0
votes
3answers
201 views

hedging with known volatility

Suppose we have a stock $X$ at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How ...
4
votes
2answers
209 views

Difference between a warrant and an option?

What is the difference between a warrant and an option on a stock? Apparently both represent the same right to receive a share of stock at the strike.
0
votes
2answers
177 views

Avoiding negative spread in pairs trading

I'm constructing money-neutral spread by this formula: Spread = log(P1) - log(P2), where P1 and P2 is prices of two instruments But sometimes spread can get into ...
4
votes
1answer
248 views

Why would an exchange choose one matching algorithm over another?

There are a number of different matching algorithms at different exchanges. Time-based FIFO is most common, but there is also mixed FIFO/pro-rata, pure pro-rata, size priority, etc. Why would an ...
1
vote
2answers
190 views

Are power contracts traded on any stock market?

Are power contracts traded on any stock markets ? What about OTC markets ? I ask about the derivatives where payoff is some exponential function of difference between strike and spot price.
3
votes
1answer
1k views

Drawbacks of Black-Scholes option pricing model

Will highly appreciate if anybody can provide logical financial proof why the Black-Scholes option pricing model overestimates the value for long-term options as described in this paper "Warren ...
1
vote
2answers
220 views

Exchange rate model and Martingales

In exchange rate model explanation, "...If under the domestic risk neutral measure $Q_d$, the process $X(t)$ satisfies $\displaystyle \frac{dX(t)}{X(t)}=\sigma dZ_d(t)$ Since $Z_d(t)$ is ...
2
votes
0answers
42 views

Discretization Schemes

I am working with two correlated SDE's and I was wondering if I could use two different discretization schemes for them. Is there maybe a reference of this being done? And can something be said about ...
4
votes
1answer
515 views

Popular R packages for Quantitative Finance

Which R packages (in this list or not) do you use in quant finance, why not an alternative, do you use it in production and if so, how? There is a list of most of the R packages related to Finance by ...
3
votes
2answers
223 views

Resources for finding quantitative finance examples using excel, VBA and access

I am seeking to increase my knowledge in the quantitative finance field. I would be grateful if someone could point me to useful resource online, where I can find working examples of they types of ...
6
votes
6answers
5k views

Why non-stationary data cannot be analyzed?

Searching online, i found out that non-stationary cannot be analyzed with traditional econometric techniques as in case of non-stationarity some basic model assupmtions are not met and correct ...
8
votes
3answers
329 views

Starting mathematics reading for quants

What book should I start with in order to learn about the mathematics behind financial (derivatives I think!) trading that would be used in HF's & IB's (Not sure whether there would be a ...
0
votes
1answer
155 views

Book recommendation for time series analysis

I have been trying to wrap my head around Engel-Granger test and jcitest etc. I have failed thus far. If possible can someone guide me about which books to start with and possibly reach to ...
2
votes
0answers
36 views

Formal Proof of Immunization Techniqu

Please correct me if I am wrong in understanding the Immunisation Technique behind bond interest rate risk management. It says that any change in interest rate can be neutralised by reinvesting the ...
5
votes
5answers
2k views

Is there a charting API which allows to replicate Bloomberg chart tool features?

I believe that most of us will agree that being able to compute values is only part of our job, as we would also like to be able to display them nicely in order to better understand or help ...
0
votes
5answers
3k views

How are HFT systems implemented on FPGA nowadays?

I have read about different implementations of HFT systems on FPGAs. Argon HFT system (http://trading-gurus.com/argon-design-an-fpga-based-hft-platform/) Hardware-only implementations or hybrid ...
5
votes
1answer
395 views

QuantLib: Black / BSM processes and pricing via volatility surface. Different results?

I start this question with a couple of C++ functions that will be useful to show some results. So start your Visual Studio C++ Express or Ceemple or whatever you want and copy & paste this: ...
1
vote
1answer
168 views

High correlation will help detect spurious regression over cointegration?

I'm analyzing two financial time series with Johansen method. A high Correlation coefficient using the Pearson method will help me to detect spurious cointegration models to avoid? If this is not ...
2
votes
1answer
98 views

Concise way of learning Bond & IR models

What is the most concise way to learn about bond and interest rate models from the book Mathematical Models of Financial Derivatives by Yue-Kuen Kwok? I have studied Oksendals Stochastic Differential ...
0
votes
0answers
131 views

Which size of constant range bar gives the most persistent chart?

A constant range bar chart is like a candle chart, only the candles don't close after a certain amount of time (i.e. 30 min, 4 hours), but after a certain range (i.e. 5 ticks) has been crossed. So if ...
1
vote
2answers
509 views

Correlation between S&P500 returns and 10y US Treasuries yields

I'd like to investigate the comovement of stock index returns with bond yields but I don't know which return's duration to use (1-year, 1-month or anything else) to get a better view of the ...
1
vote
2answers
373 views

Backtesting with Simulated Historical Data?

The trading strategies that are going to backtest well are the ones that pick the winners from the past. For example, if a trading strategy simply bought apple stock it would backtest extremely well. ...
1
vote
0answers
64 views

Handling IQFeed events in Matlab

I need to get some specific market data for my studies, and it seems like the most convenient way for me to do this is to use IQFeed data feed and MATLAB. But unfortunately, since I'm not a seasoned ...
3
votes
2answers
375 views

Calculating and interpreting cumulative returns is R

I have buy and sell signals,and accordingly, I artificially generate a signal series,for which,I assign 1 to every buy and -1 to every sell: ...
0
votes
0answers
22 views

Is it compulsory for feed to send orders/levels for particular symbol on same multicast line?

Multicast feeds have several lines some of which are dedicated for sending current order-add/modify/delete. Its is a implicit restriction that for a single security order-add/delete/modify will be ...
0
votes
1answer
213 views

Price change of a bond towards yield and YTM

I have been trying to get a good picture of PV01 and DV01(PVBP). I was going through below link. This measure is the absolute value of the change in price of a bond for a one basis point change in ...
1
vote
1answer
90 views

Why doesn't VG flatten volatility skew for short term options?

The VG process, from my inexpert point-of-view, seems to nearly perfectly model equity distributions. For longer term options, there is little to no volatility, skewness, or kurtosis parameter skew. ...
0
votes
1answer
57 views

How do I find the mappings between sedol and isin codes?

I am looking at data for Unit Trusts and OEICs in the UK. They are identified by SEDOL or ISIN codes. Given an SEDOL, how can I find the ISIN associated with the same product? And given an ISIN, ...
0
votes
0answers
68 views

How to display stock prediction results?

I'm not sure if this is a question for "Quantitative Finance" or "Personal Finance & Money" so forgive me if this one is irrelevant for this site. The Situation So I wrote a program (in vb.net ...
1
vote
0answers
136 views

Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
0
votes
0answers
35 views

How to compute return of a variance swap?

How does one calculate the investment of a zero initial investment asset, specifically a variance swap? In this asset the payoff is given by the difference between the realized variance in a certain ...
3
votes
1answer
80 views

Properties of a Symmetric Copula

I am working with the following copula, and have a few questions about it: $C(x,y) = xy + \theta (1-x)(1-y)xy$ Here $\theta \in [-1,1]$ and $x,y \in [0,1]$ First, I am trying to show this copula is ...
2
votes
1answer
124 views

Comparison of multicurve calibration methods

It seems that there are mayor softwares around offering a multicurve framework based on bootstrap. I find this puzzling nowadays, given the distinct advantages of best-fit optimization methods and ...
15
votes
5answers
25k views

Mapping symbols between tickers, Reuters RICs and Bloomberg tickers

Is there any known solution (preferably open source) to map between ticker symbols, Reuters and Bloomberg symbols. For example: Ticker: AAPL Reuters: RSF.ANY.AAPL.OQ Bloomberg: AAPL US Equity ...
0
votes
0answers
26 views

Real-World Cash Account Implementation and Return

Often in financial math, the concept of the risk-free cash account, with return R, is invoked as an instrument for calculating prices - when constructing an option-replicating portfolio, for example. ...
3
votes
1answer
76 views

Recommended Literature for creating Factor Mimicking Portfolios

Is there a textbook that contains the basics for creating Factor Mimicking Portfolios? Although there is a lot of peer-reviewed literature on this, I cannot find textbooks on Asset Pricing that ...
3
votes
1answer
94 views

Solving the Jamshidian Zhu (1997) PCA short rate model

This is my first time posting a question. I have very limited experience in the field of stochastic calculus and interest rate modelling. I have been tasked with implementing the short rate model ...
4
votes
2answers
152 views

law of one price, understanding

I am reading about mathematical finance, and I was tipsed to ask the quesiton on this site. It is about the "law of one price". Just first I'll make precise the model my book uses: I have a single ...
6
votes
2answers
293 views

Why are we obsessed over normalizing financial data?

I have recently began work on some high frequency financial tick data. I have been told to 'normalize' the data as much as possible and run linear regressions through them. In fact, the data doesn't ...
4
votes
3answers
654 views

How popular is the IRR as a tool for capital budgeting, nowadays?

This 2004 McKinsey Quarterly article reports that, back in 1999, three-quarters of CFOs always or almost always use[d] IRR when evaluating capital projects. The same article warns against the ...
1
vote
1answer
77 views

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
2
votes
1answer
116 views

How low can HFT transaction costs go?

When evaluating an HFT strategy, transaction costs are clearly an important question. When looking at commercial discount brokers for retail clients, costs can be as low as 0.005 USD per share, but ...
3
votes
3answers
439 views

Loading HF stock data into excel

Are there any free, open source VBA addins or R packages that can be linked using the yahoo finance/Google finance/other data sources api to continuously download intraday data into excel or R? ...
4
votes
1answer
986 views

What is the best solution to use QuantLib within Excel?

Excel is likely the most widespread instrument across all not-only-quants desks; in addition, we have to keep in mind that Bloomberg and Reuters allow to easily import real time data in Excel, and ...
4
votes
4answers
295 views

Why is the equity premium not arbitraged away?

The Equity Risk Premium Puzzle concerns the observation that equity returns are generally greater than bond returns. The puzzle is well known and widely studied, what is keeping investors from ...
3
votes
1answer
139 views

Brownian Bridge's first passage time distribution

Let's say we have a Brownian Bridge $Y_{b,T}(t)$ such that $Y_{b,T}(0)=0$, $Y_{b,T}(T)=b$. Let's say we are interested in the first passage time of $Y_{b,T}(t)$ at level $b$: $\tau_b = \{\min \tau; ...
1
vote
1answer
68 views

What is the distribution of stock splits?

I want to know how rare are splits more extreme than, say, 7:1 (and reverse splits similarly). An answer here points to announcements on Yahoo Finance, but apparently only monthly views. What is a ...
1
vote
0answers
45 views

proper choice of risk aversion parameter in the risk-sensitive cost-criterion

Suppose I want to minimize certain risk sensitive cost. Is it a valid question to ask what is the proper (also in which sense) choice of risk aversion parameter in the risk-sensitive cost-criterion ? ...
2
votes
1answer
1k views

How to build an execution trading system with CQG API?

I am currently using CQG for spread trading and have a spread trading strategy in CQG chart. I am trying to automate my spread trading strategy in CQG, but CQG told me to look at CQG API samples to ...
1
vote
2answers
137 views

Probability of Hyperinflation as a function of Probability of Soverign Default

I'm looking for some academic research on modeling risk of hyperinflation. Specifically, I'm interested in modeling the probability of hyperinflation over some time interval (e.g., probability of ...

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