1
vote
0answers
29 views

Is $(1,0,0,0,…,0)$ a legitimate dividend stream?

A book I am reading defines a positive linear functional as a "price functional" from a set of adapted processes to the real numbers. Specifically, it defines a "consistent price functional" as one ...
1
vote
0answers
28 views

$0$-beta stock and diversification

If we invest $w$ in the market portfolio and $1 - w$ in the risk-free asset, and observe a $0$-beta asset with expected return greater than the return on the risk-free asset, how can this be used in ...
1
vote
1answer
105 views

quantlib python : missing methods?

I'm reading Introduction to Selected Classes of the QuantLib Library I by Dimitri Reiswich and tries to "convert" it to Python. It seems to me that some C++ possibilities aren't available in python. ...
12
votes
4answers
2k views

How to estimate real-world probabilities

In the world of finance, Risk-neutral pricing allow us to estimate the fair value of derivatives using the risk free rate as the expected return of the underlyings. However, the behavior of ...
1
vote
1answer
56 views

Derivative: Delta of a Down and Out Call Option with Barrier=Debt(K)

I am trying to compute the derivative of this function with respect to V0: This is the price of a down and out call option, assuming the barrier equal to the level of debt K. In other terms, I need ...
5
votes
2answers
112 views

Interpret simulation results ($P$ and $Q$ measures)

I am struggling in interpreting results of my simulations. I use Monte Carlo algorithm to simulate stock paths and calculate option price. The notation: $r$ is a risk free interest rate, $T$ is time ...
0
votes
1answer
10 views

anyone know haw would we calculate hml ,(fama and french three factors model) [closed]

how we calculate hml and smb from our own data (malaysian data) so i can not use the dta from keneth french library using excel and when we divide firms into 6 portfolios we use value and book ratio ...
0
votes
0answers
15 views

R:log return calculation for panel data structure

I have a long form panel for hourly prices of stocks. I want to do log return calculation for this panel data structure. Below is my code: ...
0
votes
2answers
29 views

What is a definition of “Benchmark”?

The word "benchmark" is often used in Finance, but in a rather fuzzy manner, there for a rough idea of what it is, and how it is 'defined'. Can someone provide a rigorous and precise definition of ...
0
votes
0answers
44 views

Physical interpretation of variance in returns in a portfolio design

I have a downloaded the log-returns at successive times of 98 stocks from S&P index over 753 days. I calculated the total daily return according to the formula 1 below, where ...
5
votes
1answer
96 views

SVI negative rates

I've used the SVI model in the past for equity option which worekd quite well. I came across a post on Wilmott where someone said hes using SVI for swaption as well. I would like to test the model and ...
0
votes
1answer
14 views

Reference for option pricing, binomial multi-period model using martingales and conditional expectations

The title basically says it all. I am looking for a reference text on the pricing of options in a binomial multi-period model. It should be mathemathically rigorous using martingales and conditional ...
2
votes
2answers
42 views

Maximization with risk-neutral investors and VaR constraints

In this paper, the authors make a simple model with: (1) A global bank, who is risk-neutral but has a Value-at-Risk constraint: $$\max_{x_t^B} E_t[x_t^B\prime R_{t+1}]$$ s.t. $$\alpha ...
0
votes
1answer
41 views

Pricing foreign currency bonds - which approach is more theoretically “sound”?

You own a fixed rate corporate bond in foreign currency (let's say JPY). Your domestic currency is USD. Which of the these two approaches do you consider theoretically better? Discount JPY cash ...
-1
votes
0answers
38 views

How to define the return of this portfolio? [closed]

I have an insurer with a some assets that he plans to invest into : Stock Zero-coupon bond with maturity 10 years We know also that the stock is driven by the geometric borwnian motion, the short ...
1
vote
1answer
145 views

Calculating historical implied volatility

I know that each individual option has it's own implied volatility, but how do you go about calculating the overall implied volatility for an underlying? For example when someone sais the IV of a ...
1
vote
1answer
53 views

Pricing a Vanilla swap between coupons; What rates to use?

Vanilla Swap question. Entered into a 5Y fixed for floating HUF swap. Fixed is annual coupons, Float is semi-annual coupons. 1 month later I want to price it. I set up my future values for Fixed ...
2
votes
2answers
186 views

Square of Wiener process

In Ito's calculus one often comes $dW^2=dt$. How does this come about? What is it's relation to the Milstein method?
0
votes
0answers
24 views

Arbitrage and completeness in multiperiod model?

Given a 2-period market with above stock price process along with a riskfree stock with a return of 5%, how do I determine whether the market is arbitrage-free and complete when I only have ...
0
votes
0answers
16 views

Estimate the risk of swaptions

I would like to model OTM Swaptions. I can use some implementation of the Bachelier model (not B76 due to negative rates) and implied volatilities from Bloomberg. For 10Y X 10Y (10 years option ...
0
votes
0answers
24 views

Black Litterman: Is it possible to have multiple views (from different sources) on the same asset?

From the basics of Black Litterman I understand that each view on a stock is implemented via the pick matrix P with the expected value of the views in Q. I have read several papers where each stock ...
1
vote
1answer
63 views

Calculating IR sensitivity

I'm trying to figure out how to find IR sensitivity of a bond whose time to maturity of a bond is 2 years. Bond pays 10.875 percent coupons yearly. Duration is 1.8 years. How do you find the ...
0
votes
1answer
40 views

Risky duration formula for what kind of bond?

In a documentation, there is the following formula for "zero interest rate risky duration" of a bond: $\frac{1-exp(-s \cdot T)}{s}$, where $s$ is spread, $T$ time until maturity. What type of bond ...
0
votes
1answer
26 views

LIBOR Quoting Conventions

I have been trying to build a NSS parameterization of LIBOR term structure, and have confused myself over how all the dates are dealt with. On ...
0
votes
0answers
23 views

FIX engines comparison

Need help, looking for some comparison between c++ FIX engines, like onixs, antenna and some fpga solutions. If anyone has experienced some of the named engines also would like to hear the ...
0
votes
0answers
29 views

Estimate Option Price Given X% Move N Days in the Future

I was wondering if someone could recommend a method to estimate the price of an option N days from now given an X% move in the underlying. I have fitted a volatility surface but where I am running ...
1
vote
1answer
47 views

How can extract parameters in the CIR model from data?

I want extract CIR parameters from monthly LIBOR data in the EULER-MARYAMA method in MATLAB languge. I find data but I cant extract parametrs form that! what is the process? what is the formula?
1
vote
2answers
41 views

Creating index from bloomberg data in matlab

I'v got 6 different equity index time series from which I want to create an index based on a particular percentage. This would be simple although due to different holidays the date don't always match. ...
3
votes
1answer
76 views

The Relation Between the Ricci flow and the Black-Scholes-Merton Equation

Grisha Perelman once wrote that The Ricci-flow equation, a type of heat equation, is a distant relative of the Black-Scholes equation that bond traders around the world use to price stock and ...
2
votes
1answer
39 views

Calibration of 1F Hull White short-rate model to market data

I want to calibrate the Hull White 1 factor short rate model to market data. The main purpose is to simulate interest rate paths, which I will use to calculate the net pv of banking liabilities. Some ...
0
votes
2answers
68 views

CAPM betas at different horizons

When taking capital budgeting decisions appropriate cost of capital should depend on the horizon of the investment. So the beta of a stock, i.e. it's covariance with the market should depend on the ...
-1
votes
0answers
42 views

Stochatic Ito formula [closed]

I have $$dX_t= a dt + H dB_t $$ With$ B_t$ brownien motion and H is a function t such as $$E(H^2) \leq \infty $$ And$$ c< X_t < b$$ and $$t->X_t$$ is an increasing dunction I have to show ...
1
vote
1answer
75 views

What is Toxic FX Flow debate!

So, basically i want to debate and find out the real reason behind being flag by ECNs and venues as "toxic". How to avoid being flag? What kind of strategies are toxic and why? Below is an article ...
0
votes
1answer
21 views

30 Day Federal Funds Futures settlement price

A question regarding this futures: http://www.cmegroup.com/trading/interest-rates/stir/30-day-federal-fund.html It says that settlement price = 100 - [average of effective federal fund rate for ...
1
vote
1answer
51 views

Why is H always* the letter used to describe the level of a barrier?

A quick and (hopefully) easy question. Why? *(always / often / when it's not B)
0
votes
1answer
121 views

SEC 10-Q/K Filings

I am working on some research that requires parsing of SEC 10 K/Q filings. We have built a parser that will parse the raw txt SEC filing that usually contains many blocks of unencoded files (html, ...
0
votes
0answers
29 views

Pricing back swaptions corresponding to underlying swaps of Bermudan Swaption in calibrated LMM

I do not know to which swaption volatility matrix I have to calibrate the LMM in order to price back correctly the swaptions corresponding to the underlying swaps of a Bermudan Swaption. My problem: ...
-1
votes
2answers
18 views

Skewed Student t distribution MLE and Simulation

I have Financial LOB data and I feel that a skewed t distribution will fit best. I have a problem trying to find the parameters using MLE numerically since Matlabs built in function does not allow for ...
-1
votes
0answers
55 views

Returns used in volatility calculation

Can anyone explain the definition of returns they use in this paper? Page 142: https://www.jpmorgan.com/jpmpdf/1320538072221.pdf, where it says $R^j_{k,n} = \sum_{i=1}^{13} \lambda_j^i \times \ln ...
1
vote
1answer
28 views

Are financial returns considered more volatile in recessionary times as opposed to expansionary times?

I need help in understanding some results that I have obtained. I am doing some out-of-sample performance analysis for different targets of volatility in mean-variance optimization where I solely ...
1
vote
0answers
93 views

Quantitative method to select tactical bands for asset allocation

Do you know a study with a methodology for selecting tactical bands (or the allowed deviation from a strategic asset allocation)? Thanks
0
votes
0answers
14 views

Toxic FX Flow - how to avoid it [duplicate]

So, basically i want to debate and find out the real reason behind being flag by ECNs and venues as "toxic". How to avoid being flag? What kind of strategies are toxic and why? Below is an article ...
0
votes
0answers
9 views

what is earnings correlation with eps and revenue? [closed]

what does negative eps mean for a stock price ? what does negatve revenue mean for a stock price ? Is having both negativem doubly bad for the stock ?
0
votes
1answer
39 views

where can I get a list of all yahoo finance stocks symbols

I remember having seen that somewhere, I can't find it any more. Anyone knows how can I get all the list of stocks on Yahoo finance. Or even all american stocks, maybe Russell 1000/2000/3000...
3
votes
1answer
161 views

Black-Scholes Model for portfolios

Given Black and Scholes model, consider the portfolio $a_t$ = 1/2, $b_t$ = $1/2$$S_t$ $exp(-rt)$. Show that this portfolio replicates one share of stock. Show if it is self-financing. Find ...
1
vote
1answer
59 views

what is the meaning of the differential of an arbitrary adapted random process?

I was working on the definition of the self-financing portfolio. Say $V=\phi_tS_t+\psi_t A_t$ where $S_t$ and $A_t$ are the stock price and the money market price at time $t$, resp, and $\phi_t$ and ...
0
votes
1answer
34 views

Does a Call Spread always need to be symmetric?

I have a plot of a Call Spread Option at time $t ={0}$ but the graph of the call spread is not completely symmetric. My question is: does it have to be? Here is the plot I'm referring to: I'm just ...
1
vote
0answers
19 views

How to request current Interactive Broker positions using VBnet/Activex and the API?

I'm trying to use the reqPositions() method but it doesn't have an event handler associated with it that it references in the API.
1
vote
0answers
37 views

Implied volatility

I have a question about calculating the implied vol. Assuming the implied vol that a option will expire in 1 day is $\sigma_1$, and the implied vol that the option will expire in 2 days is $\sigma_2$. ...
1
vote
2answers
696 views

Difference between CAPM and mean variance optimization

Is the mean variance optimization the same thing as the capital asset pricing model? Or is the mean variance only a part of CAPM?

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