# All Questions

0answers
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### Hedging non-deliverable forward

For a non-deliverable forward, the payoff at maturity is $N(1-\frac{F}{S_T})$, where $N$ is the notional, $F$ is the forward rate predetermined at $t=0$, $S_T$ is the spot exchange rate at maturity ...
1answer
52 views

### Derivative: Delta of a Down and Out Call Option with Barrier=Debt(K)

I am trying to compute the derivative of this function with respect to V0: This is the price of a down and out call option, assuming the barrier equal to the level of debt K. In other terms, I need ...
0answers
13 views

### Value at Risk Backtest type 2 error

I am wondering why in the most popular tests(Kupiec's POF, Christoffersen, the Null hypothesis is "our model is accurate". If we set our null hypothesis that way, we only have a decent result if we ...
0answers
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### EMTA Guidelines

Does EMTA guidelines are only for Non-Deliverable trades? IF yes, then why this is applicable for Deliverable Option trades? EMTA Site - http://www.emta.org/ndftt.aspx
0answers
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### Calculation Agent Purpose in Vanilla Option Trades

What is the purpose of Calculation Agent in derivative trades? Why Calculation Agent is not required for Vanilla Option trades for deliverable currencies?
0answers
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### Exercise probabilities in Black Scholes [duplicate]

In the Black Scholes Formula, why are the probability of an Asset or Nothing Call and Cash or Nothing Call being exercised different. The probabilities are N(d1) and N(d2) respectively.
1answer
66 views

### What is the covariance of two correlated Ornstein-Uhlenbeck processes?

What is the covariance of two correlated Ornstein-Uhlenbeck processes? I was trying correlation(1,2)*Var1^(1/2)*Var2^(1/2), but I am not sure! I took ...
1answer
37 views

### Online courses or C++ books combined with Finance (alternatives to Duffy and Joshi)

I am trying to find a book for our study group that teaches the bare minimum C++ needed for financial applications. I am trying to teach it in a project based manner. In case, I don't settle on one ...
0answers
47 views

### Replicating American call option

Consider a two-period binomial model for a risky asset with each period equal to a year and take $S_0 = 1$,$u = 1.2$, and $l=0.8$. The interest rate for both periods is $R = .05$ a.) If the ...
1answer
54 views

### Yahoo data meaning of “close” and “adjusted close”

When there's a 2-for-1 stock split, the number of shares doubles, while the value of the stock halves For symbol 2154 on the Tokyo Stock Exchange, there was such a 2-for-1 split on 2016/3/29. ...
0answers
21 views

### Event Study - Event Induced Volatility for One Firm

Normally, in a stock price event study, we assume that the daily variance in the estimation period is the same as that during the event window. The event-induced volatility literature (eg, Boehmer, ...
0answers
14 views

### Forward Exchange Rate Data: Germany x US

Would anyone know where I can find historical forward exchange rate data between germany and US, yen and US to download? In Bank of England website i already found. Thanks
3answers
323 views

### Default Probability Implied in Bond Prices?

Say I am trying to find the probability of default on JP Morgan implied by the price of their fixed income assets. Can this be done? Are there any pitfalls to this approach? I have heard of this ...
0answers
16 views

### First coupon CDO tranche

I am interested in Tranches on Credit Indexes. Let $T$ be the trade date, let $t_1<T<t_2$ be the accrual dates surrounding the trade date. I would like to know which option is correct ? A) ...
0answers
28 views

### Calculation of IRR [closed]

How do we calculate IRR if I have an investment that allows me to buy into 10% of a company @1m and the first year is a negative cash flow of 200,000 but the subsequent years till year 10 is a ...
1answer
37 views

### Generating random yields

I would like to test different methods for fitting a yield curve, like the Nelson-Siegel, cubic splines etc. I would like to generate random yield to maturity data, that somehow reflects the common ...
1answer
61 views

### What are the some good measures of risk for options?

I've seen a number of measures of risk in my reading: Sharpe, Sortino, Calmar, etc. In CAPM there is Beta, and I've seen papers discussing how to modify CAPM for asymmetry. There is Value at Risk and ...
0answers
6 views

### is it ok to ask job market question here? [migrated]

I notice lot of question were asked about stochastic process, option pricing, but much less question about empirical asset pricing, Eugene Fama and Robert Shiller's stuff. I thought empirical asset ...
0answers
41 views

### How are ETF fees deducted? What happens if you short an ETF?

When I buy an ETF, the ETF issuer wants a certain management fee (expense ratio). How is this usually paid? I've read that this might be deducted from dividends - is this the case? How does it work ...
0answers
53 views

### Applying Black-Scholes to valuing index options

I am currently attempting to use the Black-Scholes model to value index options. My issue is; what should I use as the price of the underlying? Say I want to value a call option on the German DAX with ...
1answer
61 views

### BSM Model - Actual probability

Actual probability of exercise of put option under BSM model is: PD = N(-d2(u)) (using expected return of stock, u) Risk-neutral equivalent is ...
0answers
66 views

### Two-period binomial model for American option

Consider a two-period binomial model for a risk asset with each period equal to a year and take $S_0 = 1$, $u = 1.5$, and $l = 0.6$. The interest rate for both periods is $R = .1$. a.) Price ...
0answers
61 views

1answer
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### Predicting the Future FX Spot Rates

Say I need to predict what the spot rate between USD and CAD will be in 3 months. What will be the most accurate measure or model that I could possibly use? Does the 3 month forward rate necessarily ...
1answer
65 views

### How frequently do traders rebalance their gamma hedges?

Say, for instance, that you've set up a delta-neutral straddle (i.e. you are long volatility, short time decay) and want to dynamically hedge your gamma in order to offset losses due to theta. Is ...
0answers
52 views

### Modeling Interest-only Mortgages

First post on this forum - happy to be here. Please give feedback if this is off-topic so I can more meaningfully contribute moving forward. Can we infer a range of future all-in costs for I/O ARMs ...
1answer
82 views

### Why is the value of an adaptive stochastic process known at time t?

I am having a hard time to understand the concept of an adapted stochastic process. Using an analogy to finance, I have been told we can think of adaptiveness of a stock price process as having an ...
1answer
80 views

### Backesting VaR on overlapping intervals to year's end

Let us assume that each month of the year (up to November) we calculate a VaR (say 99%) with holding period to the end of the year. Thus the holding period starts with 12 months and goes down to 1 ...
0answers
24 views

### PnL Explained Using Scenario(Full Reval Model)

I was wondering if any quant guru can help . How to calculate the PnL explained using full reval aka scenario based = > t - (t-1) approach for linear instrument. I am finding difficulty to understand ...
0answers
16 views

### How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: ...
1answer
26 views

### Simple Moving Average Backtest: Cumulative Return too high

I apologize if this is way too basic a question, but I'm an absolute beginner to trading and am in the process of learning the fundamentals. Currently I'm trying to model a (10-day) SMA backtest in ...
1answer
84 views

### Bloomberg & R: Accessing multiple securities with getBars() in R

I am attempting to access 1 minute trade data for 50 securities using Bloomberg API (rblpapi). Following is the code I got from the CRAN: ...
1answer
61 views

### Qualitative properties of call

I have read somewhere that we can show by using arbitrage argument the following relationship for call option : $$\frac{\partial{C_t(T,K)}}{\partial{K}}\leq0$$ ...
0answers
34 views

### Using Market Prices of Bonds to Model the Discount Curve with a Polynomial (Math + R)

I have a small program I'm building to interpolate the discount curve from a portfolio of benchmark bonds. If anyone has any guesses as to whether it's my process, or my code that's messed up I would ...
0answers
15 views

### Affect of choosing different combinations of variables for multivariate regression [closed]

If I have variables x1,x2,x3,and x4 that have correlation coefficients −0.9,−0.5,0.5, and 0.9 to another variable y, what is the effect of choosing different combinations of them in a multivariate ...
0answers
20 views

### Using Kendall rank correlation to construct a covariance matrix?

I am wondering if it's mathematically 'correct' to employ a correlation matrix based on Kendall-correlation when constructing a covariance matrix? I.e., is it wrong to multiply standard deviations of ...
2answers
39 views

### Swap prices (preferably based on 3 month LIBOR)?

Where can I find a listing of forward swap rates based on libor. E.g. pricing on a swap of rates floating over 30 day libor for 3 year fixed, one year from now?
0answers
60 views

### Solution for american perpetual put

I have been attempting an exercise in which I have to determine the value of an american perpetual put, $P$ in terms of the asset value $S$. The solution to the exercise says: When $S>S_f$ (the ...
1answer
88 views

### How to hedge a barrier option with vanilla options?

I want to hedge a barrier option, say a knock-out call with strike K and barrier B out-of-the-money. My idea was to start from the payoff diagram of this option, and try to accomodate it with vanilla ...
0answers
22 views

### Marginal Distribution using GARCH model

I have n return series. I fitted AR(1)-GARCH(1,1) to each return series. Then used PIT(residuals) to transform the residuals to uniform. Then I fitted n dim copula to the data. I simulated 1000 points ...
0answers
16 views

### How to Rank assets in Portfolio? [closed]

I am working on active equity Portfolio. I have total 30 securities in my Portfolio. Can someone please guide me how can I rank those assets in my portfolio. ...
1answer
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0answers
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### what do metrics and indicatives mean in the finance context? Like trading of MBS products

it's often heard in my daily work as a programmer in an investment bank, supporting mortgage backed securities desks (passthrough, agency cmo, cmbs, etc). My take is that the terms describe the ...
3answers
186 views

### Construction of VIX and VVIX

I just read the CBOE's Whitepapers for VIX and VVIX and notice that they are constructed in the same way, i.e. a range of calls and puts on the respective underlyings (S&P500 in case of VIX, and ...

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