1
vote
2answers
152 views

Basket Option weight sensitivity calculation

I am looking to find/estimate the "greeks"/option price sensitivities/derivatives for a basket option situation. In specific the change in price of a put option associated with a change in weight of a ...
0
votes
1answer
172 views

How do I simulate stock prices for a 10 asset portfolio, over a period of 10 years in MATLAB? [closed]

If I have given vectors for return and volatility (i.e. I have two 1x10 vectors), and I assume at first that their correlation is 0 (meaning my covariance-variance matrix is just diagonal), how do I ...
4
votes
1answer
86 views

Korean Bond futures market: is there a fundamental difference between 3yrs, 5yrs and 10yrs contracts?

I would like to model Korean government bond futures. So far I know two concepts (just a short, incomplete description) cash-settled futures (e.g. Australia): The average yield of a basket of bonds ...
0
votes
2answers
160 views

Estimate weekly, yearly quantities from finite samples

I'd like to estimate from a daily prices serie $P_t$ with $N$ observations a quantity such as the variance of the weekly returns. I will use $\ln\left(\frac{P_{T+5}}{P_T}\right)$ assuming 5 days in a ...
1
vote
1answer
151 views

binary tree options pricing model with dividend value - How should I discount the option at?

the expected value of the option given the next period up, down values is: $ Pexp = (p Price_{next, up} + (1 - p) Price_{next, down})/R$ where p is defined as $p = \frac{\exp(-r \times \Delta t) - ...
2
votes
1answer
502 views

IB API quotes and speed

The title says it all. I trade futures options exclusively and wanted to see if anyone had insight into the quote speedsrobustness coming into the API. I'm using the Excel DDE right now just building ...
1
vote
1answer
183 views

Derivation of the Nelson-Siegel model and proof of arbitrage

1. I am looking for a derivation of the Nelson-Siegel model $y(m)=a+b\left( \frac{1-e^{-\lambda m}}{\lambda m}\right)+c\left( \frac{1-e^{-\lambda m}}{\lambda m} -e^{-\lambda m} \right)$ It is ...
3
votes
1answer
167 views

Calibrating Hull-White using volatility data

I would like to calibrate Hull-White model using volatility data.I am using [Park (2004)] paper as a reference. He suggests to minimize the following objective function: where the first term is ...
0
votes
1answer
80 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 ...
0
votes
0answers
113 views

Hull's method for the optimal hedge ratio: why?

To illustrate my question, let's assume that the owner of one unit of asset (unit spot price variable S) needs to sell this asset at time T in the future. In order to hedge against a possible fall ...
1
vote
1answer
267 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, ...
0
votes
0answers
49 views

Realized volatility Create index from individual stock data?

I am about to estimate realized volatility on high frequent stocks. I am aware of the implications of the model (e.g. microstructure etc.) But what I dont know is how I can create an index to estimate ...
11
votes
3answers
603 views

Optimal execution strategy

Can someone shed some light on optimal ways to execute medium sized orders ~2000 shares in the market? Unfortunately the execution algo I have access to is very dumb. It follows the top-of-book ...
9
votes
2answers
475 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 ...
2
votes
1answer
258 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 ...
0
votes
1answer
133 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 ...
4
votes
1answer
92 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 ...
10
votes
8answers
4k views

Why does implied volatility show an inverse relation with strike price when examining option chains?

When looking at option chains, I often notice that the (broker calculated) implied volatility has an inverse relation to the strike price. This seems true both for calls and puts. As a current ...
-2
votes
2answers
83 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 ...
2
votes
1answer
60 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 ...
3
votes
1answer
119 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 ...
1
vote
3answers
217 views

Is it wrong to use 'real world' probabilities for option valuation?

Is it wrong to use 'real world' probabilities for option valuation, even when the market is not liquid enough to delta hedge the option? My instinct is that it is wrong, because the time value of ...
0
votes
0answers
45 views

Estimate the effect of a buy order on stock price

If a stock is having ask = 100$ for 100 shares Ask size, and I put a buy market order for 1000 shares, is there an approach to estimate that this buy order will move up the stock price by what %? I ...
9
votes
1answer
335 views

Appropriate measure of Volatility for economic returns from an asset?

I am doing research on uncertainty analysis and risk assessment for oil field development. For doing economic forecast and valuation I use Real Options theory, which is almost similar to theory used ...
15
votes
8answers
1k views

Why is there no “meta-model”?

If I design a trading model, I might want to know the model's half life. Unfortunately, it doesn't seem possible to predict alpha longevity without a meta-model of the market. Intuitively, such a ...
6
votes
1answer
467 views

What is the best method to compute project volatility in Real Option Valuation?

There are few methods like Copeland-Antikarov, Herath-Park, Cobb-Charnes etc. to compute project volatility, however these methods compute upward biased volatility. What is the best method I could ...
6
votes
2answers
9k views

How to simulate stock prices with a Geometric Brownian Motion?

I want to simulate stock price paths with different stochastic processes. I started with the famous geometric brownian motion. I simulated the values with the following formula: ...
2
votes
0answers
118 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? ...
3
votes
2answers
200 views

Comparison of Brownian Motion Expected Drawdown and simulated results

Can anyone tell me whether results as predicted by Brownian Motion for a given mean and std, match what you get by measuring actual drawdown from simulated results over a number of iterations?
0
votes
1answer
89 views

Change of order size

For example I am put a limit order of size 10 at top bid. moments later, my algorithm detects we should have size of 50 here. So we request a update on this order. My question is, will we lose the ...
3
votes
4answers
561 views

How much does a Grid Computing software cost?

So far, I have been performing computations either on my own computer, or using an in-house scheduler that basically chooses a one of the employees' available workstations to run tasks in the ...
4
votes
2answers
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 ...
0
votes
0answers
39 views

Issuing bonds at discount - computing effective interest rate

Suppose Southwest Airlines issued 100,000 USD of 9%, 5-year bonds when the market interest rate is 10%. The market price of the bonds drops, and Southwest receives $96,149. First of all, in my ...
2
votes
2answers
155 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 ...
10
votes
3answers
2k views

When does delta hedging result in more risk?

There's a question in an interview book saying "when can hedging an options position make you take on more risk?" The answer provided is that "Hedging can increase your risk if you are forced to both ...
0
votes
1answer
129 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 ...
0
votes
0answers
81 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%. ...
2
votes
2answers
368 views

What Forex Services support the ForexConnect API?

I need API access to get ForEx tickers and order books for currency pairs. From what I can tell there is a .Net API called ForexConnect which I can use to get this data. Now where can I get this data ...
2
votes
5answers
7k views

Exercising an American call option early

I have seen the rationale behind why it is never optimal to exercise an American call option early, but have a question about it. If the option strike price is $E=\$20$ and it expires at $T=1yr$, if ...
11
votes
5answers
6k views

How do you explain the volatility smile in the Black-Scholes framework?

Does anyone have an explanation for the currently naturally forming volatility smile (and the variations) in the market?
12
votes
2answers
529 views

Issues when considering a quantitative trading/finance firm

I have an upcoming quantitative trading interview (prop desk at a large bank), and I would like to have some good questions to ask about the group. However, I am changing fields from academia and I do ...
1
vote
3answers
538 views

Data sources for financials of global equities

I looked through the master list of data sources but could not find any data sources for financial data of global equities. An example would be the balance sheet of, say, ...
-3
votes
1answer
84 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 ...
1
vote
2answers
201 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 ...
3
votes
3answers
317 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 ...
3
votes
1answer
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 ...
1
vote
3answers
187 views

Industry convention to track trading performance against market indices?

I come from a programming background and not am no quant by career so this is probably a newbie question for you guys. I have written some code to pull daily closing values for market indices ...
3
votes
1answer
335 views

analyze strategy performance with given matrix of weights/time and weekly returns in R

I have a matrix of 259 weekly returns, 50 assets and a portfolio composition for each of the 259 weeks. I would like to test the performance of the portfolio during 52 weeks, rebalancing every 12 ...
5
votes
3answers
588 views

What is Quantitative Investing and how does it differ from Quantitative Trading?

I have worked in quantitative trading for a couple of years so I know what that space is about. I am curious to know what quantitative investing is all about. Based on what I have read and talked to ...
1
vote
1answer
73 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?

15 30 50 per page