0
votes
1answer
77 views

Choosing broker to run with Zipline

Which brokers offer Python integration/API? Which brokers offer R integration? I'm starting on trading, and I want to learn about algorithm trading. So I would like to know what brokers offers these ...
0
votes
1answer
169 views

Empirical copula

I am trying to find the empirical copula linking two random variables $X$ and $Y$. I have some data available but it's limited with respect to the variable $Y$ and I am not convinced it's enough data ...
1
vote
1answer
22 views

Interest rate on loan for purchasing Sterling bond

I am struggling trying to find out where they get the $8$% interest rate for the loan you make to purchase the Sterling Bond in the following strategy: Problem: Suppose that $A(0)$ = $100$ and ...
2
votes
1answer
129 views

Calibrating an Ornstein Uhlenbeck process on residuals of regression

I am trying a basic statistical arbitrage strategy as follows: Perform PCA on a log return series of a basket of stocks Regress returns against top principal components identified Calculate the ...
10
votes
3answers
354 views

How to account for market movement when some exchanges are closed?

Daily data, such as open and close prices, is often available for much longer periods than high-frequency data. However, whenever backtesting any strategy that examines instruments traded in different ...
2
votes
2answers
131 views

Intraday Data - Stylized Facts?

Can someone give an overview or literature on Intraday Data Stylized Facts? In particular for equity market returns or exchange rates.
1
vote
2answers
2k views

How to normalize stock data

Please advise how can i normalize stock prices. Recently, I've been using such formulas: Log prices = Ln(Close(t)) Close(t)-Mean (Close(t)-Mean)/(StdDev) Ln(Close(t))-Mean Is there any other ...
3
votes
1answer
74 views

Time Lag for Market Inefficiency

I recalled reading a academic paper that studied how long a market exploitation took to get priced into the market. I am trying to find that article. I remember it stating that the market priced in ...
3
votes
2answers
413 views

Volatility of a rolling window strategy

What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
0
votes
2answers
32 views

Data provider for daily futures settlement prices

Is there a data provider that has historical daily settlement prices for download? I'm interested in a provider that spans multiple exchanges.
11
votes
6answers
9k views

How high of a Sharpe ratio is implausibly high for a low-frequency equity strategy?

I am looking to convince someone that an annualized Sharpe Ratio of 7 is 'extremely high' for a low frequency (daily rebalancing, say) long-short technical strategy on U.S. equities. I was hoping for ...
2
votes
2answers
111 views

Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t $ ...
2
votes
2answers
211 views

Pricing an american style option on a bond future

what is the good way to pricing american option on bond future? From bonk fixed income securities 3rd by Tuckman, I understand how to pricing European option on bond future, but I still have no clue ...
2
votes
3answers
71 views

Interpolating probabilities of default

I have a table of cumulative probabilities of default of industrial bonds, in time and credit rating. It is similar to S&P whitepaper here. Basically, it looks like this (sample numbers): ...
0
votes
1answer
92 views

Level II market data (equities)

I have been playing around with some equities historical market data and I understand that different exchanges have different definitions of what Level II (Limit Order Book) data means. What I'm ...
1
vote
1answer
57 views

Which quantitative tools are actually used for hedging energy price and volume risk?

I'm a finance professor and I am looking for someone with actual trading and risk management knowledge within the energy sector who can tell me about pricing and hedging energy (especially electricity ...
1
vote
2answers
46 views

Is it possible that a security with a positive variance can have a required return that is less than the risk free rate?

I'm not sure of the answer but I think it's possible. What I don't get is what characteristics this asset would need to have and why it would mean that an investor would accept a return less than the ...
1
vote
1answer
75 views

quadratic programming portfolio optimisation

I am using MATLAB to do an optimisation. The QP minimisation problem is set up in the standard form shown below. The optimisation is used to calculate the weights (x vector in the equation below) of a ...
7
votes
1answer
127 views

How to test that a distribution has infinite mean?

I observe a sample from a distribution that I expect to be the hitting time $$\tau = \inf\{t>0| X(t)>a\}$$ where $X(t)$ is a Lévy process with $X(0)=0$ and $a$ is some constant. $X$ is not a ...
6
votes
3answers
299 views

Replicating portfolio and risk-neutral pricing for interest rate options

For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
1
vote
1answer
71 views

HAR-RV, realized GARCH and HEAVY model for realized volatility

I don't have much experience with volatility modeling using intraday data but I'm in the process of collecting 5mins data. Currently I have ~6 months of data. Is it enough to use these models with ...
3
votes
4answers
1k views

How do banks actually make money on mortgages [closed]

This is a bit of a subjective question and relates primarily to the UK market There are a number of banks who are lending at BOE + 1.49% (ie: 1.99 %) whilst at the same time accepting deposits paying ...
-1
votes
0answers
45 views

How can I estimate expected maximum drawdown with historical data?

I am looking for a way to estimate maximum drawdowns for my portfolio (mostly options). I have a trackrecord in a spreadsheet with historical data, account size would be 20k and maximum risk 2%. I ...
4
votes
6answers
26k views

How to calculate unsystematic risk?

We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ...
1
vote
1answer
54 views

Efficient Frontier Derivation: why minimize half the portfolio variance instead of just the variance?

In Robert Merton's derivation of the efficient frontier of a portfolio, he minimizes $\frac{1}{2}\sigma^2 $ over the investment weights in each asset, where $\sigma^2$ represents portfolio variance. ...
3
votes
0answers
148 views

Credit Rating vs Bond Yield

I am looking for some references on quantifying the dependence between credit rating and bond yield. I have some data (found some Bloomberg indices which give average yield based on credit rating), ...
2
votes
1answer
76 views

Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?

I have discussion with my colleague on why a general assumption $$ud=1$$ in binomial tree option pricing model would be necessary? I take it a simplification of the problem, otherwise, there will be ...
5
votes
1answer
595 views

Back office processing for FX trades

Can someone provide (or point me to) a summary of back office processing nuances specific to FX trading? For example, I know that there are several FX-specific risks that must be managed. They include ...
1
vote
0answers
64 views

How to interpret ACF and PACF plots

I just want to check that I am interpreting the ACF and PACF plots correctly: The data corresponds to the errors generated between the actual data points and the estimates generated using an ...
6
votes
2answers
134 views

Looking for Research Paper on Creation of Currency Baskets

I came across a paper, not sure it originated from academia or a blog or such, that reported on applying principal components to build currency baskets from a set of individual currency pairs and to ...
2
votes
0answers
77 views

Law of a geometric brownian motion first hitting time (formula dont match Monte Carlo Simulation)

I posted this question before on MSE I need to use it in a small step in the middle of a simulation and I think I'm not getting correct results to this probabilities and so for my all ...
0
votes
1answer
105 views

What's the intuition behind DTS(duration times spread) in fixed income?

I am having some difficulty grasping the concept of using DTS to measure credit risk. In the equity world, one typical measure of risk is beta, which is quite well-defined as the exposure to a common ...
2
votes
3answers
165 views

Platform for Quantitative equity portfolio

What are the most popular platforms used for quantitative equity portfolio management/research? I've only used Barra so far for their factor models. Is there any specific feature or model you think ...
3
votes
1answer
136 views

Inflation-Linked Bonds & Asset Swap Spreads

I am trying to plot the asset swap spreads of government inflation-linked bonds (ILBs) versus the asset swap spread of government nominal (plain-vanilla) reference bonds. I used the article in the ...
0
votes
0answers
19 views

What's the best filter to implement in order to assess the persistency of a FX devaluation?

I'm trying to to analyze the impact of a FX devaluation in companies' exports and earnings?
2
votes
1answer
68 views

Text book or distilled guide to market making?

Are there any practical articles, blogs or books that describe common practices in market making and how to calculate and use common measures? The majority of the information I found are research ...
4
votes
3answers
98 views

What are the most effective market variables to measure liquidity/illiquidity in the market?

I'm trying to find/create a variable that measures liquidity in financial markets in order to assess, for instance whether credit conditions tightened? Does anyone know any relevant literature ...
3
votes
1answer
164 views

Analysis of Unbalanced Covered Calls

Hello I am doing an analysis on covered calls with and extra amount of naked calls. Ignore the symbol and current macroeconomic events. I couldn't find any reference to this strategy (unbalanced is ...
1
vote
1answer
63 views

optimisation problem with linear constraint

I have an optimisation problem. I wish to maximise a function subject to a constraint. It is the constraint that is causing me problems. I am using an addin in Matlab which does the optimisation ...
0
votes
0answers
44 views

Book chart plotting library identification

can you help me identify how those charts are constructed? To your knowledge, is it generated from Python, R, Java, C++? What packages can you identify? I've tried the ggplot2 library in R and I have ...
1
vote
0answers
20 views

AT1 ratio, Core T1 ration and CET1 ratio

I would like to first know the precise definition of each one of those 3 ratios as well as there differences. On the web there is bit of a mess on the explanations. I could not find a simple and clear ...
1
vote
1answer
190 views

Excel to Java for Interactive brokers

I have a working excel workbook connected to Interactive brokers DDE API. I am struggling to upgrade to a more robust environment like Java. I tried to change it to ActiveX for Excel but the ...
2
votes
0answers
74 views

negative transition probabilities in the heston model

I've been trying to implement a bivariate tree for pricing american options with the heston model in R using the paper of Beliaeva and Nawalkha ...
0
votes
1answer
68 views

Ito integrals and copulas

Let $X_{t}$ and $Y_{t}$ be two brownian motions and let their joint distribution be given by $F$. So in regularly correlated BM's where $dX_{t}dY_{t}=\rho dt$, we have a bivariate normal distribution ...
0
votes
1answer
63 views

Where can I find a correlation matrix between the revenues of different industries?

I don't need something super complicated, I would just like a quick and dirty way of estimating the correlation coefficients between the revenues of different companies. Information on companies in ...
6
votes
1answer
111 views

Estimate rolling stochastic volatility forecast using stochvol in R

I want to use the R package stochvol to fit a SV model to a DAX training set and use the output to estimate a rolling one-step-ahead forecast: ...
1
vote
1answer
49 views

Pricing American with floating strike

Consider a American floating strike put option with maturity $T$, written on a non-dividend paying stock $S_t$. The strike of this option at time $t\leq T$ is $Ke^{-r (T-t )}$, where $r$ is the ...
7
votes
6answers
950 views

Book on market microstructure

Can I get some recommendations for a book on market microstructure? I'm not looking for some author's questionable methods for trading, I'm just looking for a book that provides me with facts about ...
0
votes
1answer
29 views

Why interest rate future does not support fed policy on reducing assets buying?

Using the 3-mon eurodollar interest rate futures, I construct a yield curve each year for 2015-2021 using sampling date from the end of the month. If you graphed this out, you would see that the ...
0
votes
1answer
45 views

How is USGG10Y (or any tenor) constructed?

I was wondering how the yield curve for US treasuries are constructed (ex. USGG10Y, USGG5Y, etc.). How to compute for it exactly (what deals/quotes are included in it, what financial institutions are ...

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