# All Questions

211 views

### Portfolio Optimization using S&P Universes

Assuming a set portfolio optimization problem, if all optimization inputs are kept constant, what would you expect, in terms of results, if you run the same optimization using the S&P500 as ...
660 views

### Calculating the efficient frontier from expected returns and SD

I'm trying to calculate the efficient frontier (and the optimal portfolio at the Sharpe ratio) given two vectors for a portfolio: (1) expected returns and (2) historical standard deviations. I would ...
82 views

### Arbitrage-free market for continuous logreturn distribution?

Is it true, that a one-period market say $(0,t)$ is arbitrage-free if the logreturn for $S_t$ is continuously distributed on $\mathbb{R}$? I.e., for continuous distributions on $\mathbb{R}$, there ...
90 views

### Duration calculation for perpetuity with continuous compounding

Let's say we have a continuously compounded perpetuity. Does macaulay duration = modified duration? I've read from wikipedia for Bond Duration that macaulay duration = modified duration for ...
102 views

### How literature come up with risk-neutrality problem, considering that market is not really risk-neutral?

I am searching on real-option pricing deficiencies to encounter risk-neutrality. As we know risk-neutrality assumption, is not hold in real situations. The problem is that I could not classified ...
298 views

### How is stock data objectively different to this random walk?

I have a random walk that is generated as so using python, numpy, and matplotlib ...
96 views

### Incompatibility of Lognormal Forward Model (LMM\BGM) and Lognormal Swap Model

In his paper On the distributional distance between the Libor and the Swap market models (and also in his book about IR modeling) D.Brigo says: 10, 11, 12 are defined in the end of message. Do I ...
1k views

### Build a customizable trading engine in python [closed]

I am planning building fully customizable backtesting trading engine in python from scratch as a open source project, the main features i am considering is, It should be fully customizable from ...
201 views

### Uniqueness of equivalent martingale measure in Black Scholes-Model

Let's consider standard Black-Scholes model with price process $S_t$ satisfying SDE $$dS_t = S_t(bdt + \sigma dB_t)$$, where $B_t$ is standard Brownian Motion for probability $\mathbb{P}$. I ...
162 views

### Understanding how to calculate tracking error

I have come across two ways of calculating Tracking Error (TE) but i'm not sure if they are essentially the same. The first way is to calculate the standard deviation of the difference between a ...
129 views

### Historical data resources for Indian market

What is the best source for historical EOD data for Indian stock market? The data from Yahoo finance for some companies is not up-to-date and Google finance doesn't provide adjusted close prices. What ...
78 views

### Is there a broad currency index just like there is an equity market index?

I would like to assess the performance of currency traders so I was wondering if there is a broad currency index that can be used as a benchmark to assess the performance of these traders. The index ...
379 views

4k views

### Relationship between Beta and Standard Deviation

I was doing some financial analysis on two firms in the coffee industry. After calculating Beta and Standard Deviation for both firms, I seem to have stumbled on some weird phenomenon. It appears ...
38 views

### Variance of “hedged” term structure portfolio increasing?

I'm attempting to use PCA to hedge a small fixed income portfolio. I start with one particular bond and chose the nearest other bond to hedge the 1st principle component. This decreases the portfolio ...
53 views

### Data on banks’ leverage

Does someone know free resources to estimate the leverage of the banking and financial sector at an aggregate level? In particular I would be interested in something like Federal Reserve’s Flow of ...
162 views

### Hedging bond with CDS of different maturity

Say I buy a 10-year bond with a notional of 100k. To hedge my credit risk entirely I could buy a 10-year CDS, also on a notional of 100k. Now, if there are only 5-year CDS trading and no 10-year CDS, ...
173 views

### Expected Shortfall and Spectral Risk Measure

Not sure I am understanding spectral risk measures correctly. Why is there an equal weighting scheme placed on the tail losses in expected shortfall. Will that no bias the expected value of the loss ...
29 views

### garchOxFit in R-oxo file does not match

Could someone please help me with trying to get the Ox interface to work in R. I get the following errors as output: This version may be used for academic research and teaching only Link error: ...
559 views

### What are the main flaws behind Ross Recovery Theorem?

Stephen Ross’ new paper claims that it is possible to separate risk aversions and historical probabilities if the Stochastic Discount Factor is transition independent using Perron-Frobenius Theorem. ...
82 views

### Data on margin volumes?

I came across a Financial Times article today that said "Peaks in margin trading have been a precursor to bear runs in the past, notably in March 2000 and July 2007." I'm curious if anyone here would ...
129 views

### Negative Eonia rates

I'm curious how the current negative Eonia (Euro OverNight Index Average) rates would impact derivatives pricing. Does it mean that if I post cash collateral to you, I also need to pay you interest? ...
51 views

### how to use known premium of options to determine premium of options with another strike?

Assuming constant volatility across all strikes, how to use known premium of options to determine premium of options with another strike? e.g. suppose we know premium of \$40 call and put, \$50 call ...
130 views

### Do people actually use VaR in professional settings?

VaR seems like such an obviously flawed metric, I am surprised that it seems to be used so much in the private sector. First, the way it is named and the way it is presented often imply it is the ...
253 views

### If I am very fast (less than 10 microseconds latency) what would be the first strategy to execute? [closed]

Let's assume I found the holy grail of low-latency trading (which I didn't). For educational purposes, what would be the first strategy I would direct my trading code?
90 views

### Briefly stated, why does the function N(x) appear in the European call option pricing model?

I'm aware of the the mathematical formula for the price of a European call option on a stock however I'd like to think about it in an intuitive way.
981 views

### Where can I find literature (books, articles, etc.) about basic HFT / arbitrage strategies? [closed]

I am not looking for your winning strategies. Just the basic stuff from where to start. Can anyone share their opinions about what should I read to hit the ground running?
101 views

### run time error 424 in IB TWS Excel DDE API; failed to add combo orders

I'm using an Excel DDE to connect to Interactive Brokers TWS via their API 9.72 sample, excel 2013. When I tried to create a combo order, the rum error code 424 said "object required". It seems that ...
717 views

65 views

### Transform MPT optimization problem

I am trying to teach myself about MPT and optimization. I understand that MPT solutions can be found using three equivalent optimization problems: Minimizing variance for given return limit ...
131 views

### Importance sampling for barrier option like pricing by Monte carlo

I would like to know some references regarding importance sampling algorithms for variance reduction of Monte Carlo barrier options pricing. Please could someone help me leaving some references? If ...
66 views

### ICE oil Future Markers

i have seen Brent oil future singapore marker many times. however, i wonder what is the reason for introducing different markers in the future market. FYI - LINK
90 views

### Where can I find a list of market-moving news announcements for different asset classes?

Different asset classes have different important news announcements that move the markets intraday. For instance, oil volatility increases after the EIA Petroleum Status Report, but that announcement ...