All Questions
2
votes
0answers
113 views
2
votes
0answers
71 views
Is it possible to model general wrong way risk via concentration risk?
General wrong way risk is defined as due to a positive correlation between the level of exposure and the default probability of the counterparty due to general market factors. (Specific wrong way risk ...
2
votes
0answers
63 views
Changes to option valuation for dollar-pegged underlying
In Russia, options on futures on the RTS index are priced in points instead of currency, with points being directly related to the value of the US dollar such that, for example, if the dollar rises, ...
2
votes
0answers
101 views
Measure change in a bond option problem
This is not a homework or assignment exercise.
I'm trying to evaluate $\displaystyle \ \ I := E_\beta \big[\frac{1}{\beta(T_0)} K \mathbf{1}_{\{B(T_0,T_1) > K\}}\big]$, where $\beta$ is the ...
2
votes
0answers
117 views
Optimal Position Size with Transaction Costs given Forecast Mean and StDev
I have rather a challenging question. I'm hoping that someone can share their experience. I will build up the problem in steps.
Let's start our thinking with the idea of a buy and hold strategy of ...
2
votes
0answers
91 views
Combining Mulitple Forecasts? Budged Constraints?
I'm hoping that someone can lend a hand. I have been reading various papers on how to combine multiple forecast time series. The main paper is Granger and Bates 1969. The suggestion here is that there ...
2
votes
0answers
102 views
What are the proper metrics to look at for checking discrepancies in these two time series
I am obtaining bid/ask price and volume market data from two different sources for the same ticker and for the same day and checking to see that at time intervals X they are "roughly the same". The ...
2
votes
0answers
77 views
Probability Density of Returns of Bonus Certificates
Could anyone please help me with the following?
I need to generate a histogram (resp. probability density) of returns of a bonus-certificate.
A bonus-certificate can be replicated by an underlying ...
2
votes
0answers
75 views
Difference between kappa and delta in mixed-effects model
(This question is a crosspost from Cross Validated)
I have a following stochastic model describing evolution of a process (Y) in space and time. Ds and Dt are domain in space (2D with x and y axes) ...
2
votes
0answers
261 views
Can the Heston model be shown to reduce to the original Black Scholes model if appropriate parameters are chosen?
Summary
For Heston model parameters that render the variance process constant, the solution should revert to plain Black-Scholes. Closed from solutions to the Heston model don't seem to do this, even ...
2
votes
0answers
191 views
Long-term vs short-term strategies \ investing
Suppose most investors have very short investing horizons and use appropriate (for them) strategies, but investor X has a very long horizon. He would like to trade some advantages (early withdrawal ...
2
votes
0answers
160 views
Is inverted Japanese style curve persistent when negative rates are real / market - observed?
The time evolution of inverted curves does model / forecast a future recession and not necessarily contains the current liquidity- / credit-related aspect. The historical Japanese style inverted yield ...
2
votes
0answers
93 views
Stochastic discount factor (aka deflator or pricing kernel) and class D processes
When (under what assumptions on the model) does a Stochastic Discount Factor need to be of Class D? What would be the implications if it was not? Is it connected to one of the no-arbitrage notions?
2
votes
0answers
731 views
Backtest pair trade strategy in R
I am looking for some tips on how to run a simple backtest on a pairtrading strategy intraday using eg. 30minute bars.
I have calculated the spread, ...
2
votes
0answers
167 views
What is the use of the Euler equation in the Ramsey growth model?
I apologise for being brief, but I don't understand how is Euler equation used in the Ramsey growth model. I am reading a textbook "Dynamic General Equilibrium Modeling" and there is mentioned about ...
2
votes
0answers
129 views
Pricing with collateral
I have been confused about many things concerning the princing of securities with collateral.
We can prove that today's price of a security( fully collateralized and within the same currency) is the ...
2
votes
0answers
64 views
Any thoughts on how Warren Buffet's B of A warrants might be “marked-to-market” by either counterparty?
It's not too long since Berkshire Hathaway got its 10-year warrants in Bank of America alongside its \$5 billion purchase of preferred stock. At the time I saw some discussion about the value of ...
2
votes
0answers
108 views
How to Quantify Headwinds
What are some of the best ways to effectively measure headwinds for an open ended fund? Headwinds in this case refers to the amount of volatility contributed by a factor or a set of factors to a ...
2
votes
0answers
89 views
How to find the upper bound of a digital option given some market data?
Given the price of a call equals to 5 with Strike 100, please find the upper bound (sup) of the digital option with strike 105.
I am not sure about the solution, but I write the condition like this,
...
2
votes
0answers
81 views
Good Environment, Social, and Governance Indicators to correlate with financial performance of PE
I am trying to see if there is a correlation between the Environment, Social, and Governance (ESG) performance and the financial performance of Private Equity (PE) funds.
Are there any suggestions ...
2
votes
0answers
106 views
What is the highest frequency greek for options on futures on bonds?
I'm considering exchange traded options of futures on bonds. Options on bond futures are usually American, thus the Black model is out of question. Which is the most imporatant Greek with respect to ...
2
votes
0answers
217 views
What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?
Given a bond and a stock issued by the same issuer, what is the appropriate ratio of bond-to-stock one should hold in order to minimize the specific risk to that issuer? Equivalently, what is the ...
2
votes
0answers
119 views
Optimal stop-loss reinsurance
What are some methods for optimizing stop-loss reinsurance? I've found an article on the minimization of the variance. I also know about the method of average-at-range.
Can we apply a method for ...
2
votes
0answers
92 views
Are there canonical test cases for testing of pricing engines
Short intro: We are developing pricing engines for the calculation of market risk in a Solvency II solution, including bonds, callable bonds, cds, options, futures and so on. Are there any canonical ...
2
votes
0answers
119 views
Calculating stock weight for SEC13F filers
I am trying to evaluate weight of stocks in portfolio for an investor. For this purpose
I use SEC13F filings for particular quarters and historical prices from Yahoo. There are stocks in portfolio ...
2
votes
0answers
220 views
vix futures vega per contract and tvix vega per share
How much vega in spx terms (straddle contracts) or dollar value is in 10 vix futures contacts and 10000 shares of tvix
2
votes
0answers
241 views
TA/Pattern algorithm analysis
I have been building a momentum pattern detection algo (essentially involves fitting curves in overlapping windows at different timeframes) and wanted to see if anyone has done/seen similar work. I ...
2
votes
0answers
160 views
Tian third moment-matching tree with smoothing - implementation
I was wondering if someone has an implementation of the Tian third moment-matching tree (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1030143) with
smoothing in code (e.g. c++, vba, c#, etc.)?
...
2
votes
0answers
206 views
What does T statistics of Information Coefficient indicate?
Hi I am looking for a clear explanation of T statistics concept. Especially in quantitative equity portfolio management context, what does T statistics of monthly Information Coefficient for one ...
1
vote
0answers
20 views
Sign Bias test output interpretation of rugarch?
I fitted an ARMA-GARCH process to my data and looked at the output:
...
1
vote
0answers
75 views
Market Exposure and Hedging
Normally the Market exposure associated with your stock/portfolio is your delta for that stock/ portfolio. Basic idea of hedging involved here is buying/selling respective futures depending upon ...
1
vote
0answers
47 views
mean variance minimizer
I need to use the lagragian multiplier to find the minimal martingale measure from the set of equivalent martingale measures. i formed the lagragian as L = $L(u(t,S(t)),\lambda) = ...
1
vote
0answers
118 views
How to normalize technical indicators for machine learning?
I'm using around 130 technical indicators for 100 different companies. Each company's stock price moves in a different range, see FTSE 100. In addition, each technical indicator moves in a different ...
1
vote
0answers
82 views
Interpolate option volatility in delta space in R
I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
1
vote
0answers
78 views
analyze strategy performance with given matrix of weights/time and weekly returns in R
I have a matrix of 259 weekly returns, 50 assets and a portfolio composition for each of the 259 weeks. I would like to test the performance of the portfolio during 52 weeks, rebalancing every 12 ...
1
vote
0answers
58 views
How to measure if variance is greater at a certain time of day?
I'm not very fluent in the quant vernacular, so perhaps the nature of my question will be better illustrated as a hypothesis.
One market has closed and another market elsewhere on Spaceship Earth is ...
1
vote
0answers
107 views
How does Hanson's Market Maker (LMSR) work?
Implementing Hanson's Market Maker states:
If the market maker wants to quote a "current price", he can. The
current price for outcome 1 is:
$$
\mbox{price1} = ...
1
vote
0answers
44 views
Industry factors without GICS
I'm working through the Quantitative Equity Portfolio Management book by Chincarini and Kim.
I'd like to build a basic industry-based fundamental factor model. As this is a pet project for ...
1
vote
0answers
246 views
portfolio optimization with a loop
I am attempting to minimize the variance of a 3 stock portfolio using optimization within a loop. What I have done is calculated the stock returns and cov matrix from dates 1980-01-01 to 1989-12-31 ...
1
vote
0answers
56 views
Modelling long run relationship between dividend and earnings
I am working on a paper where I have to model the long run relationship between earnings and dividends. I have downloaded the raw data from shillers website. I have converted the series to ...
1
vote
0answers
46 views
Risk factors for derivatives on dividends
I consider pricing and risk analysis of derivatives on dividends of the members of equity indices (such as Dow Jones EuroStoxx). There are options but I focus on futures.
What are the main risk ...
1
vote
0answers
140 views
Call options portfolio: what would the underlyings' moments to be maximized?
Let you have only three underlyings, like SPY, TLT and GLD, and you want to buy $n_{1}$ Call options on SPY, $n_{2}$ Call options on TLT and $n_{3}$ Call options on GLD... with a limited budget, that ...
1
vote
0answers
49 views
Problems with exact Heston simulations
I am just wondering if there is any problem with the so-called "exact" Heston simulations? So far what I have seen are the good things about it, what are the disadvantages? Because if it is so ...
1
vote
0answers
124 views
Stepwise Cointegration
This is more of a general question at this point, but if my thought process makes sense I will follow up with an R implementation. I have read a number of papers on cointegration analysis for pairs ...
1
vote
0answers
145 views
Data feed that shows individual orders
Does anyone know how I can obtain time and sales data for a stock?
Lots of feeds provide the total volume but I would like to see the breakdown of what buy/sell orders made up the day's volume.
I ...
1
vote
0answers
78 views
How to calculate the Transfer Pricing from the FTP curve?
According to some articles, Fund Transfer Pricing procedure is
setting the FTP curve.
First it's to select instruments and grid points, namely
overnight to 1 week: rates from interbank money ...
1
vote
0answers
129 views
How to use financial ratios in a factor model?
I am trying to understand how factor loadings in a general factor model are computed. For simplicity sake, lets assume a simple model:
$$
R = B \times F + \epsilon
$$
$$
R = N \times 1
$$
$$
B = N ...
1
vote
0answers
157 views
R ARMA-GARCH rugarch package doesn't always converge
I'm trying to compute the standard ARMA(1,1)-GARCH(1,1) as shown in this answer for an entire index,just to store in a database to quickly lookup values for back ...
1
vote
0answers
67 views
What to do with linear regression or regression splines outside of the training range?
This is a cross-post from here
In my question on a load forecast model using temperature data as covariates I was advised to use regression splines. This really seems to be a/the solution.
Now I ...
1
vote
0answers
80 views
Eurdollar Futures
Trying to understand the Eurdollar market a little better. I understand it's the market for dollar denominated deposits outside the US (not just in Europe). They are unregulated and not subject to ...
