3
votes
3answers
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 ...
2
votes
0answers
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 ...
7
votes
2answers
285 views

Why does Black-Scholes equation hold on continuation region of American Option?

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 ...
1
vote
3answers
538 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, ...
2
votes
1answer
399 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 ...
2
votes
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. ...
1
vote
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. ...
3
votes
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 ...
4
votes
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 ...
1
vote
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 ...
2
votes
2answers
551 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 $$A_T=\frac{1}{T}\int_0^T W_t^2 dt$$ ...
3
votes
1answer
514 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 ...
1
vote
1answer
280 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 ...
5
votes
1answer
485 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 ...
5
votes
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?
2
votes
1answer
614 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?
3
votes
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. ...
5
votes
0answers
501 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 ...
3
votes
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?
4
votes
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 ...
0
votes
2answers
268 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 ...
3
votes
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.
5
votes
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 ...
1
vote
1answer
435 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?
3
votes
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 ...
2
votes
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 ...
3
votes
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 ...
0
votes
1answer
55 views
3
votes
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 ...
0
votes
1answer
440 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 ...
11
votes
1answer
792 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 ...
3
votes
0answers
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 ...
9
votes
2answers
529 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 ...
3
votes
1answer
516 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 ...
3
votes
0answers
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 ...
6
votes
2answers
1k views

Is Unexpected Loss ever used in Basel II?

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 ...
3
votes
1answer
2k views

When the Inverse Correlation between the SPX and VIX breaks down

As we all know the S&P and its implied vol, the VIX, generally move in opposite direction. To a large extent, the correlations makes sense. IV is one of the main drivers of the price of options, ...
-1
votes
2answers
180 views

What's the first time-integral of price called?

In general I'm wondering about the names of time-derivatives of price. E.g. in physics the first few time-derivatives of position are: f(x) = displacement f'(x) = velocity f''(x) = acceleration ...
0
votes
2answers
159 views

Quality of GAINDATA timestamps

Does anyone have a view on the quality of the timestamping of GAINCAPITAL's free historical data. There is non-FX data there and I wonder if the timestamps are in sync?
3
votes
1answer
180 views

Desired portfolio volume

I am working on a toy model, in part of which an investor has to decide (based on some utility theory) how much money to invest in a given portfolio. For simplicity, assume that the portfolio is ...
3
votes
1answer
526 views

R Outputs from Johansen test. Linear combination still not stationary?

I am trying to see if house price is cointegrated with interest rate, per capita income and rental vacancy rate and got the following output from ca.jo in R: ...
0
votes
0answers
121 views

Exact value of mean reversion rate knowing terminal value of the process

Let you have the following mean reverting process: $\text{d}x_{t}=a(\theta-x_{t})\text{d}t$, where the diffusion term is absent, that is this process is not stochastic. Let you know the value of ...
3
votes
0answers
136 views

Is it random walk?

I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3): $$ cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0 $$ for all $f(\cdot)$ ...
1
vote
1answer
157 views

Add transaction costs to prediction

An algorithm predicts price movement by some certainty and it invests proportional to the confidence level. Predictions range from -1 to +1, -1 meaning sell for a value of ...
1
vote
1answer
199 views

What are the differences between CFD and SSF?

What are the intricate differences between SSF and CFD? The similarities are that both take into account interest and settled daily thus looks more or less the same pima facie.
10
votes
4answers
315 views

How to prove that markets are incomplete under the Stochastic Volatility model?

Has anyone ever formally proved that Markets are incomplete under the stochastic volatility model? I know that if there are more random sources than traded assets, then the market is incomplete but ...
1
vote
0answers
151 views

Market Exposure and Hedging

Normally the Market exposure associated with your stock/portfolio is your delta for that stock/ portfolio. Basic idea of hedging involved here is buying/selling respective futures depending upon ...
3
votes
0answers
89 views

Overnight Index Swaps

Just a very quick general question regarding the OIS market. Is it common place on termsheets to state a PV Notional and additionally a FV notional, if so what is the purpose of this and does market ...
5
votes
1answer
527 views

Profiting from price discrepancies between stock exchanges

Here is an interesting video by Nanex: http://www.youtube.com/watch?&v=rB5jJuMP84E Perhaps some of you have already seen something similar. It is an animation of the order routing. It shows 1/2 ...
0
votes
1answer
180 views

Grokking Stochastic Oscillator for Stocks

In software, I'm trying to implement the Stochastic Oscillator (see here), and I'd like to figure out a few things. Let's say I use standard inputs 14, 3 and 3. If my 14 is for intraday ticks, what ...

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