# All Questions

249 views

### Volatility Estimation

Let say I ran two strategies and got its weights at each rebalance and equity curves. I would like to combine these systems to get the performance if I were to trade them concurrently from a portfolio ...
158 views

### Required Rate of Return vs Expected Return

I faced a problem that gives the following information: market risk premium, and risk free rate is given You currently have a portfolio of amount of x, beta b1. Now there is a new investment ...
484 views

### Is the price of European put option monotone in volatility if we replace BM in Black-Scholes with a general Levy process?

Under the Black-Scholes model, we have the European put option is $\mathbb{E} [e^{-rt}(K-S_t)]$, where we take $\log(S_t)=X_t$ and $dX_t= \sigma dW_t - \dfrac{1}{2}\sigma^2 dt + rdt$. Here the option ...
283 views

### Volatility Return Distribution/Garch Modeling

For simplicity sake, if stock returns are normally distrusted, would that imply that second moment, variance/volatility, is chi-squared distrusted? If so wouldn't that imply the statistics(employed to ...
206 views

### Initial margin requirement as percentage, not dollar value

Problem from Finan, FM/2 On 12-30-1998, you decided to bet on the January effect. ON that day, you bought 400 shares of Microsoft on margin at the price of 139 per share. The initial margin ...
218 views

### Change option B&S pricing

Consider a market composed by two stocks whose prices $X$ and $Y$ are given by B&S diffusion $$dX_t= \mu X_t dt+ \sigma X_tdW_t$$ $$dY_t= \mu Y_t dt+ \sigma Y_tdB_t$$ Supposing the market is ...
446 views

### Continuous returns for negative roll-adjusted futures data

I've generated roll adjusted notional futures data by adding a roll adjustment to the settlement price then multiplying by contract multiplier through time. For example, for crude oil CL, on 15 March ...
69 views

### Creditworthiness indicator for copula one-factor model

In this paper in equation 15 on page 261 dealing with one factor copula model, one is using creditworthiness indicator as one of a variables. It is defined as Y_c = \sqrt{\rho_c} Z ...
156 views

### Futures Contract Fair Values Accuracy

I have recently been tasked to work on fair value derivation for futures on equity indices (non-US). I know that the FVD function in Bloomberg can have a huge discrepancy from markets: where cheap is ...
206 views

### Block Bootstrapping Relative Returns

I want to run a block bootstrap on the relative returns, but I'm not sure if subtracting the mean is important. A bootstrap sequence is a synthetic sequence generated using the original sequence. If ...
144 views

### Floor and Cap problem

So I have a problem from Marcel Finan's "A Basic Course in the Theory of Interest and Derivative Markets." We are going over floors and caps, covered puts and covered calls. Consider the following ...
756 views

### Usage of Bollinger bands

I looked through several sources on Bollinger bands and I do not see clear recipes of their usage. Wikipedia says "The use of Bollinger Bands varies widely among traders. " QSE discussion seems also ...
112 views

### Quantitative risk management strategy for a large participant in an illiquid market

Are there any practical quantitative risk management strategies for a large participant in an illiquid market with a few dominant players? By a large partcipant I mean someone who has significant ...
277 views

### Risk prediction based on financial statements

I have a profit loss statement and balance sheet with the following fields: Example P&L Turnover420,363 - Cost of sales £118,730 £140,169 - Gross Profit ...
70 views

### FRA-Strategy: Make 3-month and 1-year Excess returns comparable

I am trying to analyze an investment strategy that tries to exploit the empirical difference between forward interest rates and realized spot rates. I am using FRAs to capture the difference. I am ...
285 views

Explanation for Put Option: $\frac{\partial V}{\partial t}+ \mathcal{L}_{BS} (V) = 0$, where $\mathcal{L}_{BS} (V) = \frac{1}{2} \sigma^2 S^2 \frac{\partial^2 V}{\partial S^2} + (r-q) S ... 3answers 540 views ### Data sources for financials of global equities I looked through the master list of data sources but could not find any data sources for financial data of global equities. An example would be the balance sheet of, say, ... 1answer 403 views ### Aprox intraday implied volatility using intraday option prices and EOD greeks I have two options datasets: EOD IV and Greeks Tick option and underlying prices I'm looking to calculate IV for each tick. Is there a way to approximate the ticks' IV using last EOD Greeks and ... 0answers 165 views ### Any one know how to implement the Heston and Rouwenhorst country-sector effects regression in R? Heston and Rouwenhorst (1994) devised an empirical estimation strategy to decompose stock returns into three components: a pure industry effect, a pure country effect, and a world-factor return. ... 0answers 33 views ### How to set up Heston and Rouwenhorst regression? [duplicate] Heston and Rouwenhorst (1994) devised an empirical estimation strategy to decompose stock returns into three components: a pure industry effect, a pure country effect, and a world-factor return. ... 0answers 74 views ### Standard Assumption Terminology Regulators are starting to analyse (or at least they are talking about it) model assumptions. We all know that too often our assumptions are just in the model documentation. Furthermore, we have no ... 2answers 278 views ### which product supports Basel III LCR (liquidity coverage ratio) reporting? After Jan 2013 change, now the main reporting changes requested from Basel III is LCR, Liquidity Coverage Ratio. Moody's has a product named RiskAuthority (previously Fermat CAD) that is going to ... 1answer 350 views ### Portfolio software that shows 'total return' for each investment I'm a high school technology teacher and sponsor for the Charity Student Investment Project. Currently our students track our investment portfolio via a google spreadsheet ... 2answers 553 views ### Dynamic hedging strategy example I am faced with the following problem. Let the standard Brownian motion$W_t$be the price process of a traded asset in an economy with zero interest rate. Define $$A_T=\frac{1}{T}\int_0^T W_t^2 dt$$ ... 1answer 515 views ### Monte Carlo simulating Cox-Ingersoll-Ross process The CIR process is given by the SDE $$\mathrm dr_t = \theta(\mu-r_t)\mathrm dt + \sigma\sqrt{r_t}\mathrm dW_t$$ where$W_t$is a Brownian motion. I am interested in finite-difference schemes of ... 1answer 281 views ### Blackbox Optimization + Bootstrapping = Parameter Selection? Most automated trading systems have a number of embedded parameters such as the lookback periods, entry and exit thresholds, etc. This is like the moving average crossover system or any of the systems ... 1answer 486 views ### Mathematical theories of (sub)-optimal trading strategies under “idealized” assumption - price is random process known to trader The question is NOT about real trading, but about simplified mathematical models for trading. One of the main problems in trading is that asset prices are not correctly described by the some random ... 4answers 3k views ### Central Index Key (CIK) of all traded stocks Is there a way by which I can get a list of CIK of all registered stocks at the SEC? 1answer 619 views ### What is the difference between a recovery swap and a CDS? As I understand it, recovery swaps and CDS are both used to privide hedging against the default risk of a loan. What is the difference between them? 1answer 252 views ### What is lagged interest rate? I am trying to reproduce a plot in "Statistics and Data engineering for Financial Engineering" by D. Ruppert. The author uses the risk free returns data available in the Ecdat package in R. ... 0answers 503 views ### Risk Budgets with Target Portfolio Volatility I'm working through the implementation of a risk budgeting approach as described in the recent Roncalli paper. The idea is that the portfolio manager sets a contribution of total portfolio volatility ... 2answers 3k views ### What does the prefix PX stand for on a Bloomberg Terminal? Simple question for the group: Regarding PX_LAST, PX_VOLUME etc... What does the "PX" prefix stand for? 1answer 138 views ### Relating Quantitative Easing to the rally in the SPX The Fed's balance sheet has been expanding over the last few month due to QE3. When the Fed goes out to buy treasuries or MBS, it's taking those securities out of the market and exchanging them with ... 2answers 269 views ### Matlab; How to specify Coupon frequency for Interest Rate Swap I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using ... 2answers 585 views ### Statistical models for exchange rates? What stochastics processes (if any) are used to model currencies exchange rates and how good are such models ? References on subj. are also highly welcome. 3answers 1k views ### Papers about risk managment in algorithmic trading systems? I am currently doing my research for my master thesis, which will clearly focus on the question of risk managment in algorithmic trading systems. I have done research about this topic and found some ... 1answer 436 views ### LIBOR Rates available in CSV, XML etc Is there a website that offers current LIBOR rates for all tenors for free in machine readable formats? 1answer 140 views ### Different Exercise Style Options on Same Underlying Some equities on European markets have options traded in two different exercise styles: American and European. Examples: ABB and ABB (european) on Eurex Banco Santander on MEFF Consider ... 1answer 215 views ### Which prices to use to compute realized volatility? For computation of realized volatility, especially range based volatility, deal prices are commonly used. If Level I data available should the deals data still be used or another measures of spot ... 4answers 1k views ### IB TWS & API, without IB account? I'll be starting a MFE grad program in Fall, and some of the classes have a lab that use the IB TWS & API. I'd like to play around with it for fun this summer. Unfortunately, I don't have an IB ... 1answer 55 views ### How is the dividend payment calculated when an asset is disposed on the ex date? Example: ... 1answer 136 views ### Are there any good benchmarks for performance of vanilla option pricing code? I've seen parsec (http://parsec.cs.princeton.edu/index.htm), which has a PDE pricing component, but the distribution is enormous and I haven't bothered to try to download it for review. I'm ... 1answer 445 views ### How to adjust local currency returns to US$/EUR return?

Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ...
793 views

### So many volatility models. Any comparisons of them?

Are there any papers that make an explicit contrast/comparison of the following (or other) vol models in terms of the suitability for addressing some empirical problem? Wavelet multiresolution ...
60 views

### Discount of Asian vs European vols

I understand the discount for Asian vs. European vol depends on time to expiry and length of averaging period. This makes sense intuitively; a short averaging period far away blurs into a single ...
530 views

### VaR for portfolio of funds

Let's assume we need to calculate a 1-day VaR for a portfolio of funds. Funds are traded, they can be bought and sold every day. We know exactly what the assets in each fund are. What is the right way ...
518 views

### Replicating strategy in the Black-Scholes model

I have a two-asset Black-Scholes model for a financial market: $dB_t=B_t r dt$ $dS_t=S_t(\mu dt+\sigma dW_t)$ I introduce a European claim $\xi=max(K,S_T)$ with maturity $T$, for some fixed $K$. I ...
93 views

### Optimal mortgage rate strategy

When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert. This makes it a secretary problem - in the traditional ...
In Basel II, EL is useful. It's calculated as $$EL = PD \cdot EAD \cdot LGD$$ in advance IRB (internal rate-based approach), Correlation R = 0.12 \frac{1 – e^{-50 \cdot PD}}{1 – e^{-50}} + 0.24 ...