# All Questions

295 views

### Interpolating spot rates given intermittent coupon-bond prices.

I'm trying to bootstrap spot rates given coupon-paying bond data. To simplify my problem, assume we are working with only 3 given data, the price/coupon rate on semi-annual bonds maturing in 0.5, 1, ...
168 views

### I want to keep a column in getSymbols or get.hist.quote with the Date as as.Date format [closed]

I use getSymbols to download historical information over an environment with 200 tickers but I cannot seem to keep the date information from becoming an index. I ...
97 views

### The distribution of jump gaps for Levy processes

Assume $X_{t}$ is a Levy process with triplet $(\sigma^{2}, \lambda, \nu)$, here $\nu$ is the Levy measure of $X_{t}$. Define $\tau_{1},\tau_{2},\dots$ be the time gap between the successive jumps ...
81 views

### Can we model components in a set of multivariate multi-period time-series data?

There are N data sets in periods occurring weekly/monthly, across a 10-year historical timeline. In each period, five dates are observed (labelled a to e), where a denotes the day the period ...
279 views

### How to replicate this option?

I have a question I am not sure how to approach: Suppose interest rates is 50%, a stock worth \$1 today can be worth \$2, \$1, \$0.5 next year. If the option that pays \$1 only when S = \$2 is ...
84 views

### What is the most amount of money the consumer would be willing to pay to play take this gamble?

Suppose a consumer has log-utility over wealth, defined by $u(W) = \ln(W)$. Suppose this consumer has $100$, and is considering taking a gamble in which the consumer flips a coin, and gets $20$ she ...
131 views

### Attributing the change in NII to Shift, Twist and Butterfly

The movement of the zero rate curves can be decomposed into a shift movement (the level of interest rates) and a twist movement (the slope of the curve) and butterfly (the curvature of the curve). If ...
45 views

487 views

### Is it possible to understand financial theory without mathematics?

I am trying to develop a short course on financial theory, covering the fundamentals of forward and options pricing, and 'efficient market' theory. I want to reduce the amount of mathematics to a ...
164 views

### Lower bound of ITM Calls when computing Implied Volatility

Assuming the Black Scholes model and pricing formula of a European call option. Then, if the call is ITM, i.e. if $ln(\frac{S}{K})>0$, the $d_1$-term will go towards infinity as $\sigma$ goes to ...
132 views

### Estimate the market maker's price from the posted Bid/Ask and Trade price

If I see a Bid at 181.77 and and Ask at 181.78 for SPY and then immediately see a trade filled at 181.77 on BATS, then what can we conclude about market making activity? i.e At what price did the ...
126 views

### Reasoning for Bloomberg's short rate volatilty calculation

Bloomberg, in its documentation, explains that it calculates the short rate volatility for its Hull White implementation by multiplying the e.g. 10y IRS rate (divided by 100) by the 10y cap vol. Why? ...
83 views

### Stock Price Question

Can anyone show me how to answer this please? A stock has beta of 2.0 and stock specific daily volatility of 0.04. Suppose that yesterday’s closing price was 95 and today the market goes up by 3%. ...
210 views

### Is the number of outstanding shares a stationary series?

I'm doing a panel data analysis where the log of the freefloat number of outstanding shares is one of the explanatory variables, but it fails the Augmented Dickey Fuller and Person Phillips unit root ...
719 views

### Simulating the short rate in the Hull-White model

What is the best way to simulate the short rate $r(t)$ in a simple one factor Hull White process? Suppose I have $$dr(t) = (\theta(t)-\alpha r(t))dt+\sigma dW_t$$ where $\theta(t)$ is calibrated ...
192 views

### Is there any academic material regarding robust optimization with fixed transaction costs?

I'm looking to piece together a robust optimization model that handles robust optimization with fixed transaction costs and other combinatorial variables (e.g. asset count constraints). Here's what ...
142 views

### Volatility calculation for intra-day cash-or-nothing call binary option

Firstly, I do not have a quant finance background. This is new to me, and I imagine that this is a basic question for this group. I am calculating the price of a binary/digital option with ...
128 views

### Derivation of the Stochastic Vol PDE

I'm trying to follow the derivation of the stochastic vol pde for an option price - as given in Gatheral (The vol surface), Wilmott on Quant Finance and many other places. As usual one starts off with ...
74 views

### Is it illegal for a publicly traded company to publish inaccurate financial data?

If you are the book keeper for a publicly traded company and you misrepresent the financial earnings of the company (even if by accident) for an earnings quarter, is this illegal?
64 views

### Why does my posterior mean differs from Idzorek's results?

I have implemented two different expressions (Idzorek p.6, Walters p.51) of a posterior mean return calculation within a Black-Litterman framework. My results are the same, irrespective of the ...
338 views

### Papers and algorithms on bidding schemes for best order execution?

I'm building an automated option trading bot that executes common options multi-leg strategies (straddles, spreads) and I want to learn the best way to execute my orders. As you know, the bid-ask ...
204 views

### Brokers offering low-cost / free accounts [closed]

I'm attempting a "hello world" of live algorithmic trading. A script that pulls in tick data, presents it visually, and allows me to buy / sell at the press of a button. Also a toggle between { fake ...
91 views

### How can foreign investment have a negative figure?

Just looking at http://www.tradingeconomics.com/japan/foreign-bond-investment Wondering how can foreign bond investment be negative? You can have 0 investment, you can have positive investment, but ...
50 views

### Is there any way to adjust the average cumulative credit loss rates (Exihibit 22) in Annual Default Study 1920-2012 by Moody due to country risk?

I would like to know whether we can adjust the average cumulative credit loss rates (Exihibit 22) in Annual Default Study 1920-2012 by Moody due to country risk (eg. Damodaran country risk premium). ...
161 views

### Data feed for 10 year government bond yields [duplicate]

I am trying to access a data feed for 10 year sovereign bond yields for countries, say the G20. I have tried world bank and IMF data api sources but to no avail. The data feed is used to update an ...
59 views

### Multivariate interpolation for estimating FDM in-between grid points

After implementing some FDM to price some option, there are gaps between our grid points that may be of interest. From reading around, it appears common to use bilinear interpolation to estimate ...
67 views

### What is the best way to describe latency?

What are good ways of describe observed tick data latency with a view to flagging when something is systematically wrong? For example, we would want to discount outlier ticks so that we do not alert ...
338 views

### T-Forward Price on risk-neutral measure

i have and question concerning the T-forward price definition on the Robert J.Elliot's book : Mathematics of Financial Markets. On his chapter 9, definition 9.1.3 p.249. He give the formula without ...
184 views

### Interest Rate Swaps on Mortgages [closed]

Is it possible to get interest rate swaps on mortgages? If not, why not? Are there models that describe this? Any direction would be great.
1k views

### Value of American Call vs Value of European Call when using implicit finite differences

I calculated values for put options (european and american) using the implicit finite difference method and compared them to black/scholes values. The values for american put options are higher than ...
61 views

### Finding Credit Risk Population Data

Are there any free or relatively cheap sources of aggregate data on credit risk for specific geographic regions, ages, and so on?
256 views

### what's the relationship between forecasted stock volatility and implied volatility?(option)

what's the relationship between forecasted stock volatility and implied volatility? I know that implied volatility is the volatility calculated by BS formula, is there any relationship between implied ...
219 views

### Estimate reasonable trade sizing based on daily volume

Let's assume we have data for daily volumes traded on some asset (and open interests as well). Now if we are planning to make a trade we don't want to fat-finger it and want it to be of a reasonable ...
97 views

### Economic indicators leading the yield curve

There is a lot of research on how the government yield curve can be used to predict the economy. The government yield curve is often seen as a leading indicator. But for which variables is the curve a ...
169 views

### Funding spread in FVA calculation

For the FVA calculation, is the funding spread (either borrowing or lending) treated as a piecewise constant function (i.e., if the length of the exposure is 5 month and I know the 3 and 6 months ...
137 views

### Interpolation on CDS rates

I am just wondering if there is any way we could calculate a CDS Spread (not harzard rate) on a CDS curve. Most of the papers that I have come across so far discuss about interpolating the hazard ...
118 views

### How to score a portfolio's diversity based on security returns?

What is the best way to score a portfolio's diversity based on it's returns covariance matrix? I know that if my portfolio has two securities and their returns' correlation coefficient is -1 that is ...
122 views

### probablity expiring in the money ..basic question

Everyone says $N(d_2)$ is the probability of the option being exercised but stocks that have really high volatility have really expensive options indicating a high likelihood of expiring in the money. ...
109 views

### Calculating index arbitrage

I have a days-worth of level 2 market data. I am calculating S&P500 index arbitrage. I have a few questions about the calculation: 1) Should I be summing all the bids and asks from the stocks ...
369 views

### Position Sizing For Ratio Pairs Trade

Ok, let's say I'm trading a spread of two stocks, X & Y, The spread is calculated as a ratio (Spread = X / Y). I use rolling stats to calculate the mean, standard deviation and hence the z-score ...
142 views

### How does Vega of a call/put behave under the Black-Scholes model?

I have two questions. I would prefer a reference if possible. Is the value of vega bounded for $\sigma\in [0,\infty)$? (I assume so, I imagine it goes to 0 as $\sigma$ go to infinity.) Are there any ...
317 views

### fair price for a call option

I am struggling with the following problem: An investor is considering a European call option, whose price $C_0$ is yet to be determined, on the shares of a company called XYZ. You know that : the ...
84 views

### How will the European requirements for prudent valuation affect derivatives pricing?

The European Banking authority has published the "EBA consults on draft technical standards on prudent valuation". How will these requirements for prudent valuation affect derivatives pricing, if at ...
59 views

### Why are some MBS's with coupons below the FRM rate priced at a premium?

I'm looking at 30Y 4.0% Freddie Mac MBS prices as of yesterday, approximately 104:10. Meanwhile, 30Y FRM Freddie Mac quotes are 4.39%. Why are the MBS priced at such a premium, even though the coupon ...