# All Questions

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### Pricing of a simple contingent claim

Earlier I had the question (5.11 Tomas Bjork): $$\frac{\partial F}{\partial t}+\frac{1}{2}x^2\frac{\partial^2 F}{\partial t^2}+x = 0$$ $$F(T,x) = ln(x^2)$$ And solve it using Feynman-Kac. The ...
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### Why is the LIBOR-market model free of arbitrage?

Recently I have been reading a lot on the market models. One thing that keeps escaping me - why is the Libor-market model (LMM) assumed to e free of aritrage in continuous time ? To me this means ...
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### Differenced Brownian Motion covariance

I am having some difficult showing what the following equals, where $x$ and $y$, $x>y$, distinct times: $\mathbb{E}[\Delta W_x \Delta W_y]$ where each $\Delta W_t = W_t - W_{t-1}$. I have ...
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### list of ADR's by volume or market cap

I'm looking for a list of ADR's (for a simulation) that I can screen by either market cap or volume? If anyone knows of a free way to get such a list it would be much appreciated.
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### Beta and Frequency of Data

Why are the betas of individual securities essentially the same whether we use daily or weekly data when calculating?
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I am having trouble taking the following limit of CVaR/VaR for a normal distribution as alpha approaches 1: $\lim_{\alpha \to 1} \frac{\mu + \sigma \frac{\phi^{-1}(\alpha)}{1-\alpha}}{\mu + \sigma ... 2answers 147 views ### Accessible HTF? (Slippage reduction) I designed an strategy that operates with 30-second bars on e-mini SP500. It works fine in the back-testing and the out-sample, also performs well in every walk-forward test I have tried. But, when ... 1answer 98 views ### Convolution copula? Using copula formulation for the following probability: $$\mathbb{P}(X\leq x,y_{1}\leq Y\leq y_{2})=\mathbb{P}(X\leq x,Y\leq y_{2})-\mathbb{P}(X\leq x,Y\leq y_{1})$$ ... 3answers 2k views ### What open source trading platform are available I would like to compile a list of open source trading platforms. Something that would give an overview and comparison of different architectures and approaches. 1answer 72 views ### Delta of a standardized at-the-money 30-day put option The plot below depicts the delta of a standardized at-the-money 30-day put option on the S&P500 tracker SPY over a 14-year period. This is data from OptionMetrics and standardized prices are ... 1answer 132 views ### HJM simulation problem I'm trying to simulate a 3-factor HJM model. I got the algorithms from Glasserman book. In my case, I have$3$maturity:$ 0.25y, 0.5y, 0.75y$. So my time grid is:$t_0=0,t_1=0.25,t_2=0.5,t_3=0.75$. ... 2answers 249 views ### quantiative risk measure how they are implemented in R and their use So far I have just theoretical knowledge of risk measure and never used them in application. Therefore I have some basic question how risk measures are used in reality and how they are implemented in ... 1answer 90 views ### Discounting based on instrument type Suppose we have an asset$A$, and we have modelled the cashflows for this asset to be$\{C_{1},\ldots C_{k}\}$which occur at time$\{T_{1},\ldots T_{k}\}$. Now the present value of the asset can be ... 1answer 140 views ### Debt vs. Equity? What determines whether an investment should be made using debt vs. equity? For example, startups are often financed with equity, while mortgages are always financed using debt. What characteristics ... 2answers 108 views ### Harnessing small correlations for reliable profit It is said that Edward O. Thorp was able to harness small correlations for reliable financial gain. I've seen some strategies based on strong correlations which did not seem particularly reliable. ... 1answer 802 views ### Are there Python algorithmic trading libraries supporting forex? I know about zipline and ultrafinance, but as far as I know, they don't support fx trading. Which libraries do? 0answers 191 views ### Bond (yield curve) dynamics in the Forward-LIBOR-market-model The standard Libor-Forward-Market-Models provides a way of modelling the evolution of forward rates in time. However the model does not seem to be well suited for the modelling of zero-bonds. But ... 2answers 177 views ### Avoiding negative spread in pairs trading I'm constructing money-neutral spread by this formula: Spread = log(P1) - log(P2), where P1 and P2 is prices of two instruments But sometimes spread can get into ... 0answers 603 views ### Calculate interest rate swap curve from Eurodollar futures price So I was reading Robert McDonald's "Derivatives Markets" and it says Eurodollar futures price can be used to obtain a strip of forward interest rates. We can then use this to obtain the implied ... 0answers 27 views ### modelling with Meixner process I failed to evaluate the integral of v(x)e^x over real numbers (i.e, from -infinite to +infinite) with respect to dx where v(x)=2d exp(2(pi+b)x/a)/abs(x)(1-exp(2pi.x/a)) for x<0 and v(x)=2d ... 3answers 201 views ### hedging with known volatility Suppose we have a stock$X$at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How ... 2answers 190 views ### Are power contracts traded on any stock market? Are power contracts traded on any stock markets ? What about OTC markets ? I ask about the derivatives where payoff is some exponential function of difference between strike and spot price. 0answers 28 views ### Developing an Android App. Need free volatility data [duplicate] I'm currently developing an android app that requires volatility data. Any idea where can I get it for free? I tried Yahoo Finance API and they don't seem to have volatility data. Thanks 0answers 74 views ### EMM in incomplete markets The simply put question is as follows: do we need to restrict ourselves to EMM exclusively when pricing European contingent claims (=option payoffs) even if markets are incomplete? In particular, a ... 1answer 35 views ### Integration in the context of modelling with the Meixner Process I failed to evaluate the integral of$\frac{e^{ax}}{x\sinh(bx)}$with respect to$x$from negative infinite to positive infinite, What techniques can I use to evaluate the integrals of such kind for ... 3answers 248 views ### How can the Wiener process be nowhere differentiable but still continuous? Taking a class in financial derivatives (book we use is Tomas Bjork´s Arbitrage theory in continuous time) but can´t understand the exact meaning of how the Wiener process is defined. In the book one ... 1answer 206 views ### Black-Scholes derivation assumption contradiction In many books and derivations of the Black-Scholes PDE one sees that $$\Pi=V-\Delta F \Rightarrow d\Pi=dV-\Delta dF$$ which implicitly assumes that$d\Delta=0$. Somewhere down the road one then ... 1answer 242 views ### How do you calibrate a poisson arrival rate process? Many papers in the microstructure literature assume an order arrival rate of the form$\lambda^a(\delta) = \lambda^b(\delta) = Ae^{-k\delta}$That is, an order that's placed$\delta$away from the ... 1answer 291 views ### Divergent or Convergent Strategies? Which is the way to go? Consider first the simple convergent strategy to invest some amount$X$in a game, if you win you simply take the winnings and keep playing a subsequent game. In the case of a loss, you believe in ... 2answers 109 views ### Simple question about expected value of brownian motion I would appreciate some help with the math in this paper : High Frequency Trading in a Limit Order Book Specifically, I would like to understand how the authors calculated the expected value of price ... 0answers 94 views ### Derivation of a ML estimator I have the following likelihood function: I'm given this information about the$\Omega$matrix ($\boldsymbol{1}$is a$T \times 1$vector of ones): I would like to be able to show that the ... 1answer 101 views ### Different range price data on one chart I'd like to evaluate 3-4 instruments on one price chart. For example: Stock A: 90,05 90,15 90,25 90,09 Stock B: 0,0045 0,0049 0,0039 0,0040 Stock C: 1998,1 1998,7 1998,8 1997 I try to use: ... 1answer 90 views ### Simple pricing example confusion This it taken from "Heard on the Street", Section B. Consider a market with$0$risk-free rate, no transactions costs etc. The IBM stock costs \$75 and does not pay dividends. Design a security ...
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Seeing how very few actually read the Quant Finance meta I intentionally post it here on the main site. To the more powerful admins: could you leave it here for a day or two and move it to meta ...
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I am reading a paper that very briefly talks about some volatility arbitrage strategies. It's so brief that I do not exactly understand how it works. It says one of the strategy is based on "short ...
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### Price volatility and yield volatility

This question is a bit confused, but please bear with me. Now and then I see people use the terminology "price volatility" and "yield volatility" in connection with bond options. I understand the ...
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### How to price this option without using BS framework

We have a stock at price 1 dollar which pays no dividend. Also we assume zero interest rate. When the price hits $H$ dollars for the first time where $H>1$, we can exercise the option and receive 1 ...
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### Bloomberg ticks is difference from Reuter ticks?

when I using Bloomberg excel plugins to retrieve the ticks and compare with Reuter RDF data, for some UK equity stocks in same days, the number of ticks and sum of total value is difference, why will ...
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### Having trouble finding PPI for commodity using NAICS code

Is there a way to find the Producer price index for a commodity during two different years by using the NAICS code of the commodity. For example, I know the NAICS code for cast iron steel bearings ...
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Given sales and profitability data for two time periods, how would I go about calculating the impact of price, cost, volume and mix margin % (bps)? I can do the analysis as a gross margin $bridge, ... 1answer 107 views ### How do i test the significance of Sharpe ratio of a strategy using bootstrap How do i test the significance of Sharpe ratio of a strategy whether it is any different from another strategy ?? How do i get a p-value out of it ? What should be the H0 in the hypothesis testing ? ... 1answer 92 views ### When do trades actually execute on an exchange? Obviously, when ownership of some security is transferred from party A to party B, both parties' balances must be updated and recorded in an atomic transaction. Call this "an execution". So in an ... 0answers 349 views ### Downloading Quotes in CSV format from Yahoo Finance - Beta symbol? By using http://finance.yahoo.com/d/quotes.csv?s=STOCKNAME&f=I am able to download a CSV file, does anyone know what the symbol for beta is? It should go after ... 3answers 357 views ### What quant-related functionalities is R lacking compared to commercial software like Mathematica and Matlab? R that originated as a purely statistical tool has meanwhile blossomed into a comprehensive workbench for different tasks. I am familiar with Mathematica and don't like how it forces a license on ... 0answers 65 views ### Explain$1Gamma vs %1 Gamma

What is \$1 Gamma and what is 1% Gamma? please describe the difference? I understand Gamma but cant make the diff between the two.
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### Efficient numerical approaches for pricing American Options with multiple sources of noise

I am looking for efficient numerical approaches for pricing American options when two or more sources of noise are involved (the simplest case coming to mind would be the Heston Model) Eventhough I ...
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### Why systematic divergence between ^VIX and VXX?

Why is there systematic negative divergence between the VIX index and the VXX ETF meant to track it? http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=vxx
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### How to compare different volatility measures?

I read the Euan Sinclair's book (Volatility trading) in which he suggests different volatility estimators (Close-to-close, Parkinson, Garman-Klass, ...). I am inquiring about what is the best stock ...