3
votes
2answers
146 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
1answer
230 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. ...
3
votes
0answers
56 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 ...
3
votes
2answers
172 views

Random Brownian Simulation Startling Results

I was playing around in Excel the other day, simulating possible equity curve/P&L paths for a simple game I designed. The game is really trying to find an optimal risk managment strategy. I start ...
-1
votes
1answer
133 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 ...
1
vote
4answers
144 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 ...
0
votes
2answers
160 views

How is holding an European call option equivalent to holding an asset-or-nothing call option and writing a cash-or-nothing call option?

The cash-or-nothing call option has a payoff that is equal to the strike price. All three options have the same expiry date.
1
vote
1answer
526 views

How to prove price of Asian option under geometric averaging is cheaper than a European call?

This was an exam question at Cambridge University. Let $S_t = S_0\exp(\sigma W_t + (r-\dfrac{1}{2}\sigma^2)$ and a bank account returns a continuously-compounded rate of interest $r$. Consider the ...
2
votes
1answer
145 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
1answer
80 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) ...
2
votes
0answers
85 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 ...
8
votes
1answer
2k views

Multilayer Perceptron (Neural Network) for Time Series Prediction

I have it in mind to build a Multilayer Perceptron for predicting financial time series. I understand the algorithm concepts (linear combiner, activation function, etc). But while trying to build the ...
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
3answers
712 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 ...
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
2answers
328 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
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 } } ...
3
votes
3answers
487 views

How to create a Stochastic Process through pre specified points?

I want to create a random (quasi random) process which goes through pre determined points and constraints. E.g. I have a daily price series but want to generate intra-day prices with the same OHLC ...
1
vote
1answer
326 views

Unsystematic/Idiosyncratic/Firm-specific volatility/variance in the market model?

I was asked to use idiosyncratic volatility as a regressor in a cross-sectional regression upon cross-sectional returns as the dependent variable. Returns can be thought of as the raw log stock return ...
62
votes
15answers
9k views

Video lectures and presentations on quantitative finance

What are your favourite video lectures, presentations and talks available online? A few rules: Must be related to quantitative finance. No Economics 101 courses, please. Try to avoid DIY lectures ...
1
vote
0answers
94 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
66 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 ...
3
votes
2answers
93 views

What is the difference between these two equations for GBMs?

The two equations commonly found online for GBM are: $\begin{matrix} S_{ t }=S_{ 0 }\exp\left( \left( \mu -\frac { \sigma ^{ 2 } }{ 2 } \right) t+\sigma W_{ t } \right) \\ S_{ t }=S_{ 0 ...
2
votes
1answer
213 views

Pricing credit risky bonds

How do we price credit risky bonds? If I discount the cash flows using LIBOR/zero rates, it won't take the credit riskiness into account. So should I use a rate based on the issuer's credit spread? ...
1
vote
1answer
71 views

Get discount factors with limited knowledge?

I am facing the problem of just having this information: 6% coupon bond with 2.5 years to maturity, traded at a 100% clean price 4% coupon bond with 1.5 years to maturity, traded at a 98% clean price ...
0
votes
0answers
213 views

IB with R which package?

I want to implement my models in R and trade according to them with my IB account. Now I am wondering, how I should solve this problem? Do I need to program with C an access ...
0
votes
0answers
85 views

Industry Classification Benchmark (ICB) Codes for NASDAQ Stocks?

Is there a definitive list of Industry Classification Benchmark (ICB) Codes for NASDAQ listed stocks, and if so, is there open access?
1
vote
0answers
413 views

How to estimate market integration parameter in Singer-Terhaar model for E(r)?

Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ...
0
votes
0answers
131 views

Solvency II Assets-D1S QRT

Extract from EIOPA log file for this report: This template will only be required for undertakings with structured products above an application threshold, defined as structured products representing ...
10
votes
3answers
413 views

How to group timeseries showing similar curve

I am trying to classify similar looking curves of a timeseries and was wondering what is the best algorithm to research. Reading R, it looks like k-means clustering could be applied - but I don't know ...
6
votes
2answers
511 views

What is Quantization ?

I have asked myself many times about Quantization Numerical Methods, is anyone here familiar with the subject and could give a reasonable insight of what Quantization concepts are about, and what are ...
1
vote
0answers
120 views

How to determine risk-free rate of Ecuador?

I have a question in determining the risk-free rate of Ecuador. For developed countries like United States and Great Britain, the risk-free rate can be obtained in financial database such as Reuter or ...
1
vote
1answer
271 views

Reading recommendation on using statistical analysis in online fraud prevention [closed]

Can you please recommend good reads on statistical analysis related to online fraud detection and prevention of account abuse?
1
vote
1answer
191 views

How can I calculate the margin requirements for a Bitcoin futures contract?

Suppose that I want to calculate what the margin requirements should be for a Bitcoin futures contract, where the contract is the USD/BTC exchange rate (settled in Bitcoins). I've looked at the SPAN ...
3
votes
0answers
330 views

mean reversion with Kalman Filter - Spread calculation

Ernest Chan in its book "Algorithmic Trading" shows how to use the Kalman Filter for mean reversion pair trading. I have seen that he uses the measurement prediction error for calculating the spread ...
1
vote
1answer
152 views

A Question from “Mathematical Methods for Financial Markets” Chapter 2

Exercise 2.3.1.5: The payoff of a power option is $h(S_T)$, where the function h is given by $h(x) = x^\beta(x-K)^+$. Prove that the payoff can be written as the difference of European payoffs on the ...
0
votes
0answers
70 views

BS Implied Volatility under Normal returns

If I use theoretical prices under a normal valuation model, and I estimate their implied volatility using BLACK SCHOLES implied volatility, do I'll get corresponding log normal volatility?
8
votes
3answers
2k views

Is variable binning a good thing to do?

Let's say you have a logistic regression model. Some of the factors are intrinsically categorical but some are continuous variables. Under which circumstances should a continuous variable be binned ...
0
votes
0answers
40 views

any introduction on beta adjustment for basis risk?

On beta adjustment for basis risk, I could only find an online definition: Gap reports modified to mollify the errors caused by basis risk. The essential concept of beta-adjusted gap is that all ...
1
vote
0answers
161 views

Fixed Income Var calculation

I'm trying to calculate var for a portfolio of fixed income securities. I initially want to just calculate undiversified VaR for each instrument. I'm doing the following for each instrument Take ...
2
votes
2answers
101 views

ITM Puts under negatively skewed return distribution (volatility skew)

I read Hull (2009) on implied volatilies. I understand that (given a negatively skewed return distribution) an OTM-Put is more worth than under a normal distribution and that a OTM-Call is worth less ...
0
votes
0answers
32 views

(Free) end of day historical data source for FTSE 350 sector indices [duplicate]

I have been searching for a free EOD data source for FTSE350 sector indices. I remember coming across a site on msn finance a few years back, which provided several years worth of this data (no volume ...
1
vote
0answers
142 views

Yahoo Finance API

Have been looking for ways to down load stock price data using Yahoo Finance on Chinese Stocks. Symbol that ends with .SS = stock listed in Shanghai, .zz = stock listed in Shenzhen This link ...
1
vote
1answer
54 views

Scaling Intervals in Diffusion Process

I know this is a very elementary question but... when modeling asset prices through a stochastic process as in $$dS_t=S_t μ dt+S_t σdW_t,$$ where the following is a wiener process ...
5
votes
3answers
392 views

Market weights for Black-Litterman

I'm trying to implement Black-Litterman for an arbitrary selection of assets. One of the input for BL is the "Equilibrium market capitalization weights for each asset". In most examples I've seen, ...
0
votes
0answers
28 views

How to get company ids (like CIK)

I need company ids and jurisdiction codes for all the companies all over the world. So that I can use it to extract information from opencorporates. Any idea where I can find the information
0
votes
0answers
65 views

Need 24 hours a day real time/slightly delayed prices of futures contracts on US and non-US [duplicate]

I'm looking for a data provider to get real-time/slightly delayed data for futures contracts on US and non-US indexes 24 hours a day. Can you recommend anything for a person, who can't afford ...
15
votes
5answers
2k views

What methods do you use to improve expected return estimates when constructing a portfolio in a mean-variance framework?

One of the main problems when trying to apply mean-variance portfolio optimization in practice is its high input sensitivity. As can be seen in (Chopra, 1993) using historical values to estimate ...
1
vote
1answer
40 views

What does “primary calendar” mean?

I was reading the 2013 research rankings article on Institutional Investor and came across the following quote: "We do not expect spread widening in most markets, and we expect the primary calendar to ...

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