All Questions
1
vote
0answers
44 views
Industry factors without GICS
I'm working through the Quantitative Equity Portfolio Management book by Chincarini and Kim.
I'd like to build a basic industry-based fundamental factor model. As this is a pet project for ...
1
vote
0answers
250 views
portfolio optimization with a loop
I am attempting to minimize the variance of a 3 stock portfolio using optimization within a loop. What I have done is calculated the stock returns and cov matrix from dates 1980-01-01 to 1989-12-31 ...
0
votes
0answers
132 views
Option vs Equity market-making strategies? [closed]
I need to implement a few "strategies" for a university project I am doing. The emphasis of the project is not on the strategies, but the technical (programming) means by which they are implemented.
...
-3
votes
0answers
80 views
Holt Winters Double Exponential Smoothing [closed]
I am looking out for Holt Winters Double Exponential Smoothing implementation using VBA Code.
I have searched everywhere but all I can observe, It comes with Excel Add-In. I am looking out for actual ...
0
votes
0answers
52 views
How to Maximise Efficiency With hp12c gold calculator
I would like to calculate the net present value of a loan schedule or an equation of value. e.g. "For an investor receives R1 000 after 2 years, R2 000 after 5 years and R4000 after 7 years, how much ...
7
votes
3answers
237 views
how do you evaluate an FX market aggregator?
My firm is investigating FX aggregation systems to see if we can reduce execution costs for our systematic trading strategies that involve FX (not low latency).
Some of the contenders are Integral, ...
11
votes
2answers
407 views
Can you replicate an option on an arbitrary basket of stocks?
Since a market index is nothing more than a basket of stocks, you can create your own index by putting together stocks of your choice. The only difference is that you can trade options on major ...
3
votes
1answer
54 views
Can Central Index Keys (CIKs) issued by the SEC be reassigned?
Suppose company A has CIK 0000012345 and ceases to exist. At some later time, company B registers with the SEC to submit filings.
Is it possible that company B will be assigned the same CIK ...
-2
votes
0answers
52 views
Ocaml and Algorithmic Trading [duplicate]
I'm completely new to the Algorithmic Trading domain. I've just completed a course that was Ocaml based, and read about Jane Street. Obviously they are a huge company with a large amount of resources, ...
4
votes
2answers
173 views
Fitting distributions to financial data using volatility model to estimate VaR
I want to fit a distribution to my financial data using a volatility model to estimate the VaR. So in case of a normal distribution, this would be very easy, I assume the returns to follow a normal ...
0
votes
1answer
58 views
Calculating spot rate of interest
You are given the following information regarding the domestic government fixed-interest bond market:
The current price of a one-year bond paying coupons at a rate of $4.5$% per annum and redeemed ...
3
votes
1answer
123 views
Foward-start option pricing
Consider a probability filtred space $(\Omega, \mathcal F, \mathbb F, \mathbb P)$, where $\mathbb F = (\mathcal F_t)_{0\leq t\leq T}$ satisfing the habitual conditions and is generated by $1 d $- ...
4
votes
1answer
233 views
Call option arbitrage opportunity
I am having trouble wrapping my head around some text provided to us by our lecturer (unfortunately he is currently unavailable). If we let $c$ be the price of a European call option, $S_0$ the ...
5
votes
3answers
201 views
Implied Volatility Calculation
We all know if you back out of the BS option pricing model you can derive and solve what the options is "implying" as its volatility. However, what is the formula used to derive IV (can anyone direct ...
3
votes
0answers
81 views
Stress testing covariance
Going one level beyond stressed scenarios, to parameters e.g. for a VaR measure: what are the most common approaches for stressing a covariance/correlation matrix, especially taking portfolio exposure ...
2
votes
1answer
114 views
Using cointegration to prove that a long-short strategy is market neutral (in CAPM sense)
I am trying to prove that a long-short strategy invested according to the cointegrated relationship from Engle-Granger's. So essentially I'm trying to show that the return $r_{XY}$ of the portfolio (X ...
2
votes
1answer
82 views
How are option expiration dates decided?
I looked at the CBOE website and they say the expiration is the Saturday following the third Friday of each month. However, I look up an options chain for Google, for example, and I see three ...
3
votes
0answers
102 views
PCA Variances and Principal Portfolio Variances
In Meucci's paper called "Managing Diversification" he mentions that:
"Indeed, the eigenvalues A correspond to the variances of these uncorrelated portfolios"
I tried to replicate it but found they ...
3
votes
2answers
205 views
How do you know if if an option is priced correctly?
Besides obvious extreme examples (ie volatility going to infinity, infinite time, zero time, or zero volatility, deep OTM/ITM ) how does one gauge if an option is 'correct' or at least in the ...
0
votes
0answers
65 views
SDE(s) satisfied by Radon-Nikodym derivatives of certain martingale measures [closed]
Given:
Money Market Account: $dR_{t}=R_{t}r_{t}dt, R_{0}>0$
Risky Asset: $dS_{t}=S_{t}(\mu_{t}dt+\sigma_{t}dB_{t}), S_{0}>0$,
where $r, \mu,$ and $\sigma$ are positive processes and $B$ is a ...
0
votes
0answers
47 views
earnings reports and option pricing
Let's assume that company XYZ reports earnings in a 0% interest rate environment and the option expires shortly after earnings. And there is a 50% chance the earnings are good (an upmove) and 50% bad ...
1
vote
1answer
72 views
Greeks of Basket
I am considering a product composed of 10 underlying assets. The maturity is 5 year. Each year if the performance of the equi-weighted portfolio reach a barrier, it pays a coupon.
My question concern ...
8
votes
1answer
560 views
Quantitative before/after or financial engineering studies of a bid or ask tax?
Has anyone in the quantitative finance or financial engineering community studied the effects of a bid or ask tax with actual or simulated data?
If so, what were the quantitative results or ...
2
votes
0answers
57 views
How to correctly construct a value- and equally weighted portfolio consisting of property-types?
A problem of which I couldn’t find the answer on the forum is about the construction of equally-weighted and value-weighted portfolio.
I want to compute the equally-weighted property-type portfolio ...
2
votes
0answers
78 views
Benchmarking risk
Given the portfolio return $R$ and the benchmark return $B$, I want to define a risk indicator, measuring the ability to beat the benchmark ($R>B$), given the downside risk taken; the latter not ...
2
votes
1answer
97 views
t-statistics for the mean return, using Newey-West standard errors
I have seen that in several papers, where the aim was to evaluate the performance of a certain investment strategy, they use t-statistics to test for significance in the results. However, this seems a ...
1
vote
1answer
121 views
How to download risk free rate?
I've been trying to download the national interest rates for some countries. When i use Datastream, it only gives me the currency return (while i need yield).
Can someone please tell how to ...
4
votes
2answers
212 views
How do I determine the maturity date from a T-bill's CUSIP?
Is there a way to determine a government bill's or bond's maturity date by looking at its CUSIP?
For example, the CUSIP for US T-Bills with a maturity of 12/1/11 is 9127953V1. As you probably know, ...
4
votes
1answer
131 views
Ito's Lemma - Integrand depends on upper limit of integration
A problem I came across while practicing using Ito's Lemma had a process with an integral whose integrand depends on the upper limit of integration (the goal is to find $dZ_{t}$):
...
2
votes
0answers
48 views
1
vote
2answers
247 views
How to detect and adjust for stock splits?
I am using a large daily data panel for over 250 companies and over several years. I am concerned about adjusting for stock splits. Is there any program in SAS to detect stock splits? How do I adjust ...
1
vote
2answers
120 views
Statistics of difference between two GBMs
if I have two asset prices modeled separately as geometric brownian motions. How do i go about calculating the expected statistics of their difference? Like given the sigmas and mus of both processes, ...
8
votes
1answer
190 views
Hedging duality
We consider a financial market over the time interval $[0,T]$ where a risky asset is a semimartingale $S$. By $\mathbb{P}$ we denote the set of all equivalent local martingale measures (ELMM). We ...
1
vote
0answers
56 views
Modelling long run relationship between dividend and earnings
I am working on a paper where I have to model the long run relationship between earnings and dividends. I have downloaded the raw data from shillers website. I have converted the series to ...
2
votes
0answers
154 views
Gamma vs. Volatility Risk
Original Question: What is the link between Gamma and the Volatility Risk?
It leads me to ask:
- What is the Volatility Risk definition and what are the good practices to measure it?
Thinking about ...
13
votes
5answers
3k views
Python library for Portfolio Optimization
Does anyone know of a python library/source that is able to calculate the traditional mean-variance portfolio? To press my luck, any resources where the library/source also contains functions such as ...
2
votes
1answer
114 views
Get intraday data of SAP with google Finance
According to this link I try to get intraday data of SAP listed at Xetra.
Intraday data with timestep of 1 second would be great. I do not understand parts of the command, I try
...
3
votes
1answer
122 views
Auto-correlation of GBM
The GBM is defined by
$
dS(t) = \mu S(t)dt + \sigma S(t) dW_t,
$
with analytical solution
$
S(t^\prime) = S(t) ...
1
vote
1answer
84 views
How to deal with different amount of td's in computing Sharpe Ratio
In calculating the Sharpe Ratio, should I take into account the days were I have 0 return due to non-trading day? Another user posted a similar question but this was related to trading days with no ...
7
votes
0answers
127 views
How to estimate the following model?
Suppose I have the following model:
$$r_t=\sigma_t * \epsilon_t$$
where $r_t$ is the return at time t, $\sigma_t$ is the volatility, the model used to model this volatility is an exponentially ...
3
votes
2answers
112 views
Iterating through every path of a Trinomial Tree
I am attempting to come up with an algorithm to iterate through every possible path of a trinomial tree and am having difficulties coming up with one. Is there any literature on this or has anyone ...
6
votes
10answers
1k views
Using Black-Scholes equations to “buy” stocks
From what I understand, Black-Scholes equation in finance is used to price options which are a contract between a potential buyer and a seller. Can I use this mathematical framework to "buy" a stock? ...
2
votes
1answer
105 views
Value at Risk Monte-Carlo using Generalized Pareto Distribution(GPD)
I have created a VBA program to calculate VaR by using Monte Carlo, I have simulated Brownian Motion. This method might be ok for 100% equity portfolio, but let's say this portfolio may have fixed ...
10
votes
7answers
5k views
Is the Interactive Brokers API suitable for hft?
By hft here I mean anything with holding period less than 5-10mins...
Any empirical/anecdotal evidence of using it successfully on even higher frequencies?
32
votes
10answers
12k views
How can I go about applying machine learning algorithms to stock markets?
I am not very sure, if this question fits in here.
I have recently begun, reading and learning about machine learning. Can someone throw some light onto how to go about it or rather can anyone share ...
1
vote
1answer
127 views
Testing Significance of Correlation
Lets say I have the returns of two stocks(stock1 and stock2). Now without running a regression, I lag one of the variables, calculate the correlation between the two stocks and repeat this process as ...
3
votes
2answers
207 views
Software for backtesting outside strategies (CSV transaction upload)
I've developed some software which generates sets of trades, and I'd like to backtest those trades. My software currently outputs a CSV file with details of each trade:
...
0
votes
2answers
110 views
Regression with Lagged variables
I am new to regression analysis. Let's say initially I have a linear regression
x = alag(x1) + blag(x2) + clag(x3) -- eq 1
I want to predict the price x based on the the price of x from previous ...
3
votes
1answer
163 views
Stochastic modeling of stock price process
Apart from the model of Geometric Brownian motion is there any other "widely accepted" stochastic model to characterize the dynamics of a stock price process?
3
votes
3answers
929 views
Why does the adjusted closing price take into account dividends?
I'm trying to get an intuition as to why the adjusted closing price includes a dividend adjustment:
\begin{equation}
1 - \frac{dividend}{close}
\end{equation}
I understand why the adjusted closing ...
