2
votes
0answers
14 views

How can dividend protection be considered in the binomial model in pricing the convertible bond?

If the convertible bond has dividend-protection, how can we cater it in the binomial model? If there is dividend protection at or above 1%, can we impose input of dividend yield of 1% in the ...
-4
votes
1answer
39 views

Which is the nearest town to London Gatwick [closed]

I have to spend twelve hours there every month awaitng a connection. The airport bars / shopping don't do it for me any more. Where's nearest decent sized town, and how long to get there / what cost ...
-2
votes
0answers
30 views

what are the hypothesis of ADF test?

In the adf test, it follows: null hypothesis, $H_0:\delta=0$ versus the alternative hypothesis, $H_1:\delta<0$, in the regression $$\Delta Y_t=\alpha+\delta Y_{t-1}+\gamma_1 \Delta ...
1
vote
3answers
178 views

What does it mean by autocorrelation coefficient near 1?

It is said that the time series has a stochastic trend if the first autocorrelation coefficient will be near 1. Q1) What does it mean by the above statement? Q2) How do we calculate the first ...
1
vote
1answer
38 views

What are the equation that gives hurst exponent of value >0.7 and <0.3?

I had been working on algorithm which uses the Hurst Exponent. Once i random walk simulation on matlab, x = cumsum(randm(1000,1)), I was able to get a hurst value close to 0.5. To analyze the use of ...
3
votes
2answers
78 views

How can I show that $u=e^{\sigma\sqrt{\Delta t}}$ in the binomial option pricing model

Given that $e^{r\Delta t}(u+d)-ud-e^{2r\Delta t} = \sigma^2\Delta t$ I would like to show that $u=e^{\sigma\sqrt{\Delta t}}$ I know I must somehow use Taylor's approximation $e^x = 1 + x + ...
0
votes
0answers
36 views

Log returns vs Relativizing to Portfolio size of $1

In a current empirical research project, I am tracking a non-parametric measure of a transaction cost. To this extent, I track this cost in two ways Cost in terms of log returns Cost in terms of ...
1
vote
2answers
70 views

Controlling portfolio concentration

I'm working with a heterogenous basket of instruments (in volatility terms). Risk parity allocation seems to be useful for the portfolio( * 1/Volatility). However, there are times when the ...
0
votes
1answer
54 views

Volatility swaps historical data

I am preparing a study about Volatility and Variance Swaps. Does anyone know where I can found historical public data regarding this instruments? Thanks!
-1
votes
1answer
50 views

Calculating the sensitivity of the modified bond duration to changes in the coupon rate

Given that $B=Ce^{-y} + Ce^{-2y}+ (100+C)e^{-3y}$ where B is the bond price, C is the coupon. and It is a 3 years annual coupon bond. I want to find $\frac{dD}{dC}$ where $D$ is the modified ...
5
votes
2answers
111 views

Risk neutral Esscher transform of exponential Levy processes

Let $X_t$ be a Levy Process and $e^{X_t}$ the corresponding exponential Levy process. Using the Esscher transform for a change of measure for which the Radon-Nykodym derivative is ...
2
votes
2answers
131 views

Definition of Return of A Long/short Portfolio

This can either be a silly question or a question with no sure rigorous answer but defined with some convention. Any way, here it is. What is the (industrial recognized) definition of the return of a ...
1
vote
1answer
62 views

What is a good index to track short term interest rates?

This is an FX question. I want to track short term (overnight or next best thing) rates for major/em ccys. What's the best way of doing this? Is there an index I can follow? Preferably something ...
3
votes
0answers
38 views

Characterizing relation “ has no less information than” between information systems represented by Markovian matrices

I crossposted this question on math.stackexchange. Background: Suppose that an investor's utility is both determined by the state and her action taken. A fact of life is that she can't observe the ...
2
votes
1answer
228 views

Places to make quant code/tools publicly avaliable

Over the years I have developed several tools - including pricing, optimization and calibration tools - most in VBA, C# and C++ I would like to make them publicly avaliable. Aside from putting up my ...
0
votes
1answer
101 views

Use of geometric mean for average return of several indices

Can anyone give any reference for using the geometric mean to average the returns from several indices? Note, this question is not about the usual use of geometric mean to obtain the average return ...
-1
votes
0answers
30 views

Ex-ante tracking error constructing confidence intervals

When calculating an ex-ante tracking error to be used to forecast returns how do you construct the confidence intervals? I am using the mean return of the relative returns between the portfolio and ...
3
votes
0answers
123 views

Algorithmic Trading Model Calculation and Stale Data

I'd like ask everyone a more concurrency programming but definitely quant-finance related question. How do you deal with staleness of data in market hours as quote ticks are streaming and your model ...
5
votes
1answer
63 views

Pricing a bond with variable strike collar with QuantLibXL

I am trying to price a floating rate bond with a capped and floored interest rate. The strikes of the caps and floors vary, but are known in advance. I am trying to do this with QuantLibXL, but I am ...
0
votes
1answer
49 views

Ex-Ante tracking error how to determine the look back period

I am looking to compare the ex-ante predictions against the post values. I am using a look back period of ranges from 1 year to 5 years to construct my covariance matrix that I am using for my ex-ante ...
0
votes
0answers
26 views

Minimum PD under Basel II retail asset?

I have been told that under Basel II the minimum PD that one can assign to any portfolio/segment classified under the retail asset class is 0.33%. But Google searches return nothing and I can't seem ...
6
votes
2answers
124 views

Normally Distributed Returns Become Leptokurtic Due to Compounding

I was running a bunch of simple simulations in excel the other day in excel. Using the NORM.INV(RAND(),0,1) to simulate daily stock returns I noticed that the more compounded the returns, ie, the more ...
1
vote
0answers
36 views

How do I determine what is a separate objective in a multi-objective portfolio optimization?

Is there a general rule to determining when to separate objectives when developing a multi-objective portfolio optimization? For example, one might start with a standard portfolio optimization of ...
0
votes
0answers
15 views

Cost dependency quantification

Suppose one wants to estimate the manufacturing costs dependence of the price of a specific raw commodity, are there good quantitative methods for making such estimation? I'm interested in creating a ...
4
votes
4answers
121 views

Why was NASDAQ(or other index) not fluctuating in 70s and 80s?

Today I have a search of historical NASDAQ back to 70s and noticed the index was slightly increasing in 70s-early 90s and rising up and down in recent decade of years. Why would that happen? The only ...
0
votes
2answers
95 views

Sharpe Ratio and time spent in loss

Is it possible to express, given an annualized Sharpe Ratio value, what is an expected maximum/average time spent in a draw-down or something in this manner? E.g. with SR of 10, you'd expect to spend ...
1
vote
1answer
69 views

Pricing a piece of asset whose dividend stream following a Markovian matrix

I'm trying to calculate the result of an simple example on page 326-327, in Harrison and Kreps(1978). It's pricing a piece of asset whose dividend stream is a simple Markovian process. Here's my ...
4
votes
2answers
89 views

Critique against consumption-based asset pricing theory?

I find asset pricing theory very vague and full of assumptions, especially the consumption-based modern theory. In its essence, the theory states that asset prices depend on the covariance between ...
0
votes
1answer
57 views

Econometrics - Testing

If we have a time series of returns and two time series of indicators, how would we test the use of these indicators if they are autocorrelated or nonstationary (VAR Models dont produce significant ...
1
vote
0answers
36 views

Econometrics - Granger Causality

Suppose we have two time series, if one has autocorrelations and the other is non stationary how do we test whether they Granger cause a returns series?
0
votes
1answer
78 views

Volatility tools / web sites?

Could someone give recommendations regarding volatility tools / web sites that they find useful? I am looking for information that my brokerage platform does not provide. Specifically, I want to see ...
0
votes
2answers
118 views

Optimal lag length selection criterion in GARCH(p,q) model using MATLAB

As assessed by the title, I'm trying to estimate a GARCH(p,q) model to forecast stock market volatility and, in order to be able to do that, I've to identify the optimal number of lags, p and q, to ...
3
votes
1answer
93 views

Optimal Executions for Minimizing Slippage

There has been a considerable body of work for finding trading strategies that minimize the slippage wrt arrival price. For instance, the following are on of the most well known papers: [1] Robert ...
2
votes
1answer
145 views

Call option on a Mutual Fund

I am trying to price a call option on a mutual fund. Given the lack of market implied data, I am going to estimate the fund´s expected volatility using as a reference its historical volatility ...
-1
votes
3answers
59 views

Standard way to represent trend in an a-dimensional way [closed]

Let us suppose that a factory needs to know when certain products are increasing the profit. This factory produces an huge number of products each with different targets. So the factory need to ...
1
vote
2answers
314 views

Why does it “say” portfolio diversification not suitable during market turmoil?

Currently I am trying to get a hold of MPT, asset allocation and related applications. While reading a particular resource, it says diversification works best for "normal" financial markets and ...
3
votes
0answers
34 views

Is there evidence that illiquid stocks, held less by institutions, have more price momentum?

(One of) the standard explanation people gave for momentum is under-reaction of stockholders to firm-specific news. If this is true, then it seems that these stocks should have more momentum, and ...
6
votes
1answer
77 views

Looking for a pricing library supporting Mutli-curve Framework

I am looking for a builder of Yield curves by tenors (O/N, 1M, 3M, 6M, 12M) respect to a given discount curve based on multi-curve framework as described below : Interest-rate Modelling with Multiple ...
1
vote
0answers
48 views

What is the algorithm for the Fama-Bliss instrument selection?

Fama-Bliss discount bonds are defined through a straight forward calculation (Famma, Bliss 1987). For the purposes of a project I need to derive forward rates, yields &c. for periods not included ...
2
votes
1answer
84 views

How to perform significance test on transition matrices

Say you have in your hand a transition matrix published by Moody, and you also collected the rating information for a sample of bonds, which you use to form your own transition matrix. How can we use ...
2
votes
1answer
96 views

Implied probability density (Question 2 - Applications and Interpretation)

Using the second derivative of the Call-Option-Price one can try to recover the pricing density. Formally: Assuming a constant interst rate $r$ and also not making any assumptions on the model ...
0
votes
0answers
22 views

Tracking delistings on NASDAQ & NYSE

Does anyone know of a webpage (or webpages) of current delistings for NASDAQ & NYSE?
-2
votes
3answers
259 views

How are HFT systems implemented on FPGA nowadays?

I have read about different implementations of HFT systems on FPGAs. Argon HFT system (http://trading-gurus.com/argon-design-an-fpga-based-hft-platform/) Hardware-only implementations or hybrid ...
-2
votes
1answer
42 views

What does “percent of change” mean? [closed]

Whenever a price is changed, you can find the percent of increase or the percent of decrease by using the following formula: $$\frac{\text{percent of change}}{100}=\frac{\text{change in ...
2
votes
1answer
135 views

Distribution of Geometric Brownian Motion

Please let me know where I have been mistaken! Let the SDE satisfied by the GBM $S(t)$ be $$ \frac{dS(t)}{S(t)} = \mu dt + \sigma dW(t). $$ Then, the underlying BM $X(t)$ will satisfy $$ dX(t) = ...
0
votes
0answers
20 views

Compute the average efficient frontiers with estimated parameters from generated time series

My overall objective is to analyse the impact of error in mean-variance analysis from historical data. I am given the returns and standard deviation for the five assets under consideration, as well as ...
0
votes
0answers
81 views

Monte Carlo American Option Pricing under GARCH(1,1) volatitliy

I am attempting to price a couple of at-the-money American option using the LSM algorithm and GARCH(1,1) volatility. The LSM code I have works correctly for constant volatility, however, when I switch ...
0
votes
0answers
45 views

Fitting Egarch Model

I am performing a monte-carlo simulation in MATLAB for the first order EGARCH model in which case I am simulating 100 paths of size 500 assuming Gaussian and Student's-t distributions for the ...
1
vote
1answer
86 views

Implied state price density (Question 1 - derivation of the formula)

I came upon the term "implied state price density" in a couple of papers. As far as I understand the concept one basically tries to extract the "pricing density" from the market data. For the sake ...
0
votes
1answer
32 views

Who is the issuer and the counter part of this instrument?

I have the following SWAP contract : T1UH4 which is a 2-Year Deliverable Interest Rate Swap. Product info : ...

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