0
votes
1answer
54 views

Automatic trading strategies - what are benchmarks for PL on serious backtesting?

There are plenty books and sites which offer automatic trading strategies (robots) and claim they are very profitable. On the other hand many people do not believe in such things, saying that: if ...
0
votes
1answer
25 views

Anybody knows the answer to this exercise found in PWIQF?

I got this question from the last exercise of chapter 2 from "paul wilmott introduces quantitative finance" book. Appreciate your help.
0
votes
2answers
74 views

how to calculate a cross-currency swap in basis pt?

This question has been bugging me for awhile now and I've been trying to find a definite answer, however, no avail... My question, in specific, relates to the USD/CNH CCS rate. From what I understand ...
0
votes
1answer
73 views

Where can I find answers to questions in the book “Paul Wilmott Introduces Quantitative Finance”?

I'm currently answering the exercises at the back of every chapter of the book "Paul Wilmott Introduces Quantitative Finance" and would like to compare my answers to the correct ones. Tried looking ...
3
votes
2answers
118 views

Factor Model - Minimum Variance Portfolio [Complete Proof]

Can someone check my proof? I think there is something not quite right. I have found limited resources online for this as well so I think it might benefit others to get this on the internet. Assume ...
1
vote
1answer
29 views

Risk-free arbitrage given a volume oracle?

Given a magical oracle who can correctly predict the volume, but not the price, of a given security, does there exist a risk-free arbitrage to capitalize on this information?
1
vote
0answers
72 views

PDE and Black Scholes problem

Consider Black Scholes problem $\frac{\partial V}{\partial t} + \frac{\sigma^2 S^2}{2}\frac{\partial^2V}{\partial S^2} + rS\frac{\partial V}{\partial S} -rV = 0$ with boundary condition $V(S,T)=f(S)$, ...
0
votes
0answers
31 views

European style average price option Delta

I use a numerical method to calculate the value and Greeks of an European style average price option, e.g., with a given volatility, I simulate 1000 random walk price paths find the average value ...
-1
votes
1answer
41 views

How to learn finance? [closed]

I have a background in programming of about 6 years. Now I decided to learn finance and trading as well. How can I get my foot in the door in that area?
1
vote
1answer
30 views

Interpret alpha's on Dual-Beta Model regression Results

I am trying to calculate the Dual-Beta for Apple (AAPL) by running a regression against the Spyder's ETF (SPY) & using the 10-yr Risk Free rate. The formula for the dual beta is: ($r_{AAPL}-r_f) ...
0
votes
0answers
32 views

Vanna-Volga method to infer vol surface with just few realtime tick data

My broker gives me the opportunity to get realtime tick data for up to 50 fields. Since I would like to monitor option chains, this amount of data is very limited. Suppose I am interested in ...
2
votes
1answer
38 views

Does Nelson-Siegle require adjustments to yield curve input data?

I am attempting to gain a better understanding of the limitations of the Nelson-Siegel model as described in Estimating the Yield Curve Using the Nelson-Siegel Model. As I have been playing around ...
0
votes
1answer
26 views

Normal vol - convention

apologies for the simplicity of the question, but I was wondering: what is the quoting convention for normal (bps) volatility? Say I have the following time series of data: Date Close Abs Change ...
0
votes
0answers
16 views

Residual maturity vol

The following question is probably (from a practical point of view) more relevant for EM markets which typically exhibit a more pronounced forward volatility compared to spot volatility. Say I buy a ...
0
votes
1answer
44 views

Factoring risk premium in to Forward Rate calculation

This is a self study question. I'm calculating a forward rate. Specifically, I have that in a country X, the Spot Rate is 5X/1US. I also have that the 1 year interest rate is 13% in country X and ...
1
vote
3answers
105 views

(Beginer on bond market) References on callable bond's pricing

I am searching for references on pricing callable bonds. I've not find any rigorous mathematical approach on the web. All I found was some soft approaches in a discrete framework. Edit: First of ...
2
votes
3answers
113 views

Calibration of a GBM - what should dt be?

I have a time series of daily data that I want to calibrate GBM parameters $\mu$ and $\sigma$ to. Using the discretized solution $$ S_{t_{i+1}} = S_{t_i}\exp\left(\left(\mu - ...
0
votes
0answers
48 views

Pricing defaultable binary option with hazard rate approach

I'm studying defaultable claims and asked myself how to price a digital payoff. Consider an option paying $1$ at maturity in case of non-default before maturity and if a given underlying process $S$ ...
0
votes
0answers
10 views

Option platforms providing eurex products

I search an option platform providing eurex products as eurostoxx 50. Can you advice me some platforms ? Thank you in advance for your answer Julien
2
votes
0answers
62 views

How to exploit calendar arbitrage?

Say we are looking at European Call options in a toy environment with zero deterministic intereset rates, a stock paying no dividends, no repo rates etc. Let C(T,K) be the price of a call with expiry ...
1
vote
0answers
30 views

Is it important to equalize the minimum price fluctuation in pairs trading?

For example, suppose we were trading a strategy which buys one Brent contract and sells one Gasoil contract. The minimum price fluctuation for a Brent contract is \$10, and the minimum price ...
0
votes
1answer
36 views

Market Timing Performance for a single stock

It seems there are models that study the market timing ability of funds. Models such as the Treynor-Mazuy and Merton-Henriksson. One can also study the bull beta and compare it to a bear beta. My ...
3
votes
1answer
112 views

How to calculate the Sharpe ratio for market neutral strategies?

Suppose I am long one stock and short an index in a ratio effectively making market beta as zero and I close the position with some positive P&L. How should I calculate the return for the ...
3
votes
1answer
148 views

What is the difference between asset management and wealth management?

What is the difference between this two concepts?
4
votes
3answers
117 views

What is an efficient method to find implied volatility?

I have a code that finds the implied volatility using the Newton-Raphson method. I set the number of trial to 1000 but sometimes it fails to converge and doesn't find the result. Is there a better ...
0
votes
0answers
69 views

How to express the Black Derman & Toy Model in a $dr=A\,dt+B\, dW$ form?

The Black Derman & Toy (BDT) model is given by $$d(\ln\,r)=\left(\theta(t)-\frac {d(\ln\sigma(t))}{dt}\ln r\right)\,dt+\sigma(t) \, dW.$$ How can one rewrite the BDT model as $dr=A\,dt+B\, dW$, ...
1
vote
1answer
44 views

How to model the effect of earnings surprises on long-term returns?

I'm looking into modeling the relationship between EPS announcement surprises with long-term returns (1 quarter to 3 years with intervals). I've based my current methodology off papers looking at the ...
-1
votes
0answers
13 views

Where to find stock buybacks yields?

I am looking for stock buybacks yields at level of the main European indexes. For instance, what was the stock buyback yield on the FTSE 100 last year? Do you know where I can find this information?
0
votes
0answers
72 views

How to calculate returns of backtested strategy?

Lets say I have some strategy (long/short) backtested for certain period. Strategy has entries/exits only at the end of the day and may have overnight positions hold. Now I would like to compare ...
0
votes
1answer
22 views

Equity Chart - design and granularity

I am looking to build a web based Equity chart to display performance of FX trading strategies. I would like to hear opinions and advice on a few areas that I am unsure about. Granularity Equity ...
3
votes
1answer
94 views

SABR calibration: simple explanation and implementation

I would like to learn more about the SABR model and ho it is used in modeling smiles in equity, FX and rates markets. How would you explain the process and its implementation in simple steps? Any web ...
0
votes
0answers
35 views

Pricing inflation lags

I've been looking into a short piece of maths I found on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding was correct or if the maths isn't quite ...
0
votes
1answer
75 views

How trading in currency pair works, underlying techniques and mechanisms

I am somewhat experienced in Forex trading, but I have a question which has bothered me for quite some time. If we for instance go back in time four months, to before the beginning of value loss the ...
2
votes
1answer
87 views

How to get Black Scholes' Geometric Brownian Motion differential form form the closed form?

My instructor has mostly self contained notes, where our textbook is mostly a reference. She has it written that: $$S_t = S_0e^{(\mu - \frac{\sigma^2}{2})t + \sigma W_t} \iff dS_t = S_t(\mu dt + ...
2
votes
1answer
31 views

Variability in the Expected Shortfall estimator

Are there any results for calculating the variability in the Expected Shortfall measure. I am looking for Large sample confidence intervals under Normality for Expected Shortfall or calculation of ...
2
votes
4answers
180 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 ...
0
votes
0answers
68 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 ...
0
votes
1answer
57 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 ...
0
votes
0answers
31 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 ...
2
votes
1answer
94 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 ...
4
votes
3answers
170 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 ...
0
votes
0answers
20 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 ...
1
vote
2answers
163 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 ...
2
votes
2answers
124 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 ...
0
votes
1answer
42 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 ...
0
votes
2answers
17 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 ...
0
votes
1answer
40 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 ...
2
votes
1answer
129 views

General way to solve Partial differential equation using Feynman kac representation

Consider the following PDE on interval [0,T] $\left(\frac{\partial F}{\partial t}(t,x)+\mu (t,x)\frac{\partial F}{\partial x}+\frac{1}{2}\sigma^2(t,x)\frac{\partial^2F}{\partial ...
2
votes
0answers
43 views

Inflation/Rates Correlation

I've been looking into a short piece of maths a colleague has written on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding is correct, or if my ...
3
votes
1answer
136 views

Statistical arbitrage using eigen portfolios

I was trying to understand below paper https://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf Page 20 explains about "Entering a trade". I wan't to know clearly what it means to ...

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