# All Questions

142 views

### Understanding the conditioning in a GARCH process

In a GARCH model like the following $$y_t=\sigma_tz_t,\\ \sigma_t^2=\omega(1-\alpha-\beta)+\alpha y_{t-1}^2+\beta \sigma_{t-1}^2$$ where $z_t$ is assumed to be iidN(0,1), we say that conditional on ...
48 views

### Which more topic should be covered in my undergraduate program? [closed]

Below is the topics covered in my undergraduate economics program. I want to know which course should I take to get a full overview of topics in finance today. Econometrics Micro, Macro Economics ...
246 views

### Why does [dz(t)]^2 converge to dt over infinitesimally short time periods?

I have some trouble understanding a chapter in George Pennacchi textbook "Asset Pricing". Here the author shows that the square of a Wiener Process $[dz(t)]^2$ converges to $dt$ for infinitesimally ...
129 views

### Intuitive understanding of Black-Scholes pricing

The Black-Scholes formula entails market completeness, so the price of an option is only the cost associated with dynamically hedging the option. Where does this cost come from? I don't see how ...
212 views

### What is the tau parameter in the Black-Litterman model?

Could someone please provide me with a clear and concise definition of the $\tau$ parameter in the Black-Litterman model? It seems one is rather hard to come by. I understand it to be the 'weight on ...
109 views

### investors hold efficient portfolios because generally they are risk averse

I'm trying to find a concept on this question,in my understanding investors differ on risk preference,the question said investors hold efficient portfolios because they are generally risk averse? ...
57 views

### Kalman Filtering with Linear Restrictions

A question on this topic has been asked before: Combining a linear Kalman Filter with additional linear constraints? and I checked out some of the references given: ...
98 views

### Basis Risk for Futures/Options

I am just reading about basis risk. It is being described as risk of the price of the hedging instrument not fluctuating the same as the instrument itself. I was just wondering, if we bought a ...
153 views

Did value of ratio between informed and uninformed traders at market, making difference to profitability of short-term directional trading on that market? My guess is yes and better play short-term ...
157 views

### The option values are different from two r package - foptions,rquantlib

The results are very different.I know the code from quantlib and the result of quantlib seem right(close to market price). Is there anyone know why the value from fOptions is so large or fOptions used ...
175 views

### Controling ex-post volatility by ex-ante limits

In the context of mutual funds the KID directive forces us to calculate 5 year ex-post volatility of a (market) fund (weekly returns). Thus each week we look back in the past and calculate volatility ...
147 views

### Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t$ ...
27 views

94 views

### regarding Basel II III model

I may have to get involved in some projects using Basel II, III model for risk modeling, to which I have no background. Are there any good book/tutorials to recommend? What are the underlying ...
115 views

### Market-Maker existence impact to short-term informed directional trading

How existence of market-maker affects short-term directional trading? Normally when playing short-term directional we play against market marker that will cover losses from uninformed traders. But ...
134 views

### What is the correct / expected behavior for a market order sent to an empty book?

Should it stick around until liquidity shows up? (GTC) Should it cancel any size for which there is no liquidity? (IOC) Is there such a thing as Market GTC or Market Orders must always be IOC?
77 views

### Identifiability for Time Invariant State Space Models

Kevin Murphy's Kalman Filter toolbox (for Matlab) contains an example where it's the fact that the state space system in not identifiable causes problems. I include the example in it's entirety but ...
62 views

### Variable Selection with Kalman Filter

I'm trying to estimate factor loadings on portfolios over time for portfolios that are traded pretty frequently. I have a sense that several portfolios are loading on the Fama-French HML factor ...
356 views

### Why parameterize the Black Scholes implied volatility surface?

I know that SVI volatility surfaces are very popular among financial practitioners. I understand that this is not really a model for some underlying asset (such as Black Scholes, Heston etc.) but ...
129 views

### Dealing with the stock numeraire

I don't understand how to express the stock dynamics in the stock numéraire I have $dS_t/S_t = rdt + \sigma dW_t$ as usual under the money-market numéraire and I need to price options with payoffs ...
29 views

### Finding criteria for a household financial budget falsification

I’m working on a financial problem about budget of households. Households in a state fill a form about their net budget in every year and our insurance company investigate their financial status and ...
257 views

### Quant teams predicting the World Cup

It is a good tradition of the quant teams of the major banks to predict the World Cup. As an example see this new paper from Goldman Sachs: The World Cup and Economics 2014 (Brazil will win by the ...
137 views

### Girsanov theorem in CMS convexity derivation

I am going through the derivation of CMS convexity from the notes of Lesniewski There is a transformation from $T_p$ forward measure to annuity measure $Q$ as  ...
610 views

### Why shrink the covariance matrix?

I'm trying to understand why it's useful to shrink the covariance matrix for portfolio construction or in fact general. Think I missing something. I know if you have 5,000 stocks it's a lot of ...
30 views

### Are there any Spanish language resources for getting quotes?

In English, there is MetaTrader from http://www.metaquotes.net. Is there any similar platform or program available in Spanish for backtracking and running your trading algorithms? How about ...
89 views

### Liquidity Coverage Ratio: Proposed changes by US Fed, OCC and FDIC

With its latest report on the impact of the Liquidity Coverage Ratio the EBA has stated: "Incentives for regulatory arbitrage could be minimised if central bank operations were treated ...
1k views

### Why is the VIX futures market usually in a state of contango?

I'm a VIX newbie and I'm trying to understand why the VIX futures market is usually in a state of contango. All I can figure is that the sellers of VIX futures contracts demand high "prices" (because ...
101 views

### Do people hedge with leveraged ETFs intraday? How?

Seems that the answer to the first part should be yes, but haven't seen any references or examples. E.g. suppose I want to hedge XLF position with FAZ. Do people use close to current returns, or just ...
195 views

### Price change of a bond towards yield and YTM

I have been trying to get a good picture of PV01 and DV01(PVBP). I was going through below link. This measure is the absolute value of the change in price of a bond for a one basis point change in ...
87 views

### Obtaining Expense Ratio Data

I have a list of tickers (~11,500) in a .txt/.csv file and accompanying fund data from yahoo finance. I'm wondering if there is a reasonably easy/accessible way to use this list to obtain expense ...
33 views

### The list of all UCITs IV funds tickers

I am looking for the list of tickers for all the UCITs IV complaint funds. Could there be such a list? Thanks,
83 views

### Standard Deviation as listed in Rebonato's Volatility and Correlation: Binomial Replication 2.3.4 Worked-Out Example

I am reading Rebonato's Volatility and Correlation (2nd Edition) and I think it's a great book. I'm having difficulty trying to derive a formula he used that he described as the expression for ...
273 views

Let's say we have a stock which our only actions are buy, sell and hold (with or without shorting). If we have sufficient past data of the stock, how can you determine the optimal trading action ...
357 views

### IMM Swaps vs. Forward Swaps

Could we think of IMM dated swaps as forward swaps (since they trade only on specified dates and they might not be the current date)? For example, today is June 2nd, the next IMM swap is June 14 (not ...
414 views

### How do I do a mean variance optimization with constraints?

I am using python and the cvxopt library to calculate an efficient frontier, per the docs: http://cvxopt.org/examples/book/portfolio.html However, I cannot figure out how to add a constraint so that ...
143 views

### trading strategy outperforms passive strategy in absolute terms, but in returns vice versa. how could this be?

Background: I want to compare two trading strategies in term of profitability. The red one is an active trading strategy, which involves many entry and exit to a specific market. The blue one is a ...
145 views

### Modelling driftless stock price with geometric Brownian motion

I wish to understand some basic fact about the (primitive) simulation of stock prices with geometric Brownian motion. If $S(t)$ is the stock price at time $t$, and the stock price follows geometric ...
156 views

### Simulating state space model with AR(1) dynamics

I asked a question similar to this previously: https://dsp.stackexchange.com/questions/16341/simulating-a-state-space-model However I think I have a better handle on it now and want to re-ask it: I ...
68 views

### Sample size and historical correlation matrices

I was wondering whether any literatures existed on how to properly estimate correlation matrices from historical data. Obviously the entire procedures allows a lot of leeway. The frequency of ...
78 views

### Properties of a Symmetric Copula

I am working with the following copula, and have a few questions about it: $C(x,y) = xy + \theta (1-x)(1-y)xy$ Here $\theta \in [-1,1]$ and $x,y \in [0,1]$ First, I am trying to show this copula is ...

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