# All Questions

2k views

### Early execise of American Call on Non-Dividend paying stock.

Let us consider an American call option with strike price K and the time to maturity be T. Assume that the underlying stock does not pay any dividend. Let the price of this call option is C$^a$ today ...
1k views

### When the Inverse Correlation between the SPX and VIX breaks down

As we all know the S&P and its implied vol, the VIX, generally move in opposite direction. To a large extent, the correlations makes sense. IV is one of the main drivers of the price of options, ...
88 views

### Optimal mortgage rate strategy

When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert. This makes it a secretary problem - in the traditional ...
157 views

### Desired portfolio volume

I am working on a toy model, in part of which an investor has to decide (based on some utility theory) how much money to invest in a given portfolio. For simplicity, assume that the portfolio is ...
140 views

### Market Exposure and Hedging

Normally the Market exposure associated with your stock/portfolio is your delta for that stock/ portfolio. Basic idea of hedging involved here is buying/selling respective futures depending upon ...
661 views

### Best tool to generate cashflow diagrams

I often have to generate cashflow diagrams. I was wondering if anyone has a good tool to generate them in either $\LaTeX$ or a picture?
151 views

### Add transaction costs to prediction

An algorithm predicts price movement by some certainty and it invests proportional to the confidence level. Predictions range from -1 to +1, -1 meaning sell for a value of ...
111 views

### Exact value of mean reversion rate knowing terminal value of the process

Let you have the following mean reverting process: $\text{d}x_{t}=a(\theta-x_{t})\text{d}t$, where the diffusion term is absent, that is this process is not stochastic. Let you know the value of ...
741 views

### Threshold calculation for buying a mean-reverting asset

I am trying to figure-out an optimal policy for buying a unit when its price follows a mean-reverting price process (Ornstein–Uhlenbeck), when I have a finite time deadline for buying the unit. I ...
132 views

### Is it random walk?

I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3): $$cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0$$ for all $f(\cdot)$ ...