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81 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 ...
535 views

Data Synchronization

I'm working on market trends. I have daily prices for 33 assets from different markets. I was wondering if there is a way to cancel the effects of different opening/closing times. I have been told ...
301 views

Why do long-term equity return forecast models use dependent observations?

I've been reading up on different models used to forecast the equity risk premium, and I've seen a couple of papers that had questionable methods. For example, this paper by Javier Estrada goes into ...
393 views

Does the geometric Ornstein-Uhlenbeck process have stationary variance?

I know that the long run variance of the standard OU process is $\lim_{s\rightarrow \infty}\mbox{Var}(P_{t+s}|P_t) = \frac{\sigma^2}{2\theta}$ I'm using the geometric version of the process. I ...
100 views

Assessing Forcasting with Correlated Residuals

Trying to use a linear regression model to forcast the CPI. I noticed that when I took a moving average of the residuals, though homsokedatisc and nonautocorrelated(ie they squiggle up&down with ...
538 views

YTM and current yield

Which of the following statements is correct? a. If a bond’s yield to maturity exceeds its coupon rate, the bond’s current yield must also exceed its coupon rate. b. If a bond’s yield to maturity ...
185 views

Portfolio risk-return when assets have limited and inconsistent historical data / time series?

Lets say we have "today's" snapshot of asset allocation and need to determine the 6mo, 1 yr and 5 yr risk and returns of this portfolio. If the time series for every asset is very long, longer than ...
329 views

Stochastic modelling of 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 common stochastic ...
91 views

2k views

Square root of time

I am writing about VaR and I am wondering about the following: We can scale the VaR to different time horizons by using the square root of time, which means, that the volatility is adjusted by square ...
57 views

Annual Percentage Rate and Yield

I found references relative to US where the Nominal Annual Percentage Rate or simply APR is defined as the simple interest rate (i.e. proportional to time and without compounding). Instead the ...
653 views

What is the proper way to calculate returns for Pair Trading?

Edit I am assuming that I don't need to use margin account to short here: What is a standard way to calculate return for pairs trading strategy? For example, I bought 100 dollars worth of a loser ...
184 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 ...
I want to fit the following model to a time series: $$y_{t}=\alpha_{0}+\alpha_{1}y_{t-1}+\alpha_{2}y_{t-1}^{2}+\lambda h_{t}+\varepsilon_{t}$$  ...