All Questions

0
votes
0answers
15 views

How to calculate intraday implied vol on the last day of trading an OTM option

i've been trading globex options on US Treasury futures, but my option calculator only takes the date as the time input..so on the last trading day, the model assumes all values are errors because the ...
-4
votes
0answers
30 views

Machine learning clustering use-cases in the finance industry [closed]

We want to identify use-cases of machine learning clustering in finance. Typically, clustering is an unsupervised process but we want to apply a supervised method where the data is feature ...
0
votes
1answer
79 views

Black-box local volatility pricer

I am testing a local volatility pricer by comparing its results under two settings: Pricing a 5yr ATM call option with a flat volatility of $0.194$ Pricing the call option with the typically shaped ...
2
votes
2answers
35 views

CVaR reformulation correct?

Conditional Value at Risk (CVaR) is given as: $$CVaR_\alpha(X)=\frac{1}{\alpha}\int_{0}^{\alpha}VaR_\beta(X)d\beta=-E(X|X\leq-VaR_\alpha(X))=-\frac{1}{\alpha}\int_{-\infty}^{-VaR_\alpha(X)}x \cdot ...
0
votes
2answers
46 views

Long/Short Backtesting Set up

I am going to be backtesting a Long/Short equity strategy and need some guidance on how best to deal with the short book. I was thinking that for each portfolio I would go long 50 equities and go ...
0
votes
1answer
25 views

Currency Portfolio G10 vs USD allocation

Given that I have fundamental data such as GDP growth rate for G10 countries .Now I want to build a currency pairs portfolio of G10 currencies vs USD .How can I translate country scores to currency ...
1
vote
1answer
30 views

End-of-day holdings vs overnight inventory

I am wondering whether these two terms identify the same thing: overnight inventory end-of-day holdings The way I would explain it intuitively, the inventory that is held overnight should be ...
2
votes
2answers
290 views

How to price a bond without paper during interview?

I heard that this kind of questions appear a lot in the interviews. Here is one I saw from Galssdoor: Price a bond with coupon rate 3%, yield 9% and maturity 10 years. What is the typical way to do ...
2
votes
2answers
62 views

Why do Earnings Per Share matter?

This has been bugging me for a while. I've consulted all sorts of guides, but none gave me a satisfactory answer. My question is: why do Earnings Per Share (EPS) matter? What is it about this metric ...
0
votes
0answers
6 views

CFD on warrants or options?

I'm looking for CFD-type contracts based off warrants or ETO prices; does such a thing exist? I'm interested in Asian markets; Hong Kong, Singapore, Japan.
0
votes
1answer
65 views

Correlation of Dividend Yield Index/Stock

I need your experience and intuition about dividend yields. Indeed, I would to know if the dividend yield of and Index is correlated with the dividend yields of it's componenets separately? The ...
0
votes
1answer
17 views

Question on Financial Statement [closed]

I am looking at the Financial Statement of a company, and am unsure about the following records: ...
4
votes
4answers
909 views

Library for interactive financial charts

For my recent project I am looking to build a software capable of visualizing financial charts in a dynamically and interactive matter. The workflow is as follows: I gather data from my data ...
3
votes
2answers
1k views

How to use Merton model to calculate default probability with monthly stock prices?

I want to calculate the estimated default probability with only given data the monthly returns for the last 20 years, the risk-free rate ($R_f$), equity value (EV) and the face value of debt ($D$). My ...
6
votes
1answer
257 views

Consistency of economic scenarios in nested stochastics simulation

I am interested in references on research regarding the consistency of economic scenarios in nested stochastics for risk measurement. Background: Pricing by Monte-Carlo: For pricing complex ...
3
votes
1answer
248 views

Is inverted Japanese style curve persistent when negative rates are real / market - observed?

Are the inverted (Japanese style) governmental yield curves being a sign a recession/credit risk or should they be modelled as being due to a lack of liquidity? (...with such curves evolving into a ...
2
votes
1answer
54 views

How to get real-time data for Fama-French model?

For Fama-French model we need SMB (small[market cap] minus big) and HML (high[book-to-market-ratio] minis low). I want to ...
6
votes
1answer
60 views

Mutivariate t markets

We know that some markets exhibit marginals well approximated by Student t distributions. But what is the dependence structure? Is the multivariate density really elliptical (as we all wish for) or ...
2
votes
1answer
404 views

Where to find historical stock news and other events?

So, I am working on a strategy that has pin-pointed some very interesting events in the form of extremely low volatility. The phenomena spans the past few years and a wide variety of symbols. Now, to ...
0
votes
1answer
266 views

what's the difference between Peak-Load pricing and price discrimination?

i just don't get it. Peak-load pricing wiki page gives example: in public goods such as public urban transportation, where day demand (peak period) is usually much higher than night demand ...
1
vote
1answer
176 views

Where do these Orders come from and what do they mean?

Good morning! I was looking at an order book yesterday and saw orders which I haven't seen before. Normally an order in the order book consists of the total volume, the price and how many ...
15
votes
1answer
456 views

Measuring Behavioral Finance Effects in Fund/Portfolio Manager Analysis

I want to know if there are some standardized measures to evaluate how irrationally human a portfolio manager is. Are there any performance measures or scorings for behavioral finance effects? How ...
1
vote
2answers
1k views

Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades

We have built an algorithmic trading software and need to calculate the following parameters for each position in our portfolio. Average Price Cost Realized Profit & Loss Unrealized Profit & ...
0
votes
1answer
41 views

Delta formula for FX vanilla option

What value do you use for annual dividend yield? It does not apply in case of FX.
5
votes
3answers
290 views

Why are interest rates and stock prices positively correlated?

If I've been looking at graphs correctly, there is a strong positive correlation between stock prices (or P/B values) and interest rates over time, i.e. P/B values tend to be high when interest rates ...
2
votes
1answer
300 views

Do you know any data source for historical VWAP data?

I am looking for historical VWAP pricing data for north american equities. I haven't been able to find a free/cheap data source. Do you guys know of one ? Also, is there a way to proxy for an equities ...
5
votes
5answers
2k views

How to get greeks using Monte-Carlo for arbitrary option?

Let's assume I have an arbitrary option that I can price using Monte-Carlo simulation. What is the general approach (i.e. without relying on specific option type) to calculating the greeks in this ...
0
votes
0answers
17 views

Mortgage parameters

I'm looking for readings about the trade-off between the parameters of a mortgage: length of the mortgage, percentage of the principal to repay, inflation rate (at which the payment growths) and total ...
3
votes
1answer
136 views

Practical implementation of Least Squares Monte Carlo (tweaks and pittfalls)

The Longstaff-Schwartz LSM approach is nowadays ubiquitous(at least in the academic literature) in pricing path dependant derivatives. Up to now I have mostly worked with lattice methods. My ...
8
votes
1answer
587 views

Applicability of PCA to get historical volatilities to calibrate interest rates trees

My question in short is as follows: can I take main principal component of historical covariance matrix and use it as historical volatilities when fitting a binomial tree? Here's more detailed ...
3
votes
0answers
42 views

Filtering out AR(1) effects before using stochastic volatility model

I wonder if I first filter out AR(1) (autoregressive model with lag 1) effects from univariate time series and then fit stochastic volatility model does above procedure introduce any bias at first or ...
0
votes
1answer
35 views

Black scholes OTC

Let's say you want to find the fair price of a call option. One way is to use the black scholes formula. This assumes you can delta-hedge the underlying asset and the option to eliminate risk, and ...
0
votes
2answers
106 views

forward implied volatility skew

I would like to calculate implied forward volatility skew. I have stochastic volatility monte carlo. What kind of payoff do I need to price and how to use Black() formula to calculate the implied ...
15
votes
6answers
5k views

What is the intuition behind cointegration?

What is the intuition behind cointegration? What does the Dickey-Fuller test do to test for it? Ideally, a non-technical explanation would be appreciated. Say you need to explain it to an investor ...
-1
votes
0answers
21 views

Binary option RR25D FLY 25D [closed]

How to price binary options using the above information given the above delta values?
0
votes
1answer
60 views

Share Repurchase and Bid ask Spread data

I am doing a Quantitative Finance PhD and would like some insight on data collection. I'm looking for open market share repurchase data (UK) over the past 2-3 decades. Simultaneously, their bid-ask ...
0
votes
2answers
52 views

What is the best source (book or article) to learn pair trading from for the layman?

Can someone suggest a resource with a clean cut explanation of pair trading?
2
votes
1answer
65 views

formulating MVO with costs

I am trying to formulate this simple MVO utility function with a linear transaction cost penalty added using Quadprog in MATLAB tcost = 0.001; lambda = 4; mu = vector of expected returns (say 4x1) S ...
0
votes
0answers
25 views

Standardizing SEC XBRL Reports into common format

I'd like to grab SEC XBRL 10-Q's from various companies and standardize/summarize their content to be able to run common analysis. But it looks like different companies use different elements, making ...
2
votes
1answer
163 views

How to Calculate Confidence Intervals for Moving Averages Given Nonindependence?

I've plotted 30-year moving averages across time for a couple of portfolios, and I was wondering how to calculate a 95% CI for the these moving average data (i.e., across all moving average data ...
0
votes
3answers
144 views

How does logging effect Quickfix performance?

I am using .net/c++ version of quickfix. How does logging effect Quickfix performance? If I disable logging to file, can it help to increase performance of quickfix? Thanks,
0
votes
1answer
21 views

How to calculate cash flow for XC swap

Given 3MLibor vs 12MLibor USD basis swap the 3M Libor is exchanged at 12MLibor+1%. How to calculate the cash flow
1
vote
1answer
108 views

Which is the better risk sensitive measure?

Consider the two following optimization problem 1) $$ \min_{\theta} \ln E_{\theta}[ e^{X}]$$ 2) $$ \min_{\theta} E_{\theta}[ X]$$ with the constraint $$ Var_{\theta}[X] <c$$ Is it true that ...
0
votes
1answer
26 views

Stripping projection curve

What is meant by the statement below: "Stripping projection curve (e.g. 3M curve) given the OIS curve" I understand that while bootstrapping an OIS curve using OIS swap rates and OIS fixed rates, we ...
0
votes
0answers
36 views

GARCH parameters

I'm trying to estimate parameters of GARCH(p,q) model. I tried p=1, q=1 with t-distribution errors. Ljung-Box showed no correlation in residuals and squared residual. But the null hypothesis that ...
6
votes
1answer
120 views

What is the difference between market efficiency, market equilibrium, and no-arbitrage?

Aaron Brown (in the book, The Poker Face of Wall Street, p. 196), discusses four approaches to deriving the same Black-Scholes-Merton option-pricing formula: Ed Thorp, Myron Scholes, Robert ...
1
vote
3answers
140 views

What is the name of this product?

Consider the payoff =$S_T1_{S_T>K}$ where $S_T$ is the asset price at maturity. What is this type derivative called? and is it a liquid option?
-1
votes
0answers
29 views

How to replicate the price of a FX forward contract

using the given market: 1- USD Swap market (fixed for float). Float leg pays 3MLibor quarterly, act360. Fixed Leg pays annually, act360. Market is trading mid at 1.125%. 2- TIIE market. Fixed for ...
6
votes
5answers
3k views

What are the advantages/disadvantages of these approaches to deal with volatility surface?

I would like to know if someone could provide a summarized view of the advantages and disadvantages of the approaches on the volatility surface issues, such as: Local vol Stochastic Vol ...
5
votes
3answers
166 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 ...

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