# All Questions

101 views

### Book recommendation for time series analysis

I have been trying to wrap my head around Engel-Granger test and jcitest etc. I have failed thus far. If possible can someone guide me about which books to start with and possibly reach to ...
218 views

### Starting mathematics reading for quants

What book should I start with in order to learn about the mathematics behind financial (derivatives I think!) trading that would be used in HF's & IB's (Not sure whether there would be a ...
70 views

### CDS - Accumulated Default Risk?

Say I issue insurance contracts covering fire damage in personal households. Fires occur with a probability of $x$% in a household (and they obviously occur independently from one another). If the ...
64 views

### News on ETF sector performance

I am interested to find historical news (if any) associated with intraday volatility burst in a particular ETFs like ishares IYF (Financials). So say that between 12:00 - 12:10pm, the ETF IYF's stock ...
68 views

### Natural gas forward price modelling

I'm looking to learn about gas price modeling, in particular models of forward prices. I've studied "classical" mathematical finance, fixed income theory et cetera. I'm looking for good references ...
31 views

### Which size of constant range bar gives the most persistent chart?

A constant range bar chart is like a candle chart, only the candles don't close after a certain amount of time (i.e. 30 min, 4 hours), but after a certain range (i.e. 5 ticks) has been crossed. So if ...
73 views

### Concise way of learning Bond & IR models

What is the most concise way to learn about bond and interest rate models from the book Mathematical Models of Financial Derivatives by Yue-Kuen Kwok? I have studied Oksendals Stochastic Differential ...
150 views

### Popular R packages for Quantitative Finance

Which R packages (in this list or not) do you use in quant finance, why not an alternative, do you use it in production and if so, how? There is a list of most of the R packages related to Finance by ...
19 views

### Handling IQFeed events in Matlab

I need to get some specific market data for my studies, and it seems like the most convenient way for me to do this is to use IQFeed data feed and MATLAB. But unfortunately, since I'm not a seasoned ...
65 views

### What is the effect of dividend yield being greater than the risk-free rate to American options pricing?

Even though dividends are discrete, literature often makes the assumption of continuous dividends (mostly in the case of indices but the individual stocks as well). The dividend yield denoted by q is ...
18 views

### Is it compulsory for feed to send orders/levels for particular symbol on same multicast line?

Multicast feeds have several lines some of which are dedicated for sending current order-add/modify/delete. Its is a implicit restriction that for a single security order-add/delete/modify will be ...
69 views

### Resources for finding quantitative finance examples using excel, VBA and access

I am seeking to increase my knowledge in the quantitative finance field. I would be grateful if someone could point me to useful resource online, where I can find working examples of they types of ...
39 views

### How do I find the mappings between sedol and isin codes?

I am looking at data for Unit Trusts and OEICs in the UK. They are identified by SEDOL or ISIN codes. Given an SEDOL, how can I find the ISIN associated with the same product? And given an ISIN, ...
55 views

### How to display stock prediction results?

I'm not sure if this is a question for "Quantitative Finance" or "Personal Finance & Money" so forgive me if this one is irrelevant for this site. The Situation So I wrote a program (in vb.net ...
86 views

### Bond Portfolio Immunization - Duration Matching

**Question is at the bottom** Suppose you have a portfolio of bonds A, B, and C with the following characteristics: (the "Frequency" column is the # of coupon pmts per year and also the # of ...
57 views

### Why doesn't VG flatten volatility skew for short term options?

The VG process, from my inexpert point-of-view, seems to nearly perfectly model equity distributions. For longer term options, there is little to no volatility, skewness, or kurtosis parameter skew. ...
37 views

### How do options models incorporate sticky strike/delta?

Do options models such as Heston, SVI or others handle sticky strike,delta etc... I am interested in simulating how IV across all strikes can be impacted based on changes in spot. What is a ...
100 views

### Backtesting with Simulated Historical Data?

The trading strategies that are going to backtest well are the ones that pick the winners from the past. For example, if a trading strategy simply bought apple stock it would backtest extremely well. ...
42 views

### Cross gamma intuitive calculation

I'm trying to figure out if there is a way to intuitively calculate cross gamma. I have a gamma table for 2 (or more) assets Asset 1 ...
64 views

### Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
154 views

### Correlation between S&P500 returns and 10y US Treasuries yields

I'd like to investigate the comovement of stock index returns with bond yields but I don't know which return's duration to use (1-year, 1-month or anything else) to get a better view of the ...
22 views

### How to compute return of a variance swap?

How does one calculate the investment of a zero initial investment asset, specifically a variance swap? In this asset the payoff is given by the difference between the realized variance in a certain ...
168 views

### QuantLib: Black / BSM processes and pricing via volatility surface. Different results?

I start this question with a couple of C++ functions that will be useful to show some results. So start your Visual Studio C++ Express or Ceemple or whatever you want and copy & paste this: ...
26 views

### Real-World Cash Account Implementation and Return

Often in financial math, the concept of the risk-free cash account, with return R, is invoked as an instrument for calculating prices - when constructing an option-replicating portfolio, for example. ...
82 views

### Are there providers of delayed market depth data (DOM, Level II, Order-by-Order, etc)?

I have market depth data visualization software, and I want to create a free version for introduction. As far as I know, exchanges allow to distribute their data for free for the end-users, but only ...
35 views

### Recommended Literature for creating Factor Mimicking Portfolios

Is there a textbook that contains the basics for creating Factor Mimicking Portfolios? Although there is a lot of peer-reviewed literature on this, I cannot find textbooks on Asset Pricing that ...
79 views

### law of one price, understanding

I am reading about mathematical finance, and I was tipsed to ask the quesiton on this site. It is about the "law of one price". Just first I'll make precise the model my book uses: I have a single ...
130 views

### Strictly local martingales: what is the intuition behind them?

A process $X_t$ is a local martingale if for each increasing sequence of stopping times $\{\tau_k,k=1,2,...\}$ the stopped process is a martingale. All true martingales are local martingales, but the ...
75 views

### Cross-sectional volatility vs temporal volatility

Volatility is usually defined as the standard deviation of returns, but sometimes it is calculated as the standard deviation of cross-sectional return divided by the square root of time, where other ...
64 views

### How to de-seasonalize natural gas term structure data?

I need to de-seasonalize Nat Gas futures data for a project and am hoping to get good suggestions. As we all know natural gas futures are priced higher for the winter months and to analyze/model the ...
70 views

### How low can HFT transaction costs go?

When evaluating an HFT strategy, transaction costs are clearly an important question. When looking at commercial discount brokers for retail clients, costs can be as low as 0.005 USD per share, but ...
62 views

### Looking for Research Paper on Creation of Currency Baskets

I came across a paper, not sure it originated from academia or a blog or such, that reported on applying principal components to build currency baskets from a set of individual currency pairs and to ...
38 views

### proper choice of risk aversion parameter in the risk-sensitive cost-criterion

Suppose I want to minimize certain risk sensitive cost. Is it a valid question to ask what is the proper (also in which sense) choice of risk aversion parameter in the risk-sensitive cost-criterion ? ...
46 views

### What is the distribution of stock splits?

I want to know how rare are splits more extreme than, say, 7:1 (and reverse splits similarly). An answer here points to announcements on Yahoo Finance, but apparently only monthly views. What is a ...
138 views

### Heat/Diffusion Equation

I am working on a problem where I have successfully reduced a version of Black Scholes to the Heat Equation and then shown the solution to be: ...
240 views

### Why are we obsessed over normalizing financial data?

I have recently began work on some high frequency financial tick data. I have been told to 'normalize' the data as much as possible and run linear regressions through them. In fact, the data doesn't ...
65 views

I am trying to plot the asset swap spreads of government inflation-linked bonds (ILBs) versus the asset swap spread of government nominal (plain-vanilla) reference bonds. I used the article in the ...
45 views

### Negative Risky vs Negative Butterfly

I understand that in regard to FX options, a volatility smile with negative Risk Reversals is effectively indicating that the spot market for a given currency pair is in decline (puts over). In ...
59 views

### Underlying changes impact on implied volatility

What are some valid techniques that can be used to simulate how changes in the underlying are most likely to impact implied volatility along with the skew of all strikes for options with the same ...
126 views

### Probability of Hyperinflation as a function of Probability of Soverign Default

I'm looking for some academic research on modeling risk of hyperinflation. Specifically, I'm interested in modeling the probability of hyperinflation over some time interval (e.g., probability of ...
18 views

### Chaikin Money Flow Persistence Formula

I am trying to create an approximation of the Accumulation/Distribution Rating using the Chaikin Money Flow Persistance indicator. I have the Chaikin Money Flow Formula as below, could anyone assist ...
59 views

### CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
42 views

### Non-Negativity of up-factor and down-factor in Binomial No-Arbitrage Pricing Model

Consider a stock which is trading at $S_0$ at time $t=0$ and is expected to be trading at price $uS_0$ or $dS_0$ at time t=1 where $u$ and $d$ are up-factor and down-factor. The theory says that to ...
72 views

### Brownian Bridge's first passage time distribution

Let's say we have a Brownian Bridge $Y_{b,T}(t)$ such that $Y_{b,T}(0)=0$, $Y_{b,T}(T)=b$. Let's say we are interested in the first passage time of $Y_{b,T}(t)$ at level $b$: \$\tau_b = \{\min \tau; ...
89 views

### Selling an American call option early

I understand it is never optimal to exercise an American call option early. [1] [2] However, here are my two contradictory thoughts about selling an American call option early. Assumptions I can ...
80 views

### Difference between “basic risk” and “basis risk”

Returning to Futures contracts, basic risk refers to the risk remaining after the hedge has been put in place and essentially represents the difference between the Futures price – should the ...
78 views

### Finding a basket of stocks that tracks an index

Given an index, let's say S&P500, I am trying to find a list of maximum n underlyings, which altogether track the index quite well. I am thinking of running a portfolio optimization algorithm, ...
269 views

### Why is the equity premium not arbitraged away?

The Equity Risk Premium Puzzle concerns the observation that equity returns are generally greater than bond returns. The puzzle is well known and widely studied, what is keeping investors from ...
I was wondering how to find the solution of the following stochastic integral: $$dY_{t}=a(W_{t},Y_{t})dW_{t}+b(W_{t},Y_{t})dZ_{t}$$ or in integral notation ...