1
vote
0answers
32 views

RQuantLib FixedRateBondPriceByYield() Non-tradable error

How do I use FixedRateBondPriceByYield() function on maturity date that is earlier than today? I get "non tradable error" when applying on date older than today. ...
-2
votes
1answer
39 views

regression analysis [closed]

"A model estimated with a large no. of observations may allow one to reject null hypothesis of zero coefficients for many explanatory variables.Thus we might choose to select a somewhat lower ...
1
vote
1answer
75 views

How we decide the target price for stock

people giving intraday target price of particular share. Most of the times the target is achieved.I am still puzzled how the target price of stock for intraday can calculated. To elaborate my query ...
0
votes
1answer
97 views

Why can't marginal CVA be used in pricing?

"Marginal CVA may be useful to breakdown a CVA for any number of netted trades into trade-level contributions that sum to the total CVA. Whilst it might not be used for pricing new transactions (due ...
1
vote
0answers
74 views

bandwith portfolio rebalancing in python

I want to calculate a bandwith rebalancing machanism for a portfolio of two assets. As soon as the performance of one ov the assets gets bigger or smaller than the other one + a defined tolerance ...
0
votes
0answers
25 views

Luis Torgo - Case Study, Function creates high leverage

I am doing Luis Torgo Case study - Predicting Stock Market Returns and I have a problem when I use the function trading.simulator in the package DMwR ...
2
votes
3answers
1k views

How to trade volatility?

I am analyzing the volatility of financial stock returns and let's say I have a pretty good model to forecast tomorrows volatility of the stock returns. So let's say for simplicity reasons I have a ...
2
votes
2answers
72 views

Volatility of Multiple Stocks

According to BSM, Stock Price follows log-normal distribution s.t. $$S(t)=S(0)*\exp(\sigma\sqrt t Z-(\sigma^2t)/2)$$ where Z is standard normal variable Then volatility of this stock is $\sigma \sqrt ...
1
vote
2answers
86 views

Question about find no arbitrage trading strategy

We got the stochastic process for stock price of n stocks at continues time. We can find if there is a arbitrage trading strategy or dominant trading strategy. I wonder if we cannot find such ...
6
votes
5answers
236 views

Kurtosis in asset logarithmic returns

Assets such as stocks usually display kurtosis in their logarithmic returns. However, their logarithmic returns in a time interval $n$ are the sum of smaller logarithmic returns in $1/n$ time ...
1
vote
0answers
30 views

Jacobian for Newton method for American options by front fixing

In this paper Penalty and front-fixing methods for the numerical solution of American option problems a front fixing method based on Newton is described for an American put option is described. I am ...
1
vote
1answer
27 views

Adjust regression for thin trading

What procedures can I apply to control in a regression on company returns for thinly traded stocks? Is the inclusion of the SMB-factor a potential approach? Or just a dummy variable indicating if a ...
1
vote
1answer
30 views

Fitting (marginal/multivariate) distributions to financial return data

I have calculated the simple arithmetic return on a number of different financial securities and am fitting both a Student-T and Generalised Pareto Distribution. My question is can I just use the ...
3
votes
0answers
75 views

Portfolio insurance strategy with path dependence

I have the following problem. Let us assume that $S_t$, the stock price follows, geometric Brownian moation with parameters $(\mu,\sigma^2)$. We are given an amount of money $M$ and at each point in ...
4
votes
1answer
81 views

Why are netted positions more volatile?

According to John Gregory, "netted positions are inherently more volatile than their underlying gross positions". Given the context, I think he's talking about close-out netting and not payment ...
0
votes
1answer
71 views

Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
1
vote
0answers
54 views

Need help understanding basics of cash flow engineering

I'm studying Financial Engineering, a subject I'm completely new to. I'm using Principles of Financial Engineering 3rd Edition and trying to solve the exercises ...
5
votes
1answer
148 views

Seeming arbitrage in excess reserves

In the US banks are required to store 10% of their deposits in cash in the form of Fed Funds. Due to misbalance of demand and supply, some banks borrow such cash from others; the volume averaged ...
0
votes
1answer
47 views

Implied rate of a bond question

A 2 year bond, yield 6%. A 1 year bond, yield 4%. What's the implied rate for the bond that starts one year from now?
0
votes
1answer
28 views

Daily principal payments, accumulated on yearly basis in excel

I am doing something seemingly quite easy: Prinipal calcuation of a loan. I need to calculate daily principal payments and accumulate it on a yearly basis. So my current implementation look like ...
1
vote
1answer
51 views

Lease Accounting / FX Embedded Derivatives [closed]

I have a lease agreement where the functional currency is USD, domestic currency is UAH. Lease agreement is written in EUR (rent rate) and payments are to be done in UAH in the amount of rent rate ...
0
votes
1answer
62 views

Real-time Tick Filtering

Is anybody aware of any papers regarding tick/quote filtering algorithms. I'm aware of the Olsen stuff, but I'd prefer something with fewer free parameters.
5
votes
4answers
851 views

How popular is the IRR as a tool for capital budgeting, nowadays?

This 2004 McKinsey Quarterly article reports that, back in 1999, three-quarters of CFOs always or almost always use[d] IRR when evaluating capital projects. The same article warns against the ...
0
votes
2answers
61 views

How does tranching cause leverage?

I've read that leverage is created with the tranches of a CDS index because the more junior tranches have more risk than the index. I get that the more junior the tranche the more the risk, but I ...
1
vote
2answers
60 views

What is an estimated rise in the interest rate of the 10-year Treasury in this scenario?

Suppose that the Federal Reserve had raised interest rate by 0.25% last week 17Sep2015. What is an estimated rise in the interest rise of the 10-year Treasury? Which futures contract should one use to ...
5
votes
3answers
64 views

Jegadeesh and Titman 1993 Power of their test

I am reading this classic paper(http://www.business.unr.edu/faculty/liuc/files/BADM742/Jegadeesh_Titman_1993.pdf) and got confused by one of their arguments on their overlapping portfolio strategy to ...
0
votes
1answer
64 views

Binary Option valuation problem in R using RQuantLib; also result validation aspect

When I am trying to value Binary Option using RQuantLib I am not getting all the greeks for exctype "american" wheras "european" exctype is fine. What is the problem here ? ...
5
votes
2answers
175 views

Research topics - neural networks and market liquidity

I am a masters student looking for some direction on using neural network on market depth data to help predict market liquidity and bid-ask spreads. Can some of the more experienced people give me ...
0
votes
1answer
32 views

Modeling EOD ETFs price returns together or individually?

Let's say you want to model the next day price returns for a set of US equities large cap ETFs (a relatively homogenous group). Would you model all the ETFs as a single, 15 years data set, or each ETF ...
8
votes
3answers
325 views

Does Kalman filter always improve over linear regression?

If I have a simple linear regression that has statistical signification but I would like to improve the overall prediction results. Will a Kalman filter be always an improvement or as least achieve ...
1
vote
1answer
432 views

MonteCarlo simulation of stock prices using milstein scheme with dividend yield?

While performing a montecarlo simulation of stock prices using the milstein scheme is it possible to take into account the dividend yield into the simulation itself somehow, if we are given a ...
2
votes
1answer
48 views

Multiperiod return formulae with dividends

I have a question about returns when dividends are 'paid'. Firstly, will write down some definitions: Let $P_t$ be the price of an asset at time t. Assuming no dividends the net return over the ...
-3
votes
1answer
70 views

Exchange rate conversion [closed]

If the EUR/USD exchangerate fell by -0,96%, how much has the USD/EUR exchange rate increased? According to the below charts the number would be +0,97% (currently) but I cant figure out how these ...
1
vote
1answer
130 views

Numerical Solutions for PIDE

I want to solve an exotic options of PIDE by Numerical Methods.I just focus on the integral part of PIDE and want to underestand some tips on numerical solution of how to numerically solve it. Exactly ...
15
votes
3answers
6k views

data on historical stock price of bankrupt companies

does anybody know a site where I can download historical data on stocks including companies that have gone bankrupt such as lehman brothers? it appears that bankrupt companies no longer appear in the ...
2
votes
2answers
84 views

What do you do with low r-squared when calculating high-frequency beta

I am calculating a high-frequency beta. For example I have 90 days of data of the S&P and GOOGLE and I have 10-minute percent returns for each instrument. Each day has 34 10-minute percent returns ...
13
votes
3answers
9k views

What is a Heat Rate Option?

I tried a search with google but I can't find a clear definition of what a Heat Rate Option is. I would appreciate if someone could explain to me what this type of option is. My understanding is ...
1
vote
0answers
19 views

Reconciling forecasted growth of components and sum

I'm working with a very basic basic forecast model using Compound Annual Growth Rate and I need to reconcile the forecasts at different levels of detail. Suppose I have two business lines with ...
2
votes
1answer
151 views

Risk neutral drift vs real world

I was of the understanding that risk neutral drift was always the risk free rate. A section from Gregory's book on Credit Value Adjustment seems to say risk neutral drifts are typically estimated from ...
1
vote
0answers
42 views
0
votes
2answers
101 views

Why the value of this portfolio is negative? [closed]

Let's assume I buy 1 call with strike 100 and 1 call with strike 120 I sell 2 calls with strike 110 (with same expiration) I wonder why value of this portfolio is negative at $t=0$?
5
votes
2answers
682 views

Performance of Open Source Time Series Database for Financial Market Data

We would like to store financial tick data in a database (potentially billions of rows) and then create aggregated (open-high-low-close) bar data from it (e.g. 1min or 5min bars). It was mentioned ...
0
votes
0answers
45 views

Stats and Hedge Ratio calculation questions

I did self-study and learnt some concepts to build a multiple leg spread /portfolio for trading but still confuse in some basic concepts. I will be very thankful if you can answer my couple of ...
1
vote
2answers
66 views
3
votes
3answers
1k views

Simple value of a Forward contract at an intermediate time question

I am taking "Financial Engineering and Risk Management Part I" from Columbia University on coursera and I got a seemingly simple question wrong on the first quiz. This is all based on the no-arbitrage ...
2
votes
2answers
263 views

How to value non-libor swaps (not basis swaps)?

What discount curve should be used for a swap with a fixed leg and variable leg, where the variable leg is based on rate other than Libor (in my case 1-year deposit rate). Hull (5th edition, page 595) ...
5
votes
2answers
149 views

Where do quants get historical FOMC meetings events for backtesting?

Is there any usual/best practice to fetch historical fomc meetings events online?
3
votes
5answers
4k views

Risk Neutral Probability

I read that an option prices is the expected value of the payout under the risk neutral probability. Intuitively why is the expectation taken with respect to risk neutral as opposed to the actual ...
0
votes
1answer
49 views

Is it OK to consider the expected return is zero for stocks when calculating VaR over a short horizon?

I want to implement the approach described in the following recipe for calculating VaR: Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations I was told that I can ...

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