3
votes
2answers
55 views

Difference in implied volatility calculation

I've been using vollib to calculate IV, but my answers have been different by tenths from other sources like NASDAQ and Yahoo. The answers range +- 0.5, sometimes even more. The inputs are: $S$ ...
2
votes
2answers
410 views

Key Rate Duration for MBSs greater than Key Rate Tenor

Key Rate Durations (KRD) are essentially some fixed income instrument's price sensitivity to a non-parallel shift in interest rates (i.e., a shift at the "Key" Rate). For example, a 10-year bond's ...
3
votes
1answer
120 views

Which Algorithmic trading library would you recommend for trading Bitcoin?

I am starting to do Algorithmic trading in cryptocurrencies using Python libraries. Most exchanges have RESTful API that make it easy to write you own code and get started. However, I would like to ...
0
votes
1answer
28 views

Binomial Model, Number of nodes from $t = 0$ to $t = n$

How many paths are there in a binomial model from time $t = 0$ to time $t = n$? How many nodes (states) are there? Intutively it seems that there are $2^n$ paths and $2n - 1$ nodes. But I am not sure ...
4
votes
1answer
58 views

Realized variance in SVJJ (Heston with jumps) model

I am working with the stochastic volatility model with jumps in both the price and volatility dynamics, ie. the risk neutral dynamics are of the form: $\mathrm{d}V_t = \kappa(\theta - V_t)\mathrm{d}t ...
-1
votes
0answers
19 views

US Bond vs Russian Bond [closed]

From a neutral point of view : Do you prefer investion in a US Bond or Russian Bond ? I would say US Bond !! But is there any strong argument that permits us to answer ?!
1
vote
0answers
20 views

Are there alternatives to the Box-Tiao decomposition in identifying mean reverting portfolios?

As documented in this paper, Box-Tiao decomposition (a way to decompose multiple time series into components with different speeds of mean reversion) can be used to identify mean reverting portfolios. ...
3
votes
1answer
129 views

Hedging - calculating option prices using implied volatility surface

To hedge a strategy is it accurate "enough" to price an option using an implied vol curve vs moneyness (strike/spot) assuming sticky delta? The moneyness can be read off the chart, its corresponding ...
0
votes
0answers
19 views

Which obligation choose [closed]

I have 6 different obligations: A: coupon 4% Maturity 10 years. B:coupon 4% Maturity 15 years. C:coupon 2% Maturity 10 years. D:coupon 2% Maturity 15 years. E:coupon 0% Maturity 10 years. ...
1
vote
1answer
83 views

Normalizing SPY ETF time series data with its sector ETFs?

I am looking to compare the returns of a sector rotation strategy between the various SPDR sector ETFs XLY, XLP, XLE, XLF, XLV, XLI, XLB, XLK, XLU vs. ...
0
votes
0answers
32 views

Historical volatility on bloomberg API

Is there a way to obtain the historical volatility of a stock from the bloomberg API? I would be looking for the data in the HVT table. Actually 3-months historical volatility from now would be ...
1
vote
1answer
80 views

Complicated American style option contract with numerous non-standard features (simultanous exercise, additional premium, etc.)

I want to value the following contract for times $0<t<T$, i.e. determine $V(t,\cdot)$ where $\cdot$ refers to all other dependences (strike, spot, volatility, etc.). The contract is long and ...
-1
votes
1answer
69 views

Black_scholes formula for a butterfly option

Im wondering if I can apply Black-Scholes formula to valorate a butterfly option, i.e: $$B(T)=Vcall(S(T)-K,0)+Vcall(S(T)-K',0)-2Vcall(S(T)-K'',0)$$ with $K<K''<K'$, just evaluating each call ...
0
votes
2answers
86 views

Price of an equity

An equity has a value of 100 Euros, and pay a dividend of 5 Euros in 6 months. The interest rate of 6 months is 5% and the interest rate for 1 year is 6%. I would like to compute the value of the ...
0
votes
0answers
36 views

Intraday or overnight returns?

While calculating insider abnormal returns, closing prices of securities are generally used. We take the actual ex post return of the security i on time t, minus the expected normal return for the ...
0
votes
0answers
43 views

How necessary is real analysis and complex analysis for trading at hedge fund levels?

As the title states, I am basically wanting to know the applications of real/complex analysis in finance. How important are such high levels of math ? I can obviously see how things such as ...
0
votes
0answers
14 views

Rblpapi millisecond resolution

I'm using Rblapi to get tick data, using the nice getTicks function. Much to my dismay the index is rounded to the second, while milliseconds time stamp could be provided. Tried returnsAs xts, fts(?) ...
1
vote
1answer
26 views

Order ID or Broker information from TAQ or Limit Order book?

Is it possible to see if a big order was executed in smaller chunks, and at what prices and times?
3
votes
2answers
91 views

Vega in a “constant volatility” Black-Scholes world?

A little confused, I consulted the Wilmott forums for guidance on how I can interpret vega/vomma. Another user's post reminded me that the Black-Scholes model assumes that the underlying has constant ...
1
vote
1answer
87 views

BEKK - GARCH model in Stata

Is it possible to run BEKK-GARCH in Stata? mgarch is of a different model type and google provide me with no good hints.
3
votes
1answer
62 views

Approximation of an option price

The value of an option in the money is 11.50 Euros. The parameters of the market are: -The price of the underlying stock: 81.4 Euros. -The volatility ofthe underlying is : 34.65 % The ...
0
votes
0answers
4 views

Measuring promotion baseline smoothing [migrated]

I am trying to estimate promo effectiveness for a retail product. To do this I have taken monthly quantity sold data for the product. My question is - Is it logical to model the sales baseline (sales ...
0
votes
0answers
17 views

Data on interest rate differentials (lending on own vs. foreign currency)

I'm looking for data on (inner country) interest rate differentials between lending in own and foreign currency. Is there any data publicly available? If yes, where? If not, which non-free sources are ...
0
votes
1answer
34 views

Strategies on steepen yield curve

Believe that the yield curve is going to steepen very soon. It may be fall in short-term rates, a rise in long-term rates, or some combination of these. What strategy should we pursue in the bond ...
1
vote
2answers
42 views

Differences in EIOPA S.06.02.0x QRTs (Assets D1 in 2016)

As per the COMMISSION IMPLEMENTING REGULATION (EU) 2015/2450 (published 31DEC2015) I can see that S.06.02.01 QRT relates to Quarterly (or annual if exempt) quantitative templates for individual ...
0
votes
1answer
28 views

generate matrix in Matlab [closed]

Is there any builtin function (or code) in matlab to generate Pairwise Comparison matrix (for Analytic Hierarchy Process - Decision Making) or Positive reciprocal matrix which aji= 1/ aij ? Many ...
0
votes
0answers
14 views

How would MTM an interest only currency swap affect its valuation?

Not sure how a central clearing house that marks an interest only currency swap between two parties to market everyday would effect the currency swap's price. Any ideas?
0
votes
0answers
11 views

Transaction costs estimate for investment strategy

I'm examining a strategy based on profitability. I sort UK stock into 10 portfolios based on their gross profits-to-total assets ratio. Then, I create long-short portfolios by subtracting the high ...
1
vote
0answers
44 views

Libor Market Model Calibration

Currently I am doing a research on the plain vanilla multi-curve framework Libor Market Model meaning that no stochastic volatility is involved. I had the idea to calibrate to the swaption market. In ...
0
votes
3answers
50 views

Looking for an algorithm to generate (dummy) share price data

Is there an easy-ish way I can generate "dummy" share price data for the purposes of data visualisation techniques etc.? Essentially I want to have something like the "Adventure Works" of price data. ...
0
votes
1answer
25 views

ABS vs covered bonds vs CDO [closed]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
0
votes
1answer
63 views

RiskMetrics VaR Volatility Sample Size

RiskMetrics calculates volatility using an exponentially weighted moving average. For a decay factor of 0.94, they advise a sample size of 74 past returns. Does this mean the entire calculation should ...
1
vote
1answer
66 views

Options and bond related to convexity

Relevant definition: Assumption 2.1 (No dominance). If the payoff $P$ of a financial instrument is nonnegative, then the price $p$ of the financial instrument is nonnegative. Notation: $T$ - the ...
4
votes
1answer
80 views

Call options and portfolio of the same options worth less?

A portfolio of long positions in call options with the same maturity and strikes on different assets is worth more than a call option on a portfolio of the same assets with the same weight; i.e. ...
3
votes
1answer
87 views

Modeling Financial Assets

Let $\tilde{W}_t := (1+R)^{-t}W_t$ and $\tilde{S}_t := (1+R)^{-t}S_t$ be respectively discounted wealth process and discounted asset price. Then, show that $$\tilde{W}_t = w_0 + ...
5
votes
2answers
79 views

Is it possible to deal with non-normal distribution in Black-Litterman model?

Suppose that I know that the normality assumption about my data is unrealistic (as it is very frequently): is it possible to apply any distribution that I judge the right one to the Black-Litterman ...
15
votes
5answers
22k views

how to derive yield curve from interest rate swap?

According to some textbooks, to derive the yield curve, quote overnight to 1 week: rates from interbank money market deposit, 1 month to 1 year: LIBOR; 1 year to 7 years: Interest Rate Swap; 7 ...
-1
votes
0answers
16 views

Application of PVAR in macro economic modelling [on hold]

I'm looking for a model that can best explain the elasticity of non-performing loans to macroeconomic variables and bank specific variables (panel data of a single country). Is PVAR a good choice?
0
votes
2answers
110 views

Discrepancy between binomial model, Black-Scholes and Monte-Carlo Simulation

I try to use Monte-Carlo Simulation to price a 10-year call option. Based on below parameter, S = 1, X = 1, volatility = 80%, T = 10, risk-free rate = 0.22% The option value based on Monte-Carlo ...
10
votes
3answers
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 ...
3
votes
1answer
107 views

Example of options that cannot be priced with least-square Monte Carlo

Can you give some example of options that cannot be priced with least-square Monte Carlo? Intuitively, this is any option for which a payoff depends on a previous exercise decision. It's relatively ...
3
votes
1answer
117 views

Execution quality for illiquid securities

The SEC's execution quality statistics measurements (Rule 605) arguably does a poor job at measuring the execution quality of ...
3
votes
1answer
99 views

Spectral and distortion risk measures

Is there any difference between the spectral and distortion risk measure? Or is it just a different name for the same kind of risk measure?
3
votes
1answer
147 views

Issue with OLS Regression for Nelson Siegel Svensson parameters

I have been working on getting input parameters to the Non-Linear Optimization which gives the Nelson Siegel Svensson model parameters and am carrying out the OLS regression as described in this ...
4
votes
2answers
146 views

Nasdaq trading under the scenes: market makers, ECNs, brokers. Who buys from and sells to whom?

U. S. Securities and Exchange Commission (SEC) defines market maker as: "A market maker is a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly ...
2
votes
0answers
90 views

Equity Index Announcement Data

Does anyone know of a data source that provides announcements of future index events (adds/drops/re-balances), specifically for equity indexes? I know these are mostly available somewhere on each ...
0
votes
2answers
134 views

Difference between Closing Price, Last traded price and Settlement Price for option contracts?

What is the difference between Closing price, Last traded price and settlement price ? I got the difference between Closing Price and Settlement price from previous post : The difference between ...
1
vote
1answer
53 views

Portfolio optimization

first I just hope that this question is in the right place. I have started working on portfolio optimization and the formulation of the problem and their solution : For example in the Markowitz ...
0
votes
1answer
47 views

Matlab code for equally weighted portfolio

I have daily returns of 10 stocks. I need to construct an equally weighted portfolio that goes long in the 3 highest returns and short in the 3 lowest returns. The portfolio needs to be re-balanced ...

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