1
vote
1answer
84 views

What does NPV ASSENTED after stock name mean?

For a project, I have to quantitatively implement a strategy for value investing in EURO STOXX 50. I pulled the data from Datastream. When I was checking some data plots for dividend yields and total ...
2
votes
1answer
91 views

Price an option whose strike price is always lower than the future price of the security

Suppose it is known that the price of a certain security after one period will be one of the $m$ values $s_1,\ldots,s_m$. What should be the cost of an option to purchase the security at time $1$ for ...
2
votes
1answer
226 views

Commonly used vol surface calibration model in the industry

I have 2 questions: What is the most commonly used equity option pricing model? I learned jump diffusion at school, read about Hensen and a few other models online. I am actually only calibrating ...
0
votes
1answer
280 views

Gamma and delta P&L example question

I'm trying to get a basic understanding of this example delta ladder ...
5
votes
1answer
103 views

Market price of volatility risk

Reading Gatheral's The volatility surface, page 7. The model they are talking about is ...
-1
votes
1answer
124 views

Equall Risk Contribution and The Most Diversified Portfolio [closed]

I am a master degree student on applied economics at Brazil and my thesis will be about smart beta strategies. I pretend to apply Equal Weigth, Mininum Variance, Most Diversified Portfolio and Equal ...
6
votes
2answers
324 views

Black-Scholes formula with deterministic discrete dividend (Musiela approach)

For deterministic discrete dividend, there are two approach Musiela approach, works when every dividend are paid at maturity of the option. Hull approach, works when every dividend are paid ...
2
votes
2answers
135 views

Using Financial Ratios to get credit rating or PD

Hello I'm looking for papers, aside from ones that use CDS spreads, about credit rating development or estimating default probability based on financial ratios that also include methodology and maybe ...
3
votes
1answer
161 views

Continuity of Black-Scholes formula

How to proof B&S pricing formula is continuous in time $t$ (or it is not?). The general pricing formula is $$ C_t = e^{-r(T-t)} \mathbb{E}^*[(S_T-K)^+ | \mathcal{F}_t] \hspace{1cm} 0\leq t\leq T ...
0
votes
0answers
19 views

How to estimate portfolio value in money as function of spread

I'm a beginer in field of quant algos, so sorry for my lame question. I'm trying to calculate portfolio value of 2 currencies in basic stat arb strategy as function of spread change. But my value in ...
0
votes
0answers
94 views

How to calculate Probability of Default from Survival Probability

I would calculate Probability of Default from Survival Probability. I want to know how they are related. This is how I think they are related: ...
0
votes
1answer
131 views

Feature Selection Effect on Deep Multi-Layer-Perceptron for Financial Applications

I am trying to build a machine learning system for financial price prediction. I am using a 3 layer MLP (a deep network) with 3 outputs (buy,hold,sell). I am using different features such as price ...
0
votes
1answer
131 views

Chart Correlation warnings

when I run chart.Correlation I get a series of warnings. I get the identical warnings with chart.Correlation(managers[,1:2],method="pearson") Here is a short sample: ...
0
votes
1answer
47 views

Risk free rate for Performance Analytics

In [R] one can pass either a vector or scalar as the risk free rate. What is better? If I pass a vector to (for example) chart.riskreturnscatter then the sharpe ratio lines disappear. ...
0
votes
1answer
405 views

Principal Component Analysis and Yield Curves

I've been tasked with researching trading strategies relating PCA to trading fixed income futures instruments. Apparently PCA is frequently used in this area. I'm just looking for some references for ...
2
votes
1answer
99 views

CIR model: is the short rate really non-central $\chi^2$ distributed?

Probably simple question. Consider the CIR (1985) model for interest rates $$ dr = k(\theta - r)dt + \sigma \sqrt{r}dz $$ Then it is known in closed form the conditional pdf $f(r(s),s|r(t),t)$ ($s ...
0
votes
3answers
226 views

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 ...
1
vote
1answer
571 views

Black Scholes formula with continuous dividend paying stock

I am reading the part of constructing B&S price for stock paying dividends. The simplest model used continuous yield dividend. But I can not see that rigorous in term of formulations. Firstly, ...
1
vote
0answers
241 views

Cointegration Test: Residual is stationary but not random?

I am testing cointegration relationship on various pairs of stocks by this following these steps. Test for I(1) on a pair of stocks, says X and Y, using Dickey-Fuller test. If both time series are ...
0
votes
3answers
237 views

Parametric/Analytical VaR

Suppose I want to calculate VaR for a known distribution with mean $\mu$, variance $\sigma^2$ and $\alpha$-quantile as, $VaR_{\alpha}$ = $\mu + \sigma q_{\alpha}$. For a Gaussian distribution it is ...
0
votes
1answer
192 views

Gamma is always positive on both put and call

I recently met the claim that for standard put and calls the gamma of the options are always positive. Is this a general result? I am hoping not to assume any model, especially not Black-Scholes.
0
votes
2answers
148 views

Investment: Bond vs Equity

I was talking to a friend recently and he asked me the following question. If I have a device which perfectly (with 100% accuracy) predicts that both a bond (e.g. AAA rated government bond) and the ...
1
vote
1answer
185 views

Can a null be inconclusive? [closed]

My Null for the T-test is h0: -tcritical < Tstat < +tcritical I require confidence level of 95%. If my empirical result satisfies the null, but not my p-value requirements, does this mean ...
1
vote
2answers
849 views

Bloomberg Libor Rates

I load swap rates data from Bloomberg in excel using the command =BDH(Ticker,"Px Last",Start_Date,End_Date,"Dts",FALSE) The tickers I use are "USSW1 Curncy", ...
1
vote
0answers
62 views

Value of an option to exchange an asset for another

I'm working out the examples in the paper "Changes of Numeraire, Changes of Probability Measure and Option Pricing", corollary 3. An option of exchanging asset 2 against asset 1 at time T, its time-0 ...
2
votes
3answers
208 views

Ran multivariate linear regression, checked normal probability plot, residuals are not normal. What can I do?

One of the required assumptions for multiple linear regression is that residuals are normally distributed, correct? After running my regression, my normal probability plot is showing the typical ...
3
votes
0answers
312 views

Portfolio Optimization with Monte Carlo Simulation - How to do it with Excel?

If I have three asset classes and their historical weekly returns for five years, how can I construct a minimum variance portfolio and an efficient frontier plot with Excel? To do that do I have to ...
3
votes
2answers
261 views

How can an inverted yield curve in a liquid market exist?

Take a liquid market like US T-bills, notes and bonds... Who would want a long-term security that yielded less than the short? Even if someone is a long-term lender, why wouldn't they hold the ...
2
votes
2answers
202 views

How to compute the VaR for European Call, using the delta-normal method?

I have a European call option with current stock price $S_0$, strike $K$, risk-free rate $r$, volatility $\sigma$, and time to maturity $T$ years. I assume that the stock price at time $t$, which is ...
3
votes
1answer
155 views

Black-Litterman example

I'm trying to learn Black-Litterman. I feel like I get the overall idea from books like Risk and Asset Allocation by Meucci as well as some of the early papers which develop the model. What I would ...
2
votes
2answers
186 views

Does unit root stationary imply mean stationary and variance stationary?

Newbie question. I am reading about stationary series and understand that it has many forms: mean stationary variance stationary covariance stationary My question is does unit root stationary ...
2
votes
1answer
451 views

Effect of time to maturity on european put option

Let $C(K,T,S_0)$ denote the price of an European call option with strike K and maturity T on underlying price $S_0$. Assume interest rate $r>0$. Then of course $C(K,T,S_0) \geq 0$ and $C(K,T,S_0) ...
3
votes
2answers
308 views

Scan for chart patterns software

Is there any software out there that currently would allow you to scan historical charts and look for a specific pattern and then show you that pattern for a list of stocks. Google finance and yahoo ...
3
votes
2answers
450 views

Null and Alternative hypothesis for multiple linear regression

I have 1 dependent variable and 3 independent variables. I run multiple regression, and find that the p value for one of the independent variables is higher than 0.05 (95% is my confidence level). I ...
0
votes
2answers
191 views

Who holds stock overnight?

I have heard from several different sources, e.g. professors, books and traders, that daytraders and quants avoid holding positions overnight and during holidays and weekends. Instead, they sell their ...
3
votes
2answers
470 views

Simple value of a Forward contract at an intermediate time question

I am taking "Financial Engineering and Risk Management Part I" from Columbia University on coursera and I got a seemingly simple question wrong on the first quiz. This is all based on the no-arbitrage ...
0
votes
1answer
80 views

Asset Liability Management Test Topic Interpretation

I will write a test based on Excel and one of the topics is "The Asset Liability related analysis: including the input assumptions generation, constraints, portfolio optimization analysis and results ...
2
votes
1answer
88 views

How to model bracket orders?

I'm looking for a way to make my own Python backtester (like zipline or pyalgotrade) or improve one of these backtesters. One major lack of these backtesters is the lack of support of bracket orders ...
3
votes
1answer
160 views

Normalized price process $Z(t)=\frac{\Pi(t)}{B(t)}$

If an interest rate model with the following $P$-dynamics for the short rate. $$dr(t)=\mu(t,r(t))dt+\sigma(t,r(t))d\bar{W}(t)$$ Now consider a $T$-claim of the form $\chi = \Phi(r(T))$ with ...
2
votes
1answer
72 views

Can you use a t-test on bootstrapped Value at Risk (VaR) figures?

I need to compare VaR before and after the recession. I have a series of market returns for a period before, and a series of market returns for the period immediately after. Both have been ...
4
votes
2answers
297 views

Why is there onshore and offshore currency?

I hear a lot about offshore and onshore currency, but I don't understand the difference between them. What is the difference between onshore and offshore currency in a country? Besides that, why is ...
3
votes
1answer
192 views

Bayesian or Frequentist in Finance?

I'm currently an undergrad at a Canadian university and our finance courses has been brought up through the frequentist approach (ols, hypothesis testing, sampling theory). Only recently, through ...
1
vote
2answers
173 views

Who determine Sport rate curve (Yield Curve)

My study was in a Mathematical modelling, we studied much about theory, equations, how to resolve equation, how to implement, but we don't understand well where these equations come from. My ...
5
votes
3answers
136 views

Bayesian estimation of asset pricing models

I am interested in Bayesian methods in the context of financial economics and quantitative finance and have been looking for research which uses Bayesian parameter estimation on asset pricing models, ...
3
votes
1answer
834 views

Learn backtesting using MATLAB

What are some good ressources (books, articles, ...) to learn backtesting of investment strategies using MATLAB ? It can be strategies related to fixed-income, equities, derivatives, ... whatever. ...
1
vote
2answers
67 views

Using central limit theorem to test whether population average return is the same, before and after the recession

This is the task I have been asked to do. I've read up on what central limit theorem (clt) is, but I feel like I'm missing something. The data I have is a matrix of monthly stock returns from 50 ...
1
vote
2answers
106 views

For the Dothan model $E^Q[B(t)]=\infty$?

How can I show that for the Dothan short rate model We have $E^Q[B(t)]=\infty$ ? Where Dothan short rate model is " $dr_t=ar_tdt+\sigma r_tdW_t$ ". I appreciate any help. Thanks.
1
vote
2answers
57 views

I have some historical options data, and there are duplicates of some options, how to filter them

I have some historical EOD options data for 2013, and there are duplicates listed for same strikes/expirations. I was told that by the provider that this is due to "special one-time cash payout" for ...
1
vote
1answer
45 views

interbank market rates - missing data

I took EU market rates here: https://www.banque-france.fr/en/economics-statistics/rates/main-euro-area-interbank-market-rates.html As you can see (Eonia 05/13/1999 for example) there is non defined ...
2
votes
1answer
123 views

Asymptotic behavior of theta of vanilla call option

It is well known that the theta of call option is always negative. Also, the theta of (at the money call option) goes to infinity as the time approaches to the maturity. On the other hands, (ITM and ...

15 30 50 per page