high-frequency!) log-returns of time series from liquid financial markets. One can ...
1
vote
2answers
80 views

Does a Poisson process converge to an Ito process in long term?

I have heard that a Poisson process "converges" to an Ito (diffusion) process in long term. However I do not see how the characteristic function of the form morphs into that of the latter. In what ...
3
votes
1answer
174 views

Consequence of negative mean reversion of hull white one factor model

I tried to calibrate the data for hull-white one-factor model. Sometimes, I get negative estimate of mean reversion factor after the calibration process. When I plug the negative mean reversion factor ...
1
vote
0answers
31 views

Is there a standard mortgage model available?

Is there a standard model (or way of modelling) different types of mortgages and different interest rates to find the optimal mortgage structure for home loans? e.g. a loan of $800k structure across ...
1
vote
1answer
95 views

Distribution of proportional bid-ask-spreads

I already asked this yesterday at "Economics Stack Exchange" but think this question might be better suited here. In the meantime i really tried to solve it by myself, but couldn't find anything what ...
2
votes
1answer
53 views

What is the cheapest way to connect to Nasdaq for market data and trading *electronically*?

I would like to connect to Nasdaq to execute some simple automated strategies. I am NOT a big bank or hedge fund, so paying a high monthly fee is impractical. Is there a way for a small startup or ...
3
votes
2answers
114 views

Variance of a Stock price and relationship with volatility

A bit of background. I know that the forward price of a stock (or its expected price) is given by $\mathbb{E}[S_T]=S_te^{(r-q)(T-t)}$. Here, $r$ and $q$ are not constant, but follow a curve. I was ...
3
votes
0answers
45 views

Reset Date standard for ICP (Indice Camara Promedio) trade

What is the Reset Date standard for ICP (Indice Camara Promedio) trade? Trade Currencies are USD v/s CLP. Please provide the ISDA link if there are any amendments to ISDA standards.
4
votes
2answers
132 views

Two correlated brownian motions

Is it true (see here, footnote 2, p.22 / p.14, without proof) that we can obtain two discretized brownian motions $W_t^1, W_t^2$ with correlation $\rho$ by doing $$d W_t^1 \sim \mathcal N(0,\sqrt{dt}...
3
votes
1answer
97 views

Density plot of the skew-t distribution

I am using the sgt package in R to recreate the plot from Hansen's paper ( available here http://www.ssc.wisc.edu/~bhansen/papers/ier_94.pdf on page 8) using random ...
1
vote
0answers
98 views

Latency Arbitrage in forex [closed]

(I've been downgraded on this question, and it's because most people don't understand what I mean. If you ever did hft arb, you will understand what I mean. If not, please do not answer) Everybody ...
10
votes
1answer
450 views

Processes used in quant finance

What are the main stochastic processes (and their SDE) used in quant finance? For example to model currency prices, stock prices, etc.
2
votes
2answers
65 views

Why is a risk-free portfolio desirable?

I am in the process of creating a program that generates status-quo variance-free portfolio (at least theoretically), and my question is pretty fundamental, which may just mean dumb. I am sorry if ...
0
votes
0answers
73 views

Problems calculating RSI

For the last few days I've been trying to calculate an RSI that matches a reliable source. Yahoo finance, E-trade, and TDA all give identical values, which I am unable to replicate. I have tried ...

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