All Questions

123 views

When did volatilities start to smile in capital markets?

Glimpsing through literature, I read that volatilities in the equity market started to display a smile after the crash in 1987. But when did volatilities start to smile in capital markets?
111 views

What is the right group of durations?

It seems that the group of durations commonly used in quantitative analyse is $\mathbf{R}$ but it seems to me that $\mathbf{R_+^*}$ could also be an interesting choice. While I am not aware of ...
113 views

Single Most Important Fact about a Fund - Interview Question [closed]

I recently attended an interview to work as a software developer in an Asset Management company. I was asked by the interviewer: What is the most important piece of information that should be ...
2k views

Garch modelling on Stata

I would like to ask "how to do GARCH modelling on stata". Basically I want to estimate stock market volatility using daily data. I have one variable as return series, $r_t=\ln(\frac{P_t}{P_{t-1}})$. ...
216 views

Help with understanding a normal distribution/probability question

Could someone please help me translate what this is saying on page P15, section 4.2: http://www.ntuzov.com/Nik_Site/Niks_files/Research/papers/stat_arb/Ahmed_2009.pdf Specifically: When the ...
66 views

Rate of Return Required on Buying Stocks with Loan

A bank gives a loan $L$ for $m$ months and the monthly interest rate is $i$. The bank requires monthly installments - which I calculate is $I = \frac{L}{m} + Li$. I use this loan to buy ...
51 views

I understand that there are no official figures of fx trading volume per currency, but are there any good estimates? Is there any fx exchange that is particularly forthcoming with its volume data, ...
10k views

I am preparing for the CFA level 2 exam, I got confused by the concept Z-spread and OAS. When a call option is added to a bond, since it is not favorable to the bond buyer, they would require more ...
30 views

Solvency II Assets-D1 - aggregation of line items by CIC code

The revised version of Assets D1 (now S.06.02 – List of assets under CP13) requires the following aggregations (page 24): CIC 71 (Cash), only one line per currency is to be reported; CIC 72 ...
67 views

How does Interactive Broker's historical data compare to other alternatives?

Has any of you stumbled with shows stopper problems like it having survivorship bias?
59 views

How accurately can the LIBOR market model price a floating note

I am considering some hedging strategy where portfolios of derivatives are built so that each portfolio is equivalent to a floating note, even if the instruments in the portfolio might be quite ...
4k views

How to calculate equally weighted market portfolio

There's two studies that test the same thing in different markets (i.e. they apply the identical methodology). They state: 1) "$R_{mt}$ is the equally weighted average stock return in the dual-listed ...
163 views

Forcing price to rise or fall by high volume buying and shorting

Is there an a name for the approach / strategy to artificially move a price either up or down by high volume buying or shorting. ie. Buying a large (say 5%) of a stock very quickly, thus ...
50 views

stock exchange simulator price calculations [closed]

Before you downvote it I inform you that I am a zero in the field of stocks. I have an online event conducted by my college and there is an event that simulates a dalalstreet and I have been assigned ...
94 views

Black 76 for Options on Interest Rate Futures

This is my first time using Black76 to value options on IR futures and I have a question on $F$ and $K$. I understand the price for an IR future is usually quoted as $100 - r$. Do I use this price ...
114 views

Smoothing Term Curve

Assume that we have current month term curve and the curves from the two previous months. The current curve may be shifted from the average of the previous two curve by some value (a parallel shift). ...
120 views

Itô diffusion processes in finance with unknown distribution at a terminal value

In several papers it is argued that for many Itô diffusion processes, $$dX_t = a(t,X_t)dt+b(t,X_t)dB_t,$$ in mathematical finance the distribution of $X_T$ for fixed $T>0$ is unknown, which makes ...
152 views

Risk-neutral models for rights issues

A rights issue is the granting by a corporation to its shareholders of a right to purchase $N$ new shares for each $M$ shares they already hold at a (often discounted) price $K$. Thus, it ...
163 views

Which measure to determine Risk?

Say I hold an equity and I want to calculate the Value-at-Risk over some period. Would one calculate the Value-at-Risk of the equity under a risk-neutral (as in martingale) measure or under the ...
40 views

Given monthly returns of 10-Year Govt Bond, how to get monthly risk free rate of return

I have a list of monthly returns of a 10 year Govt Bond. I am not sure if this is a good proxy for the monthly risk free rate of return. Can somebody suggest how I can derive the monthly risk free ...
53 views

What does it mean by “labor taxes cut is self-financed”?

I'm reading "Principle of Economics" by Mankiw. In Part III Market and Welfare, Ch 8 "Application: the costs of taxation", it says: Only 32% of a cut in U.S. labor taxes would be self-financed, the ...
1k views

Can someone explain what “Exotics Trade Capture” capture means in layman's terms?

I am trying to find out what Exotics Trade Capture entails. I can't find anything on Google that isn't a job posting, which is where I saw this term. Say you did this for a living, how would you ...
126 views

How to use a realized kernel?

I've read that realized kernels are the thing to use for calculating daily volatility from high-frequency data. So I've got minute data, how do I actually use such a kernel? Will it give me minute-ly ...
1k views

How to Delta Hedge with Futures?

The theory of delta hedging a short position in an option is based on trades in the stock and cash. I.e. I get the option premium and take positions in the stock and cash. In the classical ...
854 views

How to detect and adjust for stock splits?

I am using a large daily data panel for over 250 companies and over several years. I am concerned about adjusting for stock splits. Is there any program in SAS to detect stock splits? How do I adjust ...
56 views

Problems to understand a stochastic DGL equality

currently I am reading a paper called "Portfolio optimisation under non-linear drawdown constraints in a semimartingale financial model" for self-study reasons. The paper can be found here: ...
96 views

How to manage evaluation date changes in QuantLib while using ImpliedTermStructure Class

I will not attach the whole code 'cause it would be just a huge waste of space and it would be not useful for this question's purpose. What I am going to attach here is a snippet code and its output, ...
55 views

Shortcomings of certain SDE for asset price modelling

I'm simply interested on hearing some views on which shortcomings arise by using the (multidimensional) SDE $$dS(t)=S(t)\alpha(t,S(t))dt+S(t)\sigma(t,S(t))dW(t)$$ as a model for asset prices. I know ...
77 views

Quotes and Transactions Streams from Exchange

I have possibility of taking 2 types of real time streams from some exchange: bid-ask quotes (fresh quotes from order book) transaction log (transactions matched by exchange) I'm curious what ...
25 views

OF-B1 report - cell A1

Pretty basic question - what is the SIGN that should be used in cell A1 of the EIOPA Solvency II OF-B1 report? So should share capital be displayed with a positive or negative value? CP-13 extract: ...
75 views

How can I introduce exogenous variables in the equation of the conditional variance?

Is it possible to introduce dummy variables or explanatory variables in the GARCH variance equation (garchset and garchfit).This is done in the mean (ARMAX) equation through the input 'Regress' in ...
150 views

open-source implementation of orderbook from FAST?

I'm looking for c/c++ implementation of OrderBook. I need implementation to reconstruct market data from FAST. I don't need to do "matching" because it already did by exchange, I only need to ...