2
votes
5answers
99 views

What is the motivation for index benchmark?

I know that many funds have local index (i.e., SPX in US) as their benchmark. Why are investors interested in such kind of returns instead of absolute returns. From the first glance I'd think one ...
0
votes
2answers
119 views

Why does Futures contract credit and debit a position daily, if it has “locked” the price?

I thought I had understood futures contract. But it seems the daily settlements betray my understanding. Futures contract provides price & product safety to involved two parties. E.g. Wheat ...
1
vote
0answers
47 views

Order 1.5 strong SDE integration methods for systems with diagonal additive noise

I'm looking into simple-to-implement and efficient order 1.5 strong SDE integration schemes for my system. My noise is diagonal and additive (possibly time-varying). Thus methods designed for either ...
11
votes
2answers
463 views

Relationship between Large Cap and Small Cap Volatility

Relative value of large cap volatility. We all track the VIX as a measure of volatility, but we often forget that the VIX is volatility indicator for the large cap index within the SP500. We can ...
0
votes
0answers
49 views

Why is that maximizing stock value, under uncertainty, is a better option than maximizing profits?

I've been trying to access the papers that state that kind of problem, but most of them need payment for access and I am on a student budget. I know that maximizing profits=maximizing stock value in ...
0
votes
2answers
605 views

Forex brokers with free API compatible with Node.js

I have a Forex trading signal generator written in Node.js and now I am looking for a Forex broker with a free Node.js compatible API. The requirements are simple: be able to send new trade orders ...
1
vote
1answer
74 views

Where can I buy historic raw recording of an exchange

Say I want to buy historically recorded raw feed from an European exchange (say LSE). Is there a vendor that would sell me this data ? EDIT: By raw feed I mean the order by order feed (or equivalent) ...
1
vote
0answers
61 views

rugarch and rolling estimation

I use Rugarch for a long time in order to calibrate GARCH models on FX rates time series and perform simulations. I am trying to understand the ugarchroll method. However even if I can find plenty of ...
2
votes
1answer
44 views

Hansen-Jagannathan bounds derivation: last step is not clear

Pennachi's "Asset Pricing" chapter 4 derives: $$ \frac{E[R_{i}-R_{f}]}{\sigma_{R_{i}}}=-\rho_{m_{01},R_{i}}\frac{\sigma_{m_{01}}}{E[m_{01}]} $$ Then, he states that the fact that $-1\leq ...
0
votes
0answers
30 views

Price of portfolio with target volatility

Consider the following: We have two assets, S1 and S2, and with each asset is associated a volatility, v1 and v2, respectively. Now let's say v1 < v2, and we want to create a portfolio of S2 and ...
1
vote
2answers
345 views

Calculating Bollinger Band Correctly

My bollinger band comes out like the below, which doesn't seem right. Any idea what is wrong with my code for calculating upper and lower bollinber bands? I obtained my data from here ...
3
votes
4answers
1k views

Are Futures exactly Delta One?

Delta of Future is exactly one I thought. This post here, says otherwise. However, quoting John Hull again: $$f = \text{Value of Future contract} = S_{t=0} - K \exp(-rT)$$ where $S$ it the spot ...
0
votes
0answers
48 views

Credit Spread - pricing Option and Fixed Income

hi how do you handle credit spread 1. For Option with Equity underlying 2. For Fixed Income/Bond I understand there're two options: a. Expected Loss from Probability of Default & Recovery Rate ...
1
vote
0answers
125 views

Pricing binary options with kernel density estimation

Suppose I have a large enough set of prices of an asset, from which I can extract the following function: $f:T\to\mathcal{D}$, where $T$ is a fixed finite set of time intervals (say, 1 minute, 2 ...
3
votes
2answers
285 views

How do insurance companies use interest-rate swaps?

I have heard that insurance companies make use of swaps and am just trying to get some clarity on that: An insurance company (assume life insurance) has a fixed obligation to pay in the distant ...
0
votes
1answer
121 views

Where can I find historical data for volatility estimation?

I'm trying to estimate volatility following Shreve book, so I need observations of $f(t_j,t_j+\tau_k)$ and $f(t_j+\delta,t_j+\tau_k)$, where $t_J<t_{J-1}<\dots<0$ and $\tau_k$ are relative ...
1
vote
2answers
143 views

How to price long dated options most efficiently?

hi question is how to price a long dated option most computationally efficiently? With European, you use Black Shoals (yes assumption constant vol/rates...etc) but it's a simple algebraic formula. ...
0
votes
1answer
76 views

Need weighted global stock index data (components / weights)

To implement a portfolio generator, I require a set of suitable stocks. Ideally it would use the components of the MSCI World Index and use the index weights for the probability of picking a stock ...
1
vote
1answer
54 views

In a mis-matched trade who profits?

I am building a service similar to the BullionVault where users can buy and sell bullion. They will be placing their Buy and Sell orders on the service. Matched orders will get executed. My question ...
2
votes
1answer
199 views

Square-root-of-time and autocorrelation

My question is that when we have autocorrelation in daily volatilities can we scale daily volatility to annual basis using square-root-of-time rule? Does it breach the main assumption of the rule ...
1
vote
2answers
691 views

Is there a formula for future value of a growing annuity with yearly payment growth and monthly payments?

My example is saving for college: assume a start of 0 balance deposits of 200 made monthly, every year they increase by (g) 2% to account for salary increases, first deposit made at the end of the ...
1
vote
1answer
47 views

Yield to Maturity

For a bond with market price $P_t$ and fixed payments $c_n$, I'm told the yield to maturity is given by the solution $Y$ to the equation $P_t=\sum_{n=1}^N c_n e^{-Y(t_n-t)}$. Firstly, I'm not great ...
1
vote
2answers
421 views

Why is “full” Yield Curve (term structure of interest rates) 3 component based?

I am trying to understand bond-valuation and construction of yield curve. I don't have any exposure to bootstrapping or what-so-ever as of now. So it's appreciated to have an example but not too ...
1
vote
1answer
168 views

High correlation will help detect spurious regression over cointegration?

I'm analyzing two financial time series with Johansen method. A high Correlation coefficient using the Pearson method will help me to detect spurious cointegration models to avoid? If this is not ...
2
votes
3answers
357 views

Please advise on the choice of an automated trading framework

I'd like to start automating my trading strategies. I'm not looking for a fast and easy solution, therefore the programming language is not important for me, I am ready to spend an extra year to ...
7
votes
7answers
402 views

Are the sin, cos, tan functions used in some financial calculations?

I ask because those functions are on the TI BA II Plus financial calculator.
0
votes
0answers
292 views

Convexity of Portfolio Containing Eurodollar Future and Forward Rate Agreement

Assume an individual is a buyer, i.e., long, of one Forward Rate Agreement and a seller, i.e., short, of one Eurodollar Futures contract. Does the collective portfolio have positive or negative ...
0
votes
0answers
20 views

Question about allocating value among different class in capital structure

I come across a task regarding alloation of value among different class in capital structure. I took reference from ...
4
votes
1answer
172 views

Why does regression capture differences in volatility?

I read the following statement in the book python for data analysis, chapter 11, and I was wondering if someone could give me intuition about why regression has this effect? The purpose of the ...
0
votes
0answers
85 views

America option early exercice boundary via Monte Carlo simulation

I am trying to calculate an american option price via the simulation of the early exercise boundary using the method presented in this document: Monte Carlo Method For pricing a put Option. I have ...
1
vote
1answer
69 views

Adjusting open, highs and lows for past monthly stock prices?

I'm looking into modelling monthly stock prices and want to start off by using data from Yahoo Finance. I know that the closing prices given there are adjusted for stock splits and dividends, but ...
0
votes
0answers
46 views

Sketching payoff diagrams- Straddle and Butterfly (when t tends to 0)

I want to sketch a straddle and a butterfly payoff diagram when t tends to 0. I have searched and have been able to sketch both a butterfly and straddle diagram but fail to proceed when t tends to 0. ...
1
vote
3answers
603 views

Calculate correlation between two sub portfolios and the combined portfolio

I have two sub portfolios (lets call them portfolio a & portfolio b - a portfolio is just a vector of weights that sum to 1) that combine to create a total portfolio. I also have a 2 x 2 ...
1
vote
1answer
171 views

Where can I find implementations of the time-varying copula (BBX) in Matlab or R?

I want to construct some time-varying BBX copulas, however, I found that patron's package does not contain time-varying BBX copula. Anybody know where I can download them?
0
votes
0answers
368 views

Calculating the VaR from a GARCH(1,1) with Student-t innovations

I'm self-studying several questions on Ruey S. Tsay's teaching page. I'm experiencing some difficulty getting the correct answer for final exam 2013 Problem B Question 3. Given a Student-t GARCH ...
0
votes
0answers
26 views

Nominative financial datas

For a study I am looking for financial datas about trades in double auction markets. It would typically be transaction history containing the name of the participant (buyers and sellers) and the ...
2
votes
2answers
897 views

What is the price pressure?

What is the definition of price pressure and what does it imply? In a number of paper I read that the price pressure can influence the portfolio returns; can you explain why and in which way it can do ...
1
vote
3answers
126 views

What does “true”volatility mean in volatility comparison?

In Sinclair's book, wee need to compare standard deviation with "true volatility" to check the power of the model suggested, close -to-cloce, or Parkinson formula, etc. What do we mean here by "true" ...
0
votes
0answers
116 views

Where can I find ADF library in c#

Where could I find an ADF library or source code in c# for cointegration test?
2
votes
1answer
152 views

Valuation of Cox-Ross-Rubinstein Model

We have a Cox-Ross-Rubinstein model with parameters $u$ ("up"), $d$ ("down") , $r$ (interest rate) and $q$ (equivalent martingale probability) $(q=(1+r-d)(u-d)^{-1})$ . We have a contingent claim with ...
1
vote
1answer
304 views

Given a correlation martrix, calculate portfolio's correlation with its assets

Find correlation vector like $[ d e f ]$ where d, e and f represent correlation of P(portfolio) with its assets A, B and C respectively. The assets A, B, C can be another portfolio. In order for ...
2
votes
0answers
323 views

What's the practical difference between the Johansen vs Engle-Granger tests for cointegration?

For the two-variable case, what are the practical differences between using the Engle-Granger procedure versus the Johansen test for cointegration? Is one universally more powerful than the other? ...
6
votes
2answers
335 views

Non-negative matrix factorization for factor analysis of stocks

I stumbled over the term Non-negative matrix factorization in presentations such as Application of Machine Learning to Finance and this Big Data in Asset Management. The basic idea is to decompose a ...
4
votes
2answers
558 views

Looking for C# library that provides/contains performance analytics

I am looking for a C# .Net library that provides trade performance analytics similar to R-PerformanceAnalytics. Basic return statistics, draw-downs, risk-adjusted returns, risk (variations), ...
1
vote
1answer
303 views

Empirical copula

I am trying to find the empirical copula linking two random variables $X$ and $Y$. I have some data available but it's limited with respect to the variable $Y$ and I am not convinced it's enough data ...
1
vote
1answer
192 views

Where can i find tick data for futures contracts [duplicate]

Looking for places which can give me historical tick data for free or for the cheapest price. Don't really need it to be live , can be delayed too. What are my options. Mainly looking for tick data ...
1
vote
1answer
165 views

Calculating Variance Explained from PCA Loadings

I have a return history for a universe of risky assets and I've run a principal component algorithm and obtained a loadings matrix (num_factors by num_assets) for the first 5 factors. I have a ...
2
votes
1answer
123 views

What are the assumptions of portfolio optimisation with higher moments?

I was wondering whether there are a set of assumptions for portfolio optimisation with higher moments (including kurtosis and skewness) as there are for regular mean-variance optimisation?
4
votes
3answers
301 views

Why are factor models so popular for risk analysis of portfolios?

As titled, my question consists on asking for why in the most of academic papers one almost always finds that when you try to model asset returns, one needs to adjust for risk factors before analyzing ...
2
votes
0answers
117 views

How to price zero coupon bonds with the Monte Carlo method?

Im trying to calculate monthly ZCB bond prices with a fixed maturity T, over a period of months via Monte Carlo methods. Here is my attempt: For the first month, the price is $P_{t_0}(0,T) = ...

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