23
votes
12answers
11k views

How fast is QuickFix ?

In my firm we are beginning a new OMS (Order Management System) project and there is a debate whether we use Quickfix or we go for a professional fix engine? Because there is a common doubt that ...
4
votes
1answer
68 views

Full Kelly portfolios having same weights as tangency portfolios

I'm currently comparing empirically the differences between Markowitz and Kelly portfolios. I calculated the Kelly weights for monthly return observations over 10 years for a sample of 50 stocks from ...
2
votes
0answers
160 views

How to calculate yield spread?

I came across this multiple choice question on yield spread and I can't understand why the reasoning for the selected answer is correct.Can you confirm or clarify ? ( emphasis in the text is mine) ...
0
votes
1answer
49 views

Given cash flows, what is the interest rate of the following contract? [closed]

I am presented with an investment opportunity where I am given #481,000 on day 1. Thereafter, every 10 days, I am required to give back #50,000 every for 100 days (10 * 50000 = 500000). How do I ...
2
votes
0answers
38 views

Want to understand the links and relationship between all the risk metrics?

For Example : if Risk weighted asset (RWA) increased or decreased this month, which other risk metrics could have influenced RWA to increase or decrease. Also in different situations like, upward ...
0
votes
1answer
19 views

Force of Interest Compounding at Annual Rate i

I'm working through some actuarial practice and am lost as to what's going on with the differentiation here (it's been a while since I've had calc): Derive an expression for $\delta_t$ if ...
0
votes
0answers
43 views

Trades Question

Two very specific questions (they are more database questions, but need specific knowledge): A same stock could be traded in different currencies in a same exchange? A bond is always traded in his ...
1
vote
1answer
30 views

Adjusting index betas for spread DV01

If you have an index and have measured its beta with respect to the overall market, how would you go about adjusting it against spread dv01 and why would you want this number?
1
vote
0answers
58 views

Definition of sharpe ratio maximising and variance minimising portfolios

In this paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2226985, in the derivation of the mean variance efficient portfolio using lagrangians in the appendix, on page 29, the two portfolios ...
5
votes
2answers
12k views
3
votes
2answers
446 views

Why does changing the time step size in my Monte Carlo simulation change my result a lot?

I have written some software to price a call option using Monte Carlo simulation. It produces a price which is consistent with the model when I set the time step as recommended in a tutorial that I ...
0
votes
1answer
72 views

Put-Call Parity Arbitrage Exploitation for Binary-Asset-or-Nothing Options

Is the Put-Call-Parity valid for binary (asset-or-nothing) options? If not, is there another formula for such exotic options? I know that for regular options, there are arbitrage opportunities when ...
0
votes
1answer
48 views

Projecting cash flows via Monte Carlo Simulation

I am looking to model the cash flows associated with a company as part of a Project finance experiment, where I got the idea from here. I'm looking to project cash flows for an Automotive company in ...
3
votes
0answers
55 views

Range options in BS

I know how barrier options are priced in Black-Scholes scheme. I'm wondering if an analytical formula exists also for range (corridor) digital options i.e. options paying only if the price remains ...
1
vote
2answers
82 views

Portfolio Strategies Project

My first assignment for my Quantitative Finance Masters is to design a portfolio that theoretically makes money under any market movement. I am also asked to state all necessary assumptions. What ...
1
vote
0answers
113 views

Historical calibration of Hull-White model

I have a question concerning 1-factor Hull-White model. For my master project I need to calibrate it to compute Counterparty credit risk metrics. I know that the model might be calibrated either for ...
3
votes
0answers
69 views

Approximate asian geometric option with Heston

I am trying to implement Theorem 1 from this Journal in RStudio. The journal says the it is possible to find a approximate price of a geometric asian option in a Heston setup this way: ...
2
votes
0answers
38 views

How to calculate the estimation error of portfolio variance using propagation results?

I am trying to find a conservative approximation for the propagated estimation error of a investment portfolio's variance (comprising two assets), given we know the estimation error for the variance ...
1
vote
0answers
29 views

Calculate and compare IRR among products and companies

I am trying to calculate return on investment for a couple of companies and their respective products. I have two main products: credit card installment loan Owners would like to be able to ...
1
vote
2answers
64 views

does there need to be risk-neutral agents in the market to enforce risk-neutral pricing?

I'm trying to understand a fundamental link between mathematical finance and economics. I understand that risk-neutral pricing is free of arbitrage with replicating portfolio. Does risk-neutral ...
1
vote
2answers
134 views

Why is the value of debt modeled as a short put option in Merton's model?

Can someone give me an intuitive understanding of why the Merton model models the value of the debt from the lender's point of view as a short put with a risk free bond? I'm not well versed in this ...
3
votes
1answer
209 views

How to interpret negative asset volatility numerical results in Merton model?

I am currently working on my thesis where I discuss the Merton default probability model. I have a huge sample of US firms for the period 1990-2010. I use both numerical and complex iterative approach ...
2
votes
3answers
188 views

Why can't you arb skew by buying options with low implied vol and selling high implied vol in the same month and dynamically hedging?

there's something I've been trying to understand for a while now and I just can't quite understand with regards to skew. In the same month, why can't you buy a option that have low implied vol on the ...
3
votes
5answers
3k views

Is node.js being used in systematic trading software?

I have a project where I would like to track some tick data and create some indicators to follow it. I am thinking of using Node.js for this project, but I would like to know from those in industry if ...
2
votes
1answer
54 views

How to find optimal noise covariance matrices Q & R

I am trying to use the discrete Kalman filter for forecasting and I wonder what is commonly considered as the optimal way of determining the measurement noise covariance constants (Q and R) for a ...
1
vote
0answers
50 views

Are limit orders mostly being matched by market orders?

When going over order book data, most limit-order executions look similar to the following: ...
1
vote
1answer
161 views

Feynman Kac Formula for path-dependent options

Consier geometric Brownian motion: $dS_t/S_t=\mu dt+\sigma dW_t$ Feynman Kac theorem tells us that the conditional expectation $v(t,x)=E[ e^{-rT}\Psi(S_T) | S_t=x]$ can be computed by solving the ...
0
votes
0answers
34 views

Estimating Credit VaR using a simulation of joint defaults with a copula

I'm trying to follow the steps Malz gives to calculate Credit VaR using simulation of joint defaults with a copula. I'm having trouble understanding some of the steps. My math knowledge is rather ...
0
votes
1answer
105 views

VIX Calculation - weighting of strikes

The formula for calculating the VIX from SPX options is given on page 4 of this document: https://www.cboe.com/micro/vix/vixwhite.pdf My question is, why is the option price at each strike weighted ...
1
vote
0answers
24 views

Unexplained delimiters in Nasdaq ITCH file

I'm working on writing an order book constructor for Nasdaq ITCH v5 files, and I'm noticing some occasional message identifies/ delimiters that are not included in the ITCH5 specification, ...
1
vote
1answer
54 views

Calculating unweighted performance of stocks within a period

The well known calculation of unweighted index of stocks is just calculating an arithmetic average. And then, to calculate the performance of the index, I calculate the %change of the unweighted ...
0
votes
1answer
53 views

Interpretation of vega out of BS formula

I am comparing Monte Carlo estimates of VaR (using importance sampling) under both the normal and student distributions. I am also considering risk factors other than log-prices; in particular, ...
2
votes
2answers
155 views

Option with payoff $K^2/S^2$

Given the dynamics of the risky asset ( with dividend $q$ ), $$ \frac{dS_t}{S_t}=(\mu-q)dt + \sigma dW_t^P $$ Consider a european option with payoff, $$ P_0(S) = \begin{cases} 1, & ...
2
votes
1answer
296 views

What are some quantitative trading strategies used by high-frequency trading companies to make a killing on a market crash day on 24Aug2015?

http://blogs.barrons.com/focusonfunds/2015/08/24/high-frequency-trading-firms-just-made-a-killing/ Virtu Financial (VIRT), the high-speed trading firm that went public earlier this year, was one ...
1
vote
0answers
35 views

Shrinkage Estimator giving unrealistic portfolio variances

I have a historical covariance matrix which is invertible for daily and monthly returns. I used the Ledoit,Wolf shrinkage estimator for the covariance matrix and now I get really small portfolio ...
2
votes
1answer
187 views

Parametric VaR with Student-t distribution

Im using VaR to estimate parametric VaR. I have been able to do this using a Normal Distribution, however I want to also do this using a Student t-distribution and I'm unsure how to implement that in ...
1
vote
3answers
115 views

Is variance additive only under Log-returns?

Can't seem to figure this one out by thinking it through. Let's say that the simple return $R_t=P_{t+1}/P_t -1$ is assumed to be $R_t \sim iid N(0,\sigma^2)$. Thus, a two period return would be ...
0
votes
0answers
28 views

The calculation of NIBID rate from 2013 by using NIBOR rate (UIP)

I need to calculate the NIBID rates from 2013. I have the NIBOR as a starting point and some indications but I am still quite confused. I found some advices online, but it does not seem to get me the ...
1
vote
3answers
101 views

When valuing a vanilla option on an index, should we take dividend into account?

When valuing a vanilla option on an index (eg FTSE 100), should we take index dividend yield into account? $$ c=Se^{-q\tau}N\left(d_1\right)-Ke^{-r\tau}N\left(d_2\right) $$ $$ ...
1
vote
1answer
80 views

Pricing employee stock options

ESOs are typically priced using the black-scholes model, but with an additional parameter for for the employee turnover rates . An example ...
5
votes
2answers
444 views

VaR mapping - Forward Foreign Currency Contract

I have a question about VaR mapping for FX forwards. Please bear with me while I outline the problem. Philippe Jorion's book discusses VaR mapping; a means to break down complex instruments into ...
7
votes
2answers
304 views

HFT to blame for Flash Crashes?

Some people 1, 2, 3 claim that High Frequency Trading is partly to blame for the extreme volatilities in the markets yesterday (24. August 2015). Is that true? Is the amount HFTs move even enough ...
2
votes
3answers
364 views

Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)

I noticed that Bloomberg and SuperDerivatives both use "Deposit Rates" for the calculation of forward points for currencies. I couldn't find anything online that describes precisely where these rates ...
1
vote
3answers
147 views

Realtime Exchange Rate Data API

There are various sources for real-time exchange rate data, e.g. Ariva EUR/USD. Is there also an API or other source which enables to automatically retrieve real-time exchange rates as a data stream ...
0
votes
1answer
74 views

What exotic options are exchange-traded?

There are a number of exchanges that trade vanilla Call/Put American/European options on various underlyings (equities, indices, futures). There have been some trading in digital options on certain ...
8
votes
6answers
2k views

What distribution to assume for interest rates?

I am writing a paper with a case study in financial maths. I need to model an interest rate $(I_n)_{n\geq 0}$ as a sequence of non-negative i.i.d. random variables. Which distribution would you advise ...
7
votes
2answers
1k views

What are the most common/popular exotics in the interest rate markets these days?

By "exotic" I mean anything that is not a plain vanilla swap, swaption, cap or floor. Also any IR hybrids if appropriate. Possible examples would be: CMS and CMS spread options Multi-callable swaps ...
7
votes
2answers
1k views

HFT - How to define and measure latency?

I have read and heard a lot about latency. But I can't find any solid information that explains how latency is defined and measured. When people say they have achieved millisecond or nanosecond ...
1
vote
0answers
24 views

Historical UK Gilt 2-year and 5-year data

Data on the Medium (approx. 5-years) and Short (approx. 2-years) futures contract listed on ICE only goes back to 2009. Is anyone able to point me towards where I can get a longer time series, perhaps ...
22
votes
5answers
11k views

Usage of NoSQL storage in Finance

I am wondering if anyone has used NoSQL (mongodb, cassandra, etc.) to store and analyze data. I tried searching the web but was not able to see if the financial firms had gotten in to using nosql ...

15 30 50 per page