9
votes
1answer
137 views

Estimate Beta of CAPM from Implied Volatility?

In the CAPM theory Beta of asset $i$ are estimated in this way: $ \beta_i = \frac{\sigma_{im}}{\sigma^2_m} $ where $\sigma_{im} = \rho_{im} \sigma_i \sigma_m$ But all these data are historical data. ...
0
votes
0answers
48 views

Impulse response function interpretation

I would need a quick help with Impulse response function interpretation which I have done after Vector autoregression model in stata. I need to understand how to interpret IRF graph or table values ...
0
votes
1answer
73 views

Do FRN's *always* trade on par on reset days, regardless if the issuer's credit quality has changed?

I keep reading that floating rate notes trade on par on coupon reset days. Is this always true, regardless of changes in the issuer's credit quality since the FRN was issued? It seems probably ...
1
vote
0answers
46 views

simple game - fair value

Suppose a person A has the following game: there are 2 red balls, 2 green balls and 1 white ball in a bag you take 1 ball (don't put it again in the bag) and then a second ball if you take the white ...
1
vote
1answer
82 views

What is the yield when a floating-rate note is issued above/below par?

I am new in this area so all help is much appreciated! Let's say a 3-year floating rate note pays a coupon of LIBOR+100 bps, and is issued at a premium with price = 100.5. I understand that this ...
0
votes
1answer
72 views

pricing with implied volatility surface

I am a newbee in Quantive finance. supposing I calibrate a smoothing implied volatility surface with cubic spline now. A minute later I want to price K=100,t=1 option, can I just find the point on ...
0
votes
2answers
55 views

Portfolio return for assets held for different lengths of time

How does one calculate the return on a portfolio if the assets in that portfolio were held for varying periods of time? For Example: $t_0$ Buy AAPL at 100 $t_5$ Buy MSFT at 20 $t_1$$_0$ Sell MSFT at ...
3
votes
1answer
136 views

How to apply the Feynman-Kac formula?

I've been learning about Feynman-Kac recently and I understand the underlying ideas. I am stuck however in actually computing explicit solutions for specific problems. For example, suppose I have the ...
0
votes
2answers
76 views

High values of skewness and kurtosis of realized protfolio returns

I am investigating some asset allocation strategies and I am wondering about the results I obtain. I am working on monthly and weekly data of the same stock indices (SP500, FTSE 100 etc). And when I ...
2
votes
2answers
83 views

Implications of Black Scholes Plot

I'm pretty new to finances, but I'm heavily into scientific computation. For my scientific computations class, I need to have at least a basic understanding of finances for the presentation I'm going ...
1
vote
0answers
44 views

Delta hedging Question [closed]

What is the delta of a short position in 1,000 European call options on silver futures? The options mature in eight months, and the futures contract underlying the option matures in nine months. The ...
0
votes
2answers
34 views

Why debit and credit impact differently on different type of accounts?

Here is a table that I found in one of the accounting book: ...
0
votes
2answers
67 views

Business cycles and missing data

For many probability of defaults models in credit risk it is needed to use data observed from a "full" business cycles. Usually a business cycle is defined as a recurring (not necessarily periodic) ...
6
votes
1answer
160 views

Extrapolating SVI

In his paper Gatheral presents the following parametrization of the implied total variance $w(k,T) = \sigma_{BS}(k,T)^2T$ $$ w(k) = a + b\{\rho (k-m) + \sqrt{(k-m)^2 + \sigma^2} \}.$$ Assuming that ...
-1
votes
1answer
27 views

How does Fed Qe affect the housing sales in the US? Why does it happen to be that way?

From my research, Fed's Qe should encourage house sales, however the graph shows houses price in the state seem to gradually go down after 2009. Isn't that contradicting itself? Ain't the increase in ...
6
votes
0answers
166 views

Estimating Parameters - Vasicek

The Vasicek model for the short rate $r_t$ is given by the SDE $$ dr_t = \alpha(\beta - r_t)dt + \sigma dW_t, $$ where $W_t$ is a Brownian motion under the physical measure. I'd like to compute bond ...
-2
votes
1answer
49 views

How to understand this tickdata `askvolume` and `bidvolume` fields? [closed]

Here is 1 tick: Timestamp,Bid price,Ask price,Bid volume,Ask volume 20151127 00:05:00:592,1.06057,1.06061,1,1.5 Does ask volume 1.5 mean 1.5 million were ...
1
vote
1answer
80 views

Link between two Itô's Lemma written in different ways

I have been told that these two expressions of Itô's Lemma are the same, but written in different ways : $$ f(t,X_t) = f(0, X_0) + \int_{0}^{t} \frac{\partial f}{\partial s} ds + \int_{0}^{t} \frac{\...
0
votes
2answers
74 views

Where can I find the best and worst performing US stocks on a given date? [duplicate]

I'm interested in researching the effects of a stock ranking at extremes on a certain date, and was wondering if anyone can help me find a tool/site which allows to easily retrieve the best/worst ...
1
vote
1answer
31 views

no arbitrage condition for paylater option

a paylater option has the folowing payoff: $(S_{T}-K)_{+}-P1_{S_{T}>K}$. To determine the fee P that the option holder must pay, we must write the non arbitrage condition. Why is it this: $E_{Q}[(...
0
votes
1answer
46 views

volatility skew for lognormal model is flat?

Does anyone know why the volatility skew for lognormal model, such as BK, should be a flat line, meaning that implied black volatility for options will be same for those with different strike prices? ...
4
votes
2answers
156 views

Black-Scholes PDE: what is the form of the boundary conditions

I'm working on the Black-Scholes equation, but I'm pretty new to financial modeling. Right now, I am trying to understand the Black-Scholes PDE. I understand that the Black-Scholes equation is given ...
2
votes
1answer
65 views

Why financial instistution for instance banks lowered down their interest rate during QE?

When QE is carried out, the Federal Reserve prints money and buy government bonds in an effort to pour extra money into the economy. This causes financial institutions for instance banks to lowered ...
0
votes
0answers
24 views

Bond's bid-ask spread with no arbitrage assumption

Suppose I have a bond with unknown bid-ask spread, and a portfolio, containing it and also other bonds, all with known bid-ask spreads. How can the unknown spread be inferred? I assume there should ...
3
votes
3answers
157 views

Why Central Bank carry out Qe when they can directly force banks to lower down the interest rate?

To boost the economy, the central bank can do it either by lowering down the interest rate nor carry out QE. But QE objective is to lowered the interest rate also so banks can give out more loan. This ...
1
vote
1answer
61 views

How to estimate the price of a European call when the underlying is not tradable?

Assume you have a vanilla call on an underlying $S$ with strike price $K$ and expiry at time $T$. Let's say that $S$ follows a GBM with volatility $\sigma$. In general, one would use the Black-...
1
vote
0answers
54 views

Fourier transform covariance estimator

I am estimating realized variance and covariance by the estimator described in this paper, and relying on Fourier Transform. Now, as my data is one day of data in ultra high frequency, so that the ...
-3
votes
1answer
35 views

Liquidity effect in case MS decrease

What is the result if the liquidity effect is grater than other effects in case of decreased money supply? I got this question on the exam, In case of an increase in the money supply by the central ...
1
vote
1answer
101 views

FIX latency and clock syncronization

We are trying to see latency from our server to different LPs . For that we are checking sendingtime value (from them) and current clock in our server. What we saw is difference of +-20ms between ...
1
vote
1answer
71 views

MSRV estimation in R

What are the R packages that let you estimate Multi Scale Realized Volatility (MSRV)? So far I've only found highfrequency (which comes with Realized Kernel as well), but from what I understand it ...
1
vote
1answer
113 views

Anomaly or feature from Quantmod in R regarding getFX - currency data

I am using R to analyse stock data, using the quantmod package to get all sorts of data, but here specifically FX data using the function ...
2
votes
2answers
134 views

Is portfolio beta additive under all return distributions?

If beta is additive i.e. ${\beta}_P =\sum w_i \beta_i$, shouldn't the two methods below yield the same number? Method 1: Estimate beta for each asset in the portfolio. Then ${\beta}_P =\sum w_i \...
1
vote
1answer
43 views

Purpose of ISOs

Why was ISO (Intermarket Sweep Order) introduced? I read that it was introduced to help fill large orders. Some explanation is here: http://tabbforum.com/opinions/why-hfts-have-an-advantage-part-3-...
2
votes
3answers
128 views

How are referenced asset gains routed in a credit derivative?

Lets assume for the sake of the example that we are talking about a Total Return Swap. The flow diagram is something like this. Lets assume the Payer in this instance is a Hedge Fund, and the ...
1
vote
1answer
30 views

A citizen's life as an investment project (from the State's PoV)

An average citizen's life can be seen as an investment project: the State starts investing into prenatal care, the child's education etc., a young man starts making money and paying taxes (breaks even ...
2
votes
1answer
59 views

Weights in Portfolio Attribution when considering Currency

I'm performing a simple Portfolio attribution with the Brinson 1985 model where returns are decomposed into both an allocation component and a selection. Using the formula, I first did the ...
0
votes
2answers
161 views

Pairs Trading Signals and Positioning

I am currently working on a research project for a pairs trading strategy and would like to know the correct positions to take when a signal has been triggered. Say we are using this equation to ...
2
votes
0answers
31 views

Expectation of expression with two currencies under forward measure

I'm trying to calculate the expected value, at time $0$, of a cashflow paid at time $T$, resetting at time $t$. The coupon is of the form: $V_0=\mathbb{E}^{T_2}\left[\frac{A_t^y(T_1,T_2)}{B_t^x(T_1,...
0
votes
0answers
11 views

CDS Premium table Interploation for the Arrear case

If CDS spreads are given for say year end 1,2,3,4,5 .That means these premium payments are made in arrears. In that case we need to apply interpolation tools. But for which particular points do we ...
0
votes
0answers
33 views

Constructing Dedicated Risk Premia Strategies

I am trying to figure out the "best" way to construct investment strategies which are focused on capturing specific risk premia individually. From my understanding the traditional approach to capture ...
1
vote
1answer
45 views

Result linked to Black-Scholes evaluation

Why does this $$Se^{-D(T-t)}e^{-d_1^2/2} - Ee^{-r(T-t)}e^{-d_2^2/2}$$ equal to $0$? (Where $E$ is a strike)
3
votes
0answers
102 views

How many PHD level quant are there in US market? [closed]

How many PHD (economics+finance) level quants are work here in US market?
2
votes
1answer
53 views

What does martingale look like?

I'm doing a simulation of a CRR model and I'm trying to find parameters in order for the successive $S_t$s (stock prices) to be martingale. I'm assuming that if I'd create a function (and picked the ...
3
votes
2answers
50 views

Proper way to calculate the realized indiviual stock sharpe ratio

From the textbook, sharpe ratio is (return-riskfree rate)/risk However I wonder if I can use (return-index return)/risk, where the index acts as the benchmark, to calculate the sharpe ratio? I am ...
2
votes
3answers
71 views

How would I exploit arbitrage if risk-neutral pricing doesn't hold? (Option Pricing)

We are just learning about binomial option pricing, and how the up-factor and the down-factor must match the risk-neutral price. p * u + (1 - p) * d = continuous risk free rate compounded CRR ...
3
votes
3answers
261 views

Computing Pooled IRR from the IRRs of parts

Suppose I have two cash flows: CF1: -10001001001100 CF2: -20020301 I can compute now: IRR(CF1) = 10% IRR(CF2) =-55% IRR(CF1+CF2) = 4.46% Is there a way to compute (or at least get a fair ...
7
votes
2answers
229 views

How to price an option allowing to change a call into a put?

A recruiter asked me this question: Suppose you have the following contract: a call option with maturity T = 2 years the possibility to change this call into a put at t = 1 year What is the price ...
0
votes
0answers
22 views

Price of call (calibration)

I need to understand how we got this : $\forall i \in I $ $C^{*}_{0}(T_i,K_i)=e^{-rT_i}E[(S_{T_{i}}-K_i)^+|S_0]=e^{-rT_i+X_{T_{i}}}E[(S_{T_{i}}-K_i)^+]$ at How we pass from conditional expecation to ...
0
votes
2answers
103 views

Is there a python code for estimating the parameters of geometric brownian motion?

I was trying to find the parameters of GBM but could not find a python code for the same.
0
votes
1answer
28 views

Error using ghyp-distribution function

I want to fit multivariate GH distribution on my data, and then generate simulations for that distribution. Using the instructions given in ghyp package, I wrote following lines of code in R. ...

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