0
votes
1answer
73 views

How does a cross trade pose a problem to the retail investor

How does a cross trade pose a disadvantage to the retail client. In this explanation It says: ...
0
votes
0answers
40 views

Rational expectation meaning

What does rational expectation (RE) mean in agent-based modeling context? What are the relationships between RE and expectation and outcome?
1
vote
1answer
69 views

Inferring signals in absence of sign of principal components (PCA)?

PCA seems to be very popular in dimension reduction applications and for extracting the top PCs which explain the data. One such application in futures is on the term structure to obtain the level, ...
3
votes
2answers
157 views

What nonparametric methods exist for estimating intraday seasonalities?

What nonparametric "Model Free" methods exist to measure intraday seasonality? I would like to estimate intraday seasonality in any of The volatility The traded volume The bid ask spread or ...
1
vote
0answers
59 views

Clarifying the way in counting number of weeks for calculating historical weekly volatility in Bloomberg

I would like to confirm the way to counting number of weeks for calculating historical weekly volatility in Bloomberg. Given an option with issue date from 14/1/2014 to 13/1/2019, is the proper way to ...
1
vote
0answers
73 views

Approximating the PDE price of an option with a binomial model

I'm trying to replicate, with a binomial model, the price of an option obtained with a PDE. It doesn't really work, so I was wondering, if there are some caveats when doing that. The PDE model use a ...
4
votes
1answer
334 views

Is there any open-source library, implementing “exchange” to be used for algorithms running on the same computer?

Question: Is there any open-source project/library, which can act as a "local exchange" for agents (algorithms), running on the same computer? Clarification: by "local exchange" I mean, that the ...
2
votes
2answers
244 views

Calculate Daily Returns for Sharpe Ratio

For the purposes of Sharpe ratio, I calculate a trading strategy's daily returns using realized P/L only: $$ \frac{K(t + 1) - K(t)}{K(t)}, $$ where $K(t)$ is the cash balance after market close on day ...
0
votes
1answer
116 views

Expected payoff and weighted average price

Settings Let you're trading a security whose probability to be equal to $S_{T}$ at time $T$ follows a p.d.f. like the ones in the picture below. (That is just an example found with Google images, ...
4
votes
2answers
329 views

Expected value of Black-Scholes

(Apologies for any formatting mistakes) Within the Black Scholes model, given that you are estimating the volatility from historical data - and all other parameters assumed exact - one usually ...
3
votes
3answers
308 views

Measuring historical earnings surprises, their frequency and severity

This is my first post to Quantitative Finance, so I hope my question is formatted the right way. I am starting to research the effects of earnings surprises on certain equity indices. Is there a ...
2
votes
0answers
107 views

What R-packages for SOCP problems are there?

Currently, I am looking deeper into the topic of second-order cone programming. Could you suggest packages that solve SOCP-problems in R? With your answer, please provide a short description of ...
7
votes
6answers
1k views

Book on market microstructure

Can I get some recommendations for a book on market microstructure? I'm not looking for some author's questionable methods for trading, I'm just looking for a book that provides me with facts about ...
0
votes
1answer
86 views

Where can I find monthly/weekly historical data for gold and silver [duplicate]

Preferably in monthly or weekly denomination, for at least 20 years. Preferably in Excel format, but csv, or other format is fine too. I try to google but couldn't find anything, maybe I just wasn't ...
2
votes
0answers
114 views

Correlation between idiosyncratic residuals and forward returns

The classic mean-reversion strategy is to calculate an "expected return" (alpha) by computing the raw return for each security and then remove the part which you think is market driven. Statistically ...
3
votes
0answers
51 views

FTAP in the model independent case, paper by Schachermayer

I have a question about the following paper by Beatrice Acciaio, Mathias Beiglböck, Friedrich Penkner, Walter Schachermayer. At the very beginning of the paper, on page 3, there are two definitions ...
1
vote
1answer
141 views

Penny jumping in the direction of the price

Reading through examples of legal front running, I'm struggling to understand how "penny jumping" (http://www.wikinvest.com/wiki/Front-running) can be profitable. Suppose stock ABC is trading at a ...
0
votes
1answer
243 views

How can I calculate the Cumulant-Generating Function in Matlab?

Let $M(h)$ be the moment-generating function, then the cumulant generating function is given by $$K(h)=\text{ln}M(h)=\\ =\kappa_1h+\frac{1}{2!}h^2\kappa_2+\frac{1}{3!}h^3\kappa_3+\ldots$$ where ...
0
votes
0answers
42 views

VIX Future risk modeling [duplicate]

I am very new to VIX futures and need to validate the risk model for these instruments. Could someone help me with how i can calculate the volatility on these instruments. Thanks.
1
vote
1answer
95 views

Calculating deltas of call options?

From a continuous standpoint, I understand why an ATM call has delta = 0.5 and for ITM call, the delta approaches 1 since each move in the underlying corresponds to same unit of value change in call ...
0
votes
1answer
49 views

Under an EMM, does there necessarily exist a replicating portfolio?

In general, under an EMM, does there necessarily exist a replicating portfolio for every derivative? I believe the answer to this is false. A simple example is a discrete time, trinomial model. ...
0
votes
1answer
120 views

What is the realized volatility's estimation error?

Given an estimation procedure and real data, how would one compute the mean squared error? What value represents the "true" realized volatility in the case of calculating the Mean Squared Error in ...
2
votes
1answer
305 views

Do you know any data source for historical VWAP data?

I am looking for historical VWAP pricing data for north american equities. I haven't been able to find a free/cheap data source. Do you guys know of one ? Also, is there a way to proxy for an equities ...
4
votes
2answers
174 views

Multifractal Model, Generating Sample Paths with Correlations between Assets

I have studied option pricing using Geometric Brownian Motion to generate sample paths. Because of the normal distribution, it is easy to create a covariance matrix and get correlated asset returns. ...
1
vote
0answers
189 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 ...
1
vote
0answers
86 views

A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

[I already posted this question on the math forum of stackexchange and I was advised that I should post this question here] In Evans and Jovanovic (1989) you will find a model for entrepreneurs with ...
1
vote
2answers
297 views

Optimizing Principal Component factor weightings over time

I was given the returns of a cross-asset class portfolio of ETFs and I conducted PCA to obtain factors on dates from T-n, T-3, T-2,..., T. What I would like to do is decompose the market moves from ...
1
vote
1answer
424 views

Lagged dependent variable, yes or no?

I read conflicting opinions about the inclusion of lagged dependent variables in modeling, and I guess it is partly up to the researcher and depending on the scope and goal of the research. I'm ...
2
votes
0answers
91 views

How to reproject rates risk on a subset of tenors

Is there a standard method (statistical or model based) to reproject rates risk obtained on a full set of tenors onto a smaller subset of tenors ? Let's imagine that I got a delta in the following ...
4
votes
0answers
154 views

How to become a registered market maker on an exchange [closed]

We are thinking of applying to become a registered market-maker on different European exchanges. The name varies from exchange to exchange (Liquidity provider on Euronext for instance). Could anybody ...
0
votes
0answers
55 views

Price variances on fixed income assets

New to the site. I am currently working on a project that involves analyzing two pricing sources (IDC and Markit) on fixed income assets (Corp, High Yield, Muni, and Structured). I am trying to ...
3
votes
0answers
57 views

How is the redemption right on delisting of underlying shares held by holder in the convertible bond valued?

As title, If there is no delisting constraint, then I can treat the redemption right as the put right on the convertible bond. If there is redemption right on delisting, what is the conventional ...
-1
votes
1answer
156 views

Calculate the total returns from the total return index [closed]

I have the Total Return Index(RI) for several companies. I know that I can calculate the log retunrs with $ln(RI_t/RI_{t-1})$. Therefore my first guess would be to ...
6
votes
2answers
278 views

How to interpret beta meaningfully?

Although this is probably a basic question, this is probably also the right forum to post it in :) I thought I understood beta, but know I am really confused... The beta between my portfolio (weekly ...
5
votes
3answers
166 views

Stochastic volatility model with exponential OU volatility

I have a friend in the industry who said they are interested in the model I gave in the title. Whether they use it, idk. $dS_t= S_t(rdt+ \sigma_t dW_t)$ And $\sigma_t$ is the exponential of an OU ...
1
vote
4answers
164 views

Error message in calculation Implied Volatility

I am unsuccessfully trying to find the Implied Volatilities for the SPX on a given date using information of the CBOE, as well as Open Interest, but as I run the code I am getting and error message ...
1
vote
1answer
282 views

Arbirtage free price process question in Bjork's Arbitrage Theory in Continuous Time

I am currently working through questions in Bjork's Arbitrage Theory in Continuous Time. However, I am unable to solve the following question, 7.2 in the book. A solution would be greatly appreciated. ...
2
votes
0answers
88 views

Best method for determining the market value of a stock before it is issued

I am attempting to determine the hypothetical market value of a stock for a company emerging from bankruptcy as of a date prior to actual the issuance of the stock. For example, let's say the formerly ...
2
votes
1answer
164 views

Are my estimates of parameters of geometric brownian motion correct?

I wrote a simulation of a geometric Brownian motion which works like this: ${ t }_{ i }-{ t }_{ i-1 } \sim Exp(\lambda )$ ${ Z }_{ i }\sim N(0,1)$ ${ Y }_{ i }\sim { e }^{ \sigma \sqrt { { t }_{ i ...
1
vote
0answers
36 views

Weak convergence of Lookback payoff with correction term

In this article on the Multilevel Monte Carlo method on page 8, http://people.maths.ox.ac.uk/gilesm/files/mcqmc06.pdf, Giles uses a correction term to improve the weak convergence rate of the lookback ...
1
vote
1answer
82 views

Compare fund managers with insignificant alphas?

For my thesis I am evaluating two mutual fund portfolios in order to check for differences in manager performance. My hypothesis is that there will be no differences in performance (in terms of alpha) ...
1
vote
2answers
350 views

Machine Learning on matlab 2010

I am trying to develop a trading model. It uses certain technical and fundamental features and the model learns from the past. I have a 3-class output - bullish, neutral and bearish. On trying neural ...
2
votes
0answers
2k views

Difference between S&P 500 index and S&P 500 Total Return index?

There's the standard S&P 500 index (SPX) and the rarer used S&P 500 Total Return index (SPTR). If you compare graphs, you'll find that the latter grows faster. Supposedly, SPTR assumes ...
1
vote
1answer
54 views

ISDA: Interpreting a date specified as x business days prior to another date with a business day convention of 'NONE'

I've got an interest rate swap, it has a right-to-break with a bermudan exercise schedule. For each exercise, the settlement date is specified as an already-adjusted business day. The "last ...
1
vote
0answers
34 views

Does the time between prices created from a GBM affect the estimation of parameters of the GBM?

Recently I created a simulation of a GBM. The time between the prices were sampled from an exponential distribution. The log rate of return was sampled from $\sigma \sqrt { { t }_{ i }-{ t }_{ i-1 } } ...
6
votes
2answers
254 views

how to choose top n assets?

I have m assets, and have estimated their future returns and covariance matrix. I would like to invest in an evenly weighted n product basket from this universe, where 0<n<m. How do i find the ...
2
votes
1answer
64 views

What are the general limitations of Gaussian copulas with regards to the range of joint pdf's it can approximate?

I'm working with the nataf transformation - AkA Gaussian copula - and trying to establish the range of joint bivariate pdf's it can approximate, and what limitations it puts on those joint pdf's. I've ...
1
vote
0answers
96 views

Calculate display and plot relative spread using Sierra Chart

I'm trying Sierra Chart for trading Bitcoin. I would like to display relative spread for a given volume. spread_rel = 200.0 * (ask - bid) / (bid + ask) where ...
1
vote
0answers
74 views

How To Regress Returns Vs Price as Pct of 52 week high?

I would like to do a linear regression of daily stock price returns, vs the price as a percentage of the 52 week high. i.e. [next week return] = A * [Price / 52 Week High ] + B where A and B are ...
1
vote
3answers
732 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 ...

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