# All Questions

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### Modelling the Cost of Risk

I would like to read something about the cost of risk. Could anyone recommend some reference about how it is calculated or modelled?
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### Turn of the year

I understand the basics of "Turn of the year" effect. But I am wondering why does this effect sometimes cause overnight rates around year end to dip below normal overnight rate levels (i.e. negative ...
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### Intraday Value at Risk approximations

We use full valuation of derivatives portfolios using scenarios from historical data. For simple contracts, this is relatively fast. For contracts requiring monte carlo simulation, this becomes ...
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### How to compute the stochastic integral of log-normal process?

How do you compute the following integral: $$\int_0^t e^{\mu s + \sigma W_s} ds$$ or $$\int_0^t e^{\mu s + \sigma W_s} dW_s$$ ? Are those integrals stochastic processes of some well-know type (...
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### Fourth moment of ARCH(2)

I am studying the ARCH(2) process given by $$X_t = \sqrt{h_t} \varepsilon_t$$ where $$h_t = \alpha_0 + \alpha_1 X_{t-1} ^2 + \alpha_2 X_{t-2} ^2$$ and $\varepsilon_t$ follows $N(0,1)$. ...
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### What is the difference between gross and net enterprise wide risk?

Reading a Basel paper on recommendations on internal economic capital models. One of the recommendations says members of the bank's board should be able to demonstrate understanding of the difference ...
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### Why should a factor not priced and yet is relevant to the return generating process

I am reading Elton's AFA presidential adress article here. http://people.stern.nyu.edu/eelton/working_papers/Expected_Return_Realized_Return.pdf In the paper, he is warning against using the average ...
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### Finding mean vector and covariance matrix for annual returns given quarterly returns

I am currently trying to calculate a vector for the mean annual returns of 4 different asset classes along with their 4x4 covariance matrix in excel. However, I am having problems since the data I ...
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### What are some options to execute ML algos against with live data using C#, F# or Python for a retail trader?

I'm a retail algorithmic trader. I've written some algorithms that parse intraday movements and make decisions. I still execute trades manually but eventually I need the ability to execute trades on ...
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### Test for difference in security returns before and after financial regulation

I'm going to study the effect of corporate credit rating changes (Moody's) on stock prices before and after a specific financial regulation. So far i have used an event study where i have divided the ...
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### Portfolio insurance strategy with path dependence

I have the following problem. Let us assume that $S_t$, the stock price follows, geometric Brownian moation with parameters $(\mu,\sigma^2)$. We are given an amount of money $M$ and at each point in ...
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### credit risk - How to calculate the probability of default (private companies)?

Part of my master thesis I am working with a company. I have the project to use their financial database with all the financials data (7 years) of approximately 3’000 companies. They have their own ...
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### Is there any index calculation methodology that is suitable when constituents change frequently?

Trying to create a custom stock sector index, however adding/dropping of the constituents will be frequent. Which kind of index calculation methodology (e.g. Price Weighted, Equal Weighted, Cap ...
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I am trying to implement Theorem 1 from this Journal in RStudio. The journal says the it is possible to find a approximate price of a geometric asian option in a Heston setup this way: $$X_{1cGAO}=e^{... 0answers 66 views ### Correct form for State Space Equation for Kalman Filter for DNS In this paper: http://www.ssc.upenn.edu/~fdiebold/papers/paper55/DRAfinal.pdf in eqns 3,5 the state eqn has the mean removed. (z_t-\mu)=A(z_{t-1}-\mu) + \epsilon_t y_t=C z_t + \delta_t ... 0answers 117 views ### Forecast biasness of VIX term structure I'm interested in the topic of VIX futures being overpriced, so I'm looking for different models to find evidence for it. Asensio 2013 uses a regression to evaluate the forecast biasness of the VIX ... 0answers 75 views ### why many option contract price less than minimum boundary price? I downloaded data from NSE(National Stock Exchange) website regarding closing price of European Call Option written on Index. From standard textbook, I read that option contract must satisfy C(t) \... 0answers 200 views ### Calculating Net Annualized Return on LendingClub historical data I am interested in the formula LendingClub provides as their measure of "Net Annualized Return": \big(1 + \frac{\sum_{i=1}^N{((I_i + L_i - S_i - C_i + R_i) / P_i) P_i}}{\sum_{i=1}^N{P_i}}\big)^{12}-... 0answers 94 views ### How does one simulate intraday strategies which don't end up flat at the close? I ran into this trying to simulate trading interlisted names between the NYSE and the TSX. Depending on my strategy parametrization it would sometimes end up with a significant short or long dollar ... 0answers 123 views ### Is there a countably infinite Sigma-Algebra? Why? Assume \,\mathcal{F} be a nonempty collection of subsets of \Omega. \,\mathcal{F} is called a \sigma-Algebra whenever if A\in\mathcal{F} then A^c\in\mathcal{F}, and if A_1,A_2,...\in\... 0answers 58 views ### Range options in BS I know how barrier options are priced in Black-Scholes scheme. I'm wondering if an analytical formula exists also for range (corridor) digital options i.e. options paying only if the price remains ... 0answers 30 views ### conferences for credit portfolio managers What are worth conferences for credit portfolio managers? I appreciate your recommendations! PS:I am aware that this question is not the typical quant.SE question, BUT I couldn`t find reliable ... 0answers 120 views ### Fitting High Frequency Indicators I have a high frequency time series of the bid and ask prices of a stock recorded on every tick. For each data point I also have a certain indicators that predict the future movement of the price. The ... 0answers 126 views ### The difference in sign bias test in detecting the exist of asymmetric effects and the adequacy of symmetric GARCH model. The question is that I want to know whether there is difference in the applying of sign bias test in detecting the exist of asymmetric effects and the adequacy of symmetric GARCH model. In the ... 0answers 104 views ### Yield for valuation of illiquid corporate bond I am trying to value a illiquid corporate bond issued at a discount to face value by a privately held company in India. The corporate bond is a sinkable bond (amortizing principle) with coupon rate of ... 0answers 139 views ### Model a floating rate BBB yield curve Background: We want to design a compensated prepayment liability index to define an amount a bond buyer would need to receive in a redemption prior to the nominal maturity of a bond. Ideally we'd ... 0answers 62 views ### Reference Request: Horse Race for Portfolio Allocation Probably the most popular horse race study for portfolio strategies is Optimal versus Naive Diversification: How Inefficient Is the 1/N Portfolio Strategy?, with DeMiguel, L. Garlappi and R. Uppal.... 0answers 70 views ### Residual Covariance Matrix, and MVO for Residual Variance and Alpha My overall goal is to find an efficient frontier using QP in terms of \alpha and residual variance (\omega^2) for a portfolio P given a benchmark B. We know the equation for residual variance ... 0answers 55 views ### What are your list of concept or model in standard textbooks that are always reliable to used in working? What are your list of concept or model in standard textbooks that are always reliable to used in working? As opposed back to this: What concepts are the most dangerous ones in quantitative finance ... 0answers 98 views ### How can a beginner trader make use of 'volatility of volatility' For a beginner option trader in equity options, how can he use this metric that is provided by his broker/data vendor? How can he use this metric to gain an added understanding of the option pricing/... 0answers 115 views ### Which kind of normalization to prefer before PCA (generic solution for any factor analysis) I have financial assets with totally different volatilities, thus I must standardize them before PCA, otherwise, assets with high variance may be considered as principle components, which is wrong. ... 0answers 323 views ### Bloomberg scripting language (BLAN) Did anyone work with Bloomberg scripting language (BLAN is the name I guess). If so is it really flexible and is it competitive with other valuation services (say Super Derivatives). Does it enable ... 0answers 92 views ### Comprehensive List of Regime Switching/ Change Point Models I am looking for a comprehensive list of regime switching/change point models/techniques which can be used to model different regimes / change points in financial time series. What I found so far are: ... 0answers 192 views ### Discrete Trading to reduce speculation I recently read a paper by Terje Lensberg (2014) "Costs and benefits of financial regulation: Short-selling bans and transaction taxes" where he analyzed the effects of financial regulation (short ... 0answers 157 views ### What is the most efficient way to periodically download all new 10-K filings from SEC's EDGAR? I found this website which uses a perl script to download all the filings. It states: "There are 200K+ 10-K (and equivalent) filings, which will take considerable harddisk space and time to download. ... 0answers 44 views ### Clarification of Saturation-Reset Regimes I have worked my way through this article, waiting to get into school I have been self-learning a bit. I have a good grasp on most of the article, but the component strategy of Saturation and Reset ... 0answers 63 views ### Dynamic Hedging for a Bond Sorry if this question is duplicate. Analyzing the scenario to hedge bond credit risk with CDS. but if Bond price changes CDS notional will not change. is there any way i can hedge this ? 0answers 250 views ### Constructing Volatility Smile from American Options My question is about best practices for reconstructing volatility smiles for a fixed tenor from American option data. For simplicity/liquidity, I am currently considering options on SPY. I am ... 0answers 64 views ### Dixit & Pindyck (1993) Chapter 4, equation 13 Starting with the Bellman equation for the optimal stopping problem:$$F(x,t)=max\{\Omega(x,t), \pi(x,t)+(1+\rho dt)^{-1} E[F(x+dx, t+dt)|x]\} In the continuation region where the second term is the ...
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I would like to understand better the $n^{th}$ to default pair spreads of a basket default swap containing $m>n$ entities. For example, consider 2 single name CDS's with same spread and same ...
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### How do I specify Thirty360::European day counter in RQuantLib

I am taking liberty to ask the following question in quantLib forum though this question is about RQuantLib I am trying to use RQuantLib to calculate clean price of a fixed coupon bond using a Nelson-...
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### Portfolio Optimization with Monte Carlo Simulation - How to do it with Excel?

If I have three asset classes and their historical weekly returns for five years, how can I construct a minimum variance portfolio and an efficient frontier plot with Excel? To do that do I have to ...
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### how to apply a simple copula model

I'm playing around with copulas and wanted to generate some sample based on copula techniques in R. For this purpose I applied the following algorithm: Generate three sample vectors coming from ...