17
votes
2answers
706 views
Tools in R for estimating time-varying copulas?
Are there libraries in R for estimating time-varying joint distributions via copulas?
Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
4
votes
1answer
154 views
Options: Vertical LEAPS
I am developing an algorithm and it needs to know what to do in certain market conditions
It takes on a Vertical Bull Call Debit Spread on LEAPS that are 12+ months out in the future. This means that ...
6
votes
1answer
233 views
Can options volume have an impact on the price of the underlying asset?
Can options volume affect the underlying asset price indirectly? I know that options buying/selling does not directly affect the price of the underlying asset (rather, the asset price contributes most ...
2
votes
0answers
241 views
TA/Pattern algorithm analysis
I have been building a momentum pattern detection algo (essentially involves fitting curves in overlapping windows at different timeframes) and wanted to see if anyone has done/seen similar work. I ...
4
votes
1answer
175 views
Can binary model lead to non-normal distribution?
If we suppose an instrument goes up or down 1 tick per $\Delta t$ (binary
model), its long term distribution will be normal, per the Central
Limit Theorem.
However, suppose we model as follows:
The ...
2
votes
0answers
180 views
What is a good site to download historical stock 'events' such as earnings releases? [duplicate]
Possible Duplicate:
What data sources are available online?
Earnings and valuation data sources online
I'd like to backtest some strategies involving earnings release surprises, as well ...
4
votes
1answer
167 views
Standard Deviations out the money where options will respond to underlying asset price changes
Is there an understood way of determining how far out the money an option can be, before it starts/stops responding to the underlying asset price changes?
I usually look at the greeks, gamma, delta, ...
14
votes
6answers
2k views
Can social media be applied to algorithmic trading?
Can social media sites, like Twitter, be used to analyze financial markets for algorithmic trading? How much research has been done on this topic?
7
votes
1answer
401 views
Monte carlo portfolio risk simulation
My objective is to show the distribution of a portfolio's expected utilities via random sampling.
The utility function has two random components. The first component is an expected return vector ...
4
votes
0answers
356 views
Correct way to calculate bond's Yield-to-Horizon
I'm creating some .Net libraries for bond pricing and verifying its correctness with a bond pricing excel spreadsheet (Bond Pricing and Yield from Chrisholm Roth) but I believe it calculates the Yield ...
5
votes
1answer
2k views
The difference between Close price and Settelment Price for future contracts
What is the difference between Close price and Settelment Price for future contracts?
Is there a define rule for evaluating the settlement price or each instrument/exchange different rules applied?
...
7
votes
2answers
716 views
What does the VIX formula measure and how does it work?
I have read the CBOE's white paper on the VIX and a lot of other things, but I need to honestly say, I don't really get it, or I am missing something important.
In semi-layman's terms, is the VIX ...
2
votes
0answers
160 views
Tian third moment-matching tree with smoothing - implementation
I was wondering if someone has an implementation of the Tian third moment-matching tree (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1030143) with
smoothing in code (e.g. c++, vba, c#, etc.)?
...
1
vote
1answer
524 views
What is the difference between STOXX and STOXXE?
Could anyone explain the difference between STOXX and STOXXE? Which is the right index for benchmarking European stocks?
Thanks.
8
votes
1answer
271 views
Option Portfolio Risk - Volatility/Skew - practical implementation
I'm trying to improve my methods for calculating real-time US Equity option portfolio risk.
My main problem is volatility "stability" across all strikes in an option series.
The current ...
8
votes
2answers
2k views
How can I compare distributions using only mean and standard deviation?
I only have means and standard deviations of samples of two random variables. What technique can I use to determine how similar the distributions these describe are? Assume that the values are built ...
1
vote
0answers
539 views
What skills and education are required for HFT? [closed]
I'm a university student and I'm quite interested in High Frequency Trading Algorithms. What courses should I take and what skills should I acquire so that I can work in this field?
So far, I've been ...
1
vote
0answers
150 views
how to choose a financial spread betting provider for ease of control with customers' programs [closed]
I want to use my quantitative finance programs for real world trades on financial spreads; forex, indices, stocks etc. The features presented by many providers are for the human interaction side. ...
5
votes
1answer
210 views
How to value a floor when a loan is callable?
Certain bank loans pay a spread above a floating-rate interest rate (typically LIBOR) subject to a floor. I would like to find the value of this floor to the investor. Assume for this example that ...
6
votes
1answer
306 views
How can I simulate portfolio risk (diversification) with a 'Wheel of Fortune' like investment options/returns?
Say I have 6 possible investment options with the following probability of success and the corresponding returns:
...
10
votes
3answers
1k views
How are limit orders selected from the order book?
I'm sure there is a simple answer to this but I haven't had any luck with searches. I'm just wondering when someone places a market order which order(s) from the limit order book are selected to fill ...
1
vote
0answers
276 views
Probability distributions in quantitative finance [closed]
What are the most popular probability distributions in quantitative finance and what are their applications?
2
votes
1answer
162 views
How often do ETF creation units baskets change?
Large institutions can swap baskets of underlying securities for ETF shares that can then be traded on an exchange as part of arbitrage between the price of the basket and the ETF share price. These ...
2
votes
1answer
196 views
Where are creation units baskets for ETFs published?
Where can the specification of a creation unit basket for an ETF be found? This information is needed for calculating the arbitrage possible between the ETF instrument itself and the creation unit ...
2
votes
2answers
2k views
Calculating Portfolio Skewness & Kurtosis
I need to calculate the skewness and kurtosis of 2 asset portfolio, can someone please help me with the formulas and definition of terms? Thank you.
I have been using the matrices method and I am not ...
3
votes
3answers
600 views
How to normalize Futures data(different leverage) for cointegration test?
For example I want to construct 2 time series, one for ES and the other for NQ and test for cointegration.
ES one point equal to 50$.
NQ one point equal to 20$.
If I have the following data:
...
9
votes
3answers
753 views
How to cluster stocks and construct an affinity matrix?
My goal is to find clusters of stocks. The "affinity" matrix will define the "closeness" of points. This article gives a bit more background. The ultimate purpose is to investigate the "cohesion" ...
10
votes
5answers
7k views
How to annualize Sharpe Ratio?
I have a basic question about annualized Sharpe Ratio Calculation: if I know the daily return of my portfolio, the thing I need to do is multiply the Sharpe Ratio by $\sqrt{252}$ to have it ...
4
votes
0answers
141 views
Use of Local Times in Option Pricing
I know two applications of local time in option pricing theory.
First, it allows a derivation of Dupire's formula on local volatility in a neat way (i.e. without resorting to differential operator ...
12
votes
4answers
1k views
Evaluating automated trading strategies: accepted practice
Both for private projects, and for clients, I've been working on code a lot this year to evaluate automated trading strategies. This often ends up turning into the task of how to fairly compare apples ...
2
votes
1answer
151 views
When does an ETF take out expenses?
When does an Exchange Traded Fund (ETF) take out expenses (for example 0,3% on a yearly basis)? Does it happen daily, or once yearly or according to some other scheme? Where does it take them from?
10
votes
1answer
209 views
What weights should be used when adjusting a correlation matrix to be positive definite?
I have a correlation matrix $A$ for an equity market that is not positive definite. Higham (2002) proposes the Alternating Projections Method, minimising the weighted Frobenius norm $||A-X||_W$ where ...
7
votes
3answers
567 views
What strategy would benefit most from having the fastest connection to the exchange?
Imagine that you have the fastest connection to the exchange (receive quotes 1 ms earlier than everyone else) for both stocks and derivatives.
How would you benefit from this?
Of course almost any ...
6
votes
1answer
224 views
Which is a more appropriate choice of risk measurement in a utility function, CVaR or VaR?
What is the consensus on which risk measure to use in measuring portfolio risk? I am researching what is the best risk measure to use in a portfolio construction process for a long/short option-free ...
7
votes
1answer
386 views
What are the most common/popular exotics in the interest rate markets these days?
By "exotic" I mean anything that is not a plain vanilla swap, swaption, cap or floor. Also any IR hybrids if appropriate.
Possible examples would be:
CMS and CMS spread options
Multi-callable swaps
...
4
votes
1answer
306 views
Should cointegration be tested using close or adjusted close prices?
When doing cointegration tests should I use the adjusted close price or just close price for the time series?
The dividend of each stock is on different dates and can cause jumps in the data.
5
votes
2answers
797 views
How to extrapolate implied volatility for out of the money options?
Estimation of model-free implied volatility is highly dependent upon the extrapolation procedure for non-traded options at extreme out-of-the-money points.
Jiang and Tian (2007) propose that the ...
7
votes
1answer
1k views
What is the reason for the convexity adjustment when pricing a constant maturity swap (CMS)?
I'm trying to wrap my head around pricing a Constant Maturity Swap (CMS). Let's imagine the following deal: 6m LIBOR in one direction, 10y swap rate in the other. The discount curve is derived from ...
4
votes
2answers
170 views
Are there financial instruments that make a bet on traded volume instead of price or its derivatives?
For most financial instruments we can go long or short and make a bet on the price. In the case of options we can bet on derivatives of price and other factors (e.g., interest rates).
Is there an ...
6
votes
2answers
2k views
What is a medium to low frequency trading strategy and why is it less hyped?
The term high frequency trading has been used quite often recently to refer to trading using real-time tick data (or data aggregated to few seconds) and having an intra-day holding period.
How are ...
8
votes
1answer
308 views
Has any research used Bayesian networks to estimate risk factor betas?
Is there any published research on estimating the beta of a security with respect to one or more risk factors via Bayesian networks?
I'd like to see if this is a promising angle of research.
4
votes
1answer
188 views
What procedure do leveraged ETFs use to limit losses?
I've skimmed through more than one ETF prospectus trying to find the procedure for clamping losses at the limits of an ETF, and so far, no help. Has anyone found a description of the "clamping" ...
2
votes
1answer
172 views
In a covered call strategy, should I hold the call or sell/roll if the delta becomes too small?
I am tweaking a covered call algorithm. The short leg consists of out of the money call options. The goal is to collect the tim premium, but an equally favorable circumstance is when the call ...
11
votes
1answer
664 views
Cleansing covariance matrices via Random matrix theory
I am exploring de-noising and cleansing of covariance matrices via Random Matrix Theory. RMT is a competitor to shrinkage methods of covariance estimation. There are various methods expressed usually ...
3
votes
2answers
10k views
How to calculate unsystematic risk?
We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ...
11
votes
2answers
409 views
Can you replicate an option on an arbitrary basket of stocks?
Since a market index is nothing more than a basket of stocks, you can create your own index by putting together stocks of your choice. The only difference is that you can trade options on major ...
2
votes
0answers
207 views
What does T statistics of Information Coefficient indicate?
Hi I am looking for a clear explanation of T statistics concept. Especially in quantitative equity portfolio management context, what does T statistics of monthly Information Coefficient for one ...
5
votes
1answer
309 views
What is the forward rate for a Black-Karasinski interest rate model?
I was wondering if anyone could help me with the instantaneous forward rate equation for a Black-Karasinski interest rate model?
I was also after the Black-Karasinski Bond Option Pricing Formula.
1
vote
0answers
605 views
Historical S&P 500 Stock Weights [closed]
I'm looking for histocial weights of S&P 500 constituents. I have access to a Bloomberg terminal. Any thoughts on how/where I might calculate/find these data?
P.S. I'm looking for as much data as ...
0
votes
0answers
110 views
Getting the actual distribution of a stock price at time T using implied volatility [duplicate]
Possible Duplicate:
How to derive the implied probability distribution from B-S volatilities?
Let's assume a stock price S, with volatility $\sigma$ constant, no dividend, and risk free ...
