# All Questions

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### What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable? [closed]

According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
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### Why annualized return and cumultive return aren't equal over 1-year period with Performance Analytics package in R?

I use Performance Analytics package in R to compare annualized and cumulative return of a portfolio. My expectation is that both should be equal over a period of 1-year but results tell me I'm wrong. ...
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### Why do we usually model returns and not prices?

I think this is a quite similar question for most of you, however it is not completely understandable for me at the moment: Why do we usually use returns and not prices to model financial data in ...
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### Why Markov Functional Models (Hunt 2000) are not yet so popular?

I refer to MFM introduced by Hunt [2000]. These models can be seen a subset of interest rate market models. MFM allow us to describe the term structure elements using a set a functions of a ...
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### Do you have a good application example of Approximate Dynamic Programming?

Have you ever tackled a finance problem with Approximate Dynamic Programming? I have only used dynamic programming for simple examples like a optimal extraction in mining. Do you have canonical ...
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### Can I add the greeks of individual postions to obtain greeks for the portfolio

I understand that the delta of an option portfolio is just the sum of the deltas of the individual option positions. What about the other Greeks like gamma and vega? Do the vega and gamma of a ...
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### SEC 13F Security List has incorrect CUSIP numbers?

I'm building database of 13F sec.gov forms with 13F security lists (http://www.sec.gov/divisions/investment/13flists.htm). Along with integrity checks. I implemented CUSIP digit check algorithm to ...
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### How to apply the “Knapsack Problem” to minimise a portfolio's volatility?

Suppose I have a stock selection universe of 100 stocks. I have estimated the covariance matrix of this 100 stocks. I would like to create an equaly-weighted basket of 5 stocks which has the lowest ...
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### How to calculate probability of option expiring in the money?

Given the following values ...
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### How to value a Binary Option using market data?

Is there a way to calculate the price of a binary option (i.e., an option that pays out 1 dollar when the stock price hits $x$ amount) using market call/put option prices, forward prices, etc. for a ...
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### Is Geometric Brownian Model suitable for long term price forecast?

I was thinking of using Geometric Brownian Motion to forecast future prices of timber (say one variable, the stumpage price of sawtimber). I tested the time series with Augmented Dickey-Fuller test ...
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### Historical Data - Free Sources in 2015? [duplicate]

I've found some free sources for stock historical data but none that aren't broken links or give me quite what I need. I want... For NASDAQ, S&P 500, DJIA: Historical data for the past 5 years ...
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### The importance of good optimizers in Portfolio Optimization

I work as a Quant for an Asset Management and Insurance company and have recently enrolled for Masters degree in Computer Science. I am thinking about investigating how important having a "good" ...
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### Estimating mean reversion

I've read in some places that mean reversion parameters for a rates model, eg Hull White, can be estimated directly from the current yield curve. However I've not been able to find anything more on ...
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### Historical data for Canadian exchanges and mutual funds

There are scores of posts on obtaining historical data for many of the big exchanges, but for some reason there is a gap in sourcing historical data for Canadian exchanges. Short of Yahoo Finance and ...
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### How to estimate constrained a constrained VAR(1) with MATLAB?

Suppose I want to estimate the following VAR(1) model: $$Y_t = \mu + \Phi Y_{t-1} + \varepsilon_t$$ where $Y_t=(y_{1t}, y_{2t},…,y_{kt})'$, $\mu=(\mu_1,…,\mu_{k})’$ and $\Phi$ a matrix of ...
269 views

### quantiative risk measure how they are implemented in R and their use

So far I have just theoretical knowledge of risk measure and never used them in application. Therefore I have some basic question how risk measures are used in reality and how they are implemented in ...
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### Floating-rate bond

How can I extract expectations about future rates from prices of floating-rate bonds? Please, give reference to any articles, if possible. Thank you in advance.
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### Question regarding sinking fund

I am currently studying about financial mathematics for my Exam FM to become an actuary. There is one thing that really bothers me so I would like to have some answers. Whenever I solve a problem ...
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### How can I forecast future correlation?

There are some standard models for forecasting volatility (e.g., GARCH) and for forecasting returns (e.g., factor models). What kind of standard models exist for forecasting future correlation between ...
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### Getting Parameter of Translated Gamma Distribution from Monte Carlo

Spin-off from here. (Edit) Main question: What do I do about a parameter whose suggested values range quite vastly? (Edit) Backstory: I am given data of loss values and the dates that correspond to ...
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### Simulating Stock's close, high and low prices

I am testing a model in which I need to simulate closing, high and low prices (i.e. 3 dimensions of prices) of any given stock. Using the simple Geometric Brownion Motion equation I can easily ...
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### Compute moments of aggregate loss using Monte Carlo

Spin-off from here. Richard referred to me an article that tells me how to get parameters of a translated gamma distribution to which I should consider fitting simulated aggregated loss values. The ...
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### Does DV01 grow proportionally to portfolio?

I'm having trouble understanding DV01 convention. From what I understand it stands for "Dollar value of 1 basis point." For instance, if I have a bond with DV01 = 0.05, does a portfolio composed of ...
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### Time-Varying Copulas (GAUSS)

Could anyone suggest me how to begin with Time-varying Copulas or Stochastic Copulas? I'm looking for the GAUSS code, however it seems there are only MATLAB code available over the internet. I'm ...
136 views

### Get distribution for aggregate loss using Monte Carlo

I am given two data sets containing dates and losses (in some currency). Given a distribution for the amount of losses and an (a,b,0) distribution for frequency of losses, how can I use Monte Carlo ...
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I am doing a Quantitative Finance PhD and would like some insight on data collection. I'm looking for open market share repurchase data (UK) over the past 2-3 decades. Simultaneously, their bid-ask ...
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### Why the growth of the American Economy is going to cause the Fed to raise interest rates?

Due the growth of the American economy the Fed have published that interest rates are likely to increase. Why is that the response of the Fed?
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### What is the difference between generating portfolios on the efficient frontiers and generating different efficient frontiers

This question is bothering me for a while. We suppose a very simple and basic set up. Given are a certain amount of assets from which we want to build an portfolio in an "optimal sense". MPT gives us ...
4k views

### Applications of Fourier theory in trading

What are fashionable applications of Fourier analysis in trading? I have heard vague ideas of applications in High Frequency Trading but can somebody provide an example, maybe a reference? Just for ...
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### How to get get weekly returns from daily data

Good day I would like to get weekly returns data from daily data , I want to use the Wednesday-to-Wednesday approach – the returns (rt) are computed from the Wednesday closing prices Pt , i.e., rt = ...
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### Research methodology of systematic strategies

Can someone please share your research methodology of systematic trading strategies? I feel like I am always using the a same data driven procedures over different underlyings and would like to get ...
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### Annuity Duration Based on Closed Derivative is half of Effective Duration?

I am analyzing an annuity with a stub. I calculate the effective duration as (P(-10bps) - P(+10bps))/(2*Principal * (.001)) I then take the derivative of the standard annuity formula discounted by ...
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### What is Margin of Conservatism

In modelling loss given default,(LGD), we often encounter the term Margin of Conservatism. What is it in layman's terms? I am not able to find a wikipedia page on this.
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### How to apply the chain rule for partial derivatives to transformations?

I'm currently working to solve the Black-Scholes model partial differential equation (it's a model for a.o. stock option prices). The Black-Scholes equation for a calloption C(S,t) is given by \$ ...
119 views

### option pricing with limitation on the change of underlying daily changes

how are we supposed to price an European option given the fact that the daily return of the underlying is limited within -X% to X%? For example, if X = 5, the price of the underlying cannot go up 8% ...
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### Comparing cost of two alternative given their distribution

I have distribution for cost of two alternative through Monte Carlo simulation. The distributions are not normal. Given the benefit of the two alternatives is the same but ungiven, I want to choose ...
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What is the best way to begin calculations for pairs trading? I have seen two ways: 1) Start from the price ratio (StockAPrice/StockBPrice) and calculate mean, standard deviation and z-score from a ...
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### Standardized Abnormal Returns

I have a question. In an event study, I have found a standardized cumulative abnormal return Z test formula. It is attached. I couldn't find any sources to prove it. Do you know any articles about ...