2
votes
3answers
190 views

Latency and Delays across Exchanges

I have recently come across this paper by Battalio et al. "Can Brokers Have it all? On the Relation between Make Take Fees & Limit Order Execution Quality" and realized how little I know about the ...
1
vote
0answers
36 views

Texts on the Generalized Method of Moments

I was looking for a book that could explain me well the Generalized Method of Moments, its mathematical nuances, and even have a look to the empirical side, maybe with some guided exercises with Stata ...
2
votes
2answers
180 views

Real world monte-carlo (P-measure)

Consider the 2 following approaches to pricing a security: Monte-carlo ($\mathbb{Q}$-measure) $\begin{equation} C = \frac{1}{N} \sum_{i=1}^{n} e^{-rT} max(S_i(t) - K, 0) \end{equation}$ Monte-carlo ...
1
vote
1answer
91 views

Vega in Heston / Bates Model

Just a question regarding "convention": Is the Vega in Heston / Bates model the sensitivity with regards to $\sqrt v_0$ or a term of $\sqrt v_0$ and $\theta$ (Long term variance)? Regards
1
vote
1answer
118 views

Broker or source of intraday futures data for a python API?

I am looking for a broker that offers a python API for downloading historical intraday data on futures. So far I have only seen Interactive Brokers and Tradestation. Are there some other brokers ...
2
votes
1answer
132 views

Why is CSA currency OIS rate used in discounting instead of local currency OIS?

I have been struggling to understand the logic behind cross currency OIS discounting (where cash flows happen in different currencies than the collateral is paid). I will illustrate my question ...
6
votes
0answers
193 views

Markov-Switching Multifractal and FX Rates

Is there a better model than Markov-Switching Multifractal (MSM) for detecting regime shifts in FX rates across multiple time horizons? I am especially interested in the different aspects of the ...
3
votes
0answers
81 views

How does one simulate intraday strategies which don't end up flat at the close?

I ran into this trying to simulate trading interlisted names between the NYSE and the TSX. Depending on my strategy parametrization it would sometimes end up with a significant short or long dollar ...
2
votes
3answers
101 views

How free are we in risk-neutral distributions?

Suppose we do not have a particular pricing model, we have just a frictionless market with constant interest rate (say $0$), and some traded stock $S$ which does not pay dividends. For any expiry $T$ ...
0
votes
1answer
321 views

Which distribution do I get?

Let's assume the stock moves according to a classic Black-Scholes model, and makes a proportional jump with an unknown proportion. Say, it is either +1% or -3% of the stock value, and we know for sure ...
0
votes
1answer
44 views

Should earnings be modelled normally or lognormally?

I am having difficulty deciding whether a company's earnings should be modelled normally or lognormally. If we consider two arguments: (i) The earnings of a company are the returns on the assets of ...
0
votes
0answers
46 views

What's the risk-neutral expectation of the arithmetic average of stock price?

All Black-Scholes assumptions apply ($y$ is yield): what's $E(A_T), E(A_T^2)$ and $Var(A_T)$ where $A_T=\frac{\int_0^T S_tdt}{T}$ is the continuous-sampling arithmetic average of the stock price ...
1
vote
0answers
77 views

Interpretation of Johansen cointegration test in R

I am using urca package of R for Johansen Cointegration test in 2 stocks datas( A and B. My question is very elementar, but have cause some problems for me. How I interpret the critical values, for ...
2
votes
1answer
86 views

Understanding Quandl Futures Data

I'm interested in learning how to adjust my own futures contracts for analysis. Unfortunately my quantitative classes didn't really go into this, and I would like to learn it on my own. The methods ...
2
votes
0answers
111 views

Simulation of Heston process

I am currently working on implementing Heston model in matlab for option pricing (in this case I am trying to price a European call) and I wanted to compare the results I obtain from using the exact ...
0
votes
0answers
31 views

short term trading does it really add value and to whom?

Short term traders who flip their stocks within 5-10 minutes, do they really add value to any one? Text book answer is yes, they help price discovery and provide liquidity. Within that 5 minutes ...
3
votes
4answers
466 views

Why are Quantquote historical trades different vom ActiveTick historical trades

I bought quantquote.com historical data of AAPL on second basis. To comapre I also got activetick.com For activetick I used the historical trading API. If you look at around 15:13:53 you see that ...
0
votes
0answers
21 views

Risk neutral pricing formula justification in incomplete markets [duplicate]

I'm having trouble understanding how to justify the use of the risk-neutral pricing formula $V(t) = \mathbb{E}^{*}[e^{r(T-t)}H(S_{T})|\mathcal{F}_{t}]$ in models which are characterized by ...
0
votes
0answers
18 views

How was the adj.close for RIG calculated after Transocen - GobalSantafe merge

Yahoo's algorithm for adj.close calculation is pretty clear, as explained in the link. Said that, however, the values for RIG till 2007-11-26 don't follow such rules, as shown here. Indeed, if one ...
0
votes
1answer
32 views

Modeling EOD ETFs price returns together or individually?

Let's say you want to model the next day price returns for a set of US equities large cap ETFs (a relatively homogenous group). Would you model all the ETFs as a single, 15 years data set, or each ETF ...
0
votes
0answers
14 views

negative yield (interest rate) and Option Pricing [duplicate]

If i have negative yield (interest rate) can I still proceed with Standard Black and Scholes or Simple Binomial Model? any Adjustment is required to the model? how does it effect the pricing model in ...
4
votes
1answer
113 views

Expert System for Credit Scoring

I am working on a credit scoring model for a credit without a garanty (consumer credit). I'm looking for a methodology for an expert system for credit scoring decision that doesn't base on ...
1
vote
3answers
98 views

What's the disadvantage of using linear programming for portfolio optimization?

I am a MFE student and we have project on the Markowitz portfolio optimization problem. i am wondering how much impact there will be, if I use a simpler linear optimizater instead of a quadratic ...
3
votes
1answer
108 views

French Data from daily to monthly returns

Ken French on his website publishes daily, monthly and yearly returns for the Fama-French 3 Factors model which are excess market (Rm-Rf), small-minus-big (SMB) and high-minus-low (HML) returns. I ...
0
votes
0answers
77 views

Values for Heston Model Parameters

Under the Heston model, the stock price and volatility follow the processes \begin{align*} dS & = \mu S dt + \sqrt{V} S dW^1, \\ dV & = \kappa (\theta - V)dt + \sigma \sqrt{V} dW^2, \\ dW^1 ...
3
votes
1answer
138 views

Compare events effect on stock prices from different time periods

I’m going to test for the effect corporate credit rating announcements have on stock prices through different economic climates (good times vs. bad times). I want to research whether or not the stock ...
1
vote
1answer
89 views

Is the Black-Scholes model price a bijection on the interval of static arbitrage free prices

Consider some stock with observed price $S$ and a call option on the stock with value $C$, time to maturity $T$ and strike $K$. Assume there is a constant, continuously compounded interest rate $r$. ...
2
votes
0answers
83 views

Identifiability of a state space model (Dynamic Linear Model)

Take a general linear Gaussian state space model (SSM)(aka Dynamic Linear Model DLM): $X_{t+1}=FX_t + V_t$ $Y=HX_t+W_t$ $V_t \sim N(0,Q)$ $W_t \sim N(0,R)$ I am interested in the ...
6
votes
3answers
220 views

Why do stocks fall so quickly? Technical explanations

Why do stocks fall so quickly? China's market is down 40% in the past month ,for example. But when you look at charts of individual stocks, you see many instances of stocks giving up months of weeks ...
3
votes
2answers
79 views

Probability of Closing Stock Price Over a Defined Period

I found this equation when I was reading "Paul Wilmots on Quantitative Finance" which calculates the probability that of a stock price ending/landing on a particular price (S'). So if the stock ...
1
vote
1answer
59 views

Calculate put price with Black-Scholes and one discrete dividend

I try to solve this exercise: a) Calclculate the price of a 3-month European put option on a non-dividend-paying stock with a strike price of 45 when the current stock price is 40, the risk-free ...
1
vote
2answers
129 views

Solving the Bootstrapping equation when matrix is non-square

I am trying to construct a Zero Coupon Yield curve for US Government Bonds from market data (coupons, face values, prices, months to maturity) via Bootstrapping. However, I am not too sure how I would ...
0
votes
0answers
46 views

Where I can find the conventions used in building an FX volatility surface?

Here are some conventions used in building the EUR/USD volatility surface. I need to validate these fields: Base Currency: EUR Term Currency: USD Spot Lag: 2bd Interpolation Variable: ...
1
vote
0answers
89 views

Black-Scholes formula with deterministic interest rate and dividend yield

Does any one have the Black-Scholes formula for a European call with time-dependent but deterministic interest rate and dividend yield ?
1
vote
1answer
187 views

How to use quantlib with excel?

I installed an quantlib on my mac, but have no idea, how to start using it with an excel. Please advise hoq to do it. I followed all instructions here: http://quantlib.org/install/macosx.shtml. I ...
0
votes
1answer
90 views

American put option and rising interest rate

Will a rise in interest rate always result in a lower price of an American put option?
0
votes
1answer
35 views

Test Log-Normality for LIBOR forward rates under the Libor Market Model

As far as I understand, under the Libor Market Model the forward rates are assumed to have a log-normal distribution. Given that I have constructed my LMM model and now have a matrix of: k different ...
1
vote
1answer
98 views

Calibration of non-mean-reverting OU process

I'm looking for some reference on how to calibrate a non-mean-reverting Ornstein-Uhlenbeck process to historical data using MLE or OLS. The model has the following SDE: ...
2
votes
1answer
552 views

how do I loop through all the stocks with quantmod and ttr?

I just started with quantmod package. If I want to select stocks based on their recent performance, then I need to loop through all the stocks in, say, NYSE. So I need: get all the stock symbols ...
2
votes
0answers
49 views

How to construct a cointegrating vector using more than 2 price series in R?

I use now this code from hier Why does the following data fail my cointegration test? with slightly modification of possibility to load something directly from Dropbox file storage . ...
2
votes
2answers
169 views

What are Barra style factors useful for?

I'm reading the paper's summary of: Beckers, Stan, and Jolly Ann Thomas. "On the persistence of style returns." The Journal of Portfolio Management 37.1 (2010): 15-30. about how some of these ...
1
vote
1answer
57 views

Asian Option with Geometric Averaging

Can someone point me to any notes on how to derive the closed form formula for Asian geometric average option with payoff $\text{max}\left(\text{log}\left(\frac{A_T}{K}\right), 0\right)$ where $A_T$ ...
0
votes
0answers
18 views

Complex yields occur for some sets of cash flows

My question is not inherently related to Matlab but if there is a solution using Matlab that would be great. I have inherited some Matlab code that uses the function bndyield to get the yield of some ...
3
votes
1answer
61 views

Estimating $\mu$ - only increasing $T$ improves estimate?

Assuming an asset price $S$ follows a geometric Brownian motion (GBM), the log returns $R$ are distributed as $$ R_i := \log\left(\frac{S_i}{S_{i-1}}\right) \sim \mathcal{N}\left(\left(\mu - ...
3
votes
1answer
276 views

How to adapt a Moving Average period to market conditions?

I would like to know if there is some way to adapt the period of a moving average to market conditions like for instance the stop loss can be adapted to market conditions using the average true range. ...
10
votes
2answers
398 views

GARCH model, expectation of volatility?

Consider a time series $\{r_t\}$ following a standard GARCH(1,1) model, i.e., $$ r_t = \sigma_t \epsilon_t,$$ where $\epsilon_t \sim N(0,1)$ and are i.i.d, and $$\sigma_t^2 = \omega + \alpha_1 ...
5
votes
1answer
236 views

Getting ETF data from google finance

I hope this is on-topic. I want to set-up a set of investment rules and back-test it on a mix of asset-classes. Thus I thought that using ETFs for the back-test would be a good idea (time series could ...
1
vote
2answers
84 views

convert three months interbank rate into monthly rate

I have a time series of the three month interbank rate each month and I suppose that the rate is has yearly frequency. I need these interbank rates to be on a monthly basis because I want to us these ...
1
vote
0answers
80 views

PDE vs TREE vs MC vs Analytical

One what basis the pricing model can be differentiated for particular trade pricing. For exapmle why PDE or Binomial tree or MC or Analytical method will be consider for pricing any trade. Question ...
7
votes
2answers
176 views

Quantitative Real Estate Investment Finance

I'm wondering if there is an application of quantitative finance to real estate investment? Specifically I'm wondering about models for pricing small neighborhoods (or even single houses) that take ...

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