All Questions

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Constructing NS-Svensson parameters with zero coupon AND coupon bonds

I am in the process of calculating sovereign zero coupon yield curves using the NS-Svensson parameter for a number of countries. Due to data constraints, I would like to use the information from price ...
49 views

Estimate volatility in forecast

I have a model with a rolling forecast. In each time step $t$, I predict the price for the next periods, e.g. $\hat{p}(t, t+1)$ and $\hat{p}(t, t+2)$. If I start in $t=0$ and arrive at $t=2$, I ...
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Delta hedging cost of exotic options?

I'm simulating dynamic delta hedging for up-and-out call option. For plain vanilla call options, I heard that the option price is the expected value of the accumulated delta hedging cost. Does it also ...
54 views

calibration of Gaussian two factor short rate model

I am trying to calibrate the gaussian two factor short rate model whose dynamics is given by r(t)=x(t)+y(t)+phi(t) Now to calibrate the model to term structure ...
46 views

Merton Jump Diffusion Model: Influence of lambda

I use Monte Carlo to simulate sample paths of Merton's jump diffusin model. By plotting a histogram of the log returns and using kerneldensity to approximate the density function I try to look at the ...
100 views

How difficult/easy it is to migrate from CME FAST to CME MDP3.0?

Has anyone gone through this migration? Just wanted to have an idea of the amount of effort required.
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Garch models and assumption of stationarity ?

I found big inconsistency in the GARCH models and their underlying assumption of stationarity. GARCH models require that data must be stationary, where stationary means both mean and variance are ...
121 views

Orthogonal Regression/PCA

I am doing orthogonal regression. My X matrix consists of returns on a broad market index, value index, growth index, a few sectors,.....(my Y is the returns on an equity fund) I am regressing the Y ...
90 views

Tools/R-code to create gain/loss-asymmetry plots

The gain/loss asymmetry is a well known stylized fact: It basically states that real financial time series take longer for going up than going down. To detect it a heavy statistical machinery is ...
103 views

FORECASTING Model AR(1) in an Autoregressive Form The Pi´s Parameters

Ive been implementing a little exercise to obtain the first 2 forecasting points of an AR(1) process. And i want to have the forecasting ponts using the three forms: Im folowing this pdf ...
77 views

how to convert notional to nominal of bond future to ctd bond

I want to know if you can easily convert a notional of a bond futures contract into the nominal of the ctd bond if you have the conversion factor. For example you have 1000 notional of a futures ...
88 views

Gain/loss-asymmetry in artificial financial markets?

The gain/loss asymmetry is a well known stylized fact: It basically states that real financial time series take longer for going up than going down. My question Are you aware of any artificial ...
252 views

Why $N(d_1)$ and $N(d_2)$ are different in Black & Scholes

I'm struggling to understand the meaning of $d_1$ and $d_2$ in Black & Scholes formula and why they're different from each other. As per the formula, $$C = SN(d_1) - e^{-rT}XN(d_2)$$ which ...
88 views

Impact of big order on price

What is known about the question: If someone buys or sells a huge amount of some asset how the price would change ? Of course, it depends on the kind of assets and other context. My main interest is ...
141 views

How to perform risk budgeting for non-linear portfolios?

I am using this question to compute optimal weights following a risk budgeting approach. The problem is I am using non-linear portfolios (options,equity,fixed income,fx). What I am looking for is ...
377 views

Greeks of a swaption using Brigo

I struggeling with calculating the delta of a swaption. In the interest rate case I usually mess around with the multiple cash flows over time so that the discounting is more complex than in the ...
72 views

Connection between implied volatily and implied probability

I am reading some lecture notes about Black-Scholes (BS) option pricing. Since the BS-formula is not supported by observed data because of the dependence of the implied volatility on the strik and ...
505 views

How to learn QuantLib-python at first?

In my project, I have to get the delta of up and out call option (with vol surface). I found out that QuantLib might help me on that. Since my main language is python and I don't know well about C++, ...
161 views

Legitimate input parameters for Nelson Siegel Svensson model

I had previously asked this question and have come to better understand the answer with regards to setting the input parameters for the Non-Linear Optimization problem that provides the NSS ...
221 views

Rebalancing portfolio weights

I have a matrix of returns and weights for every time period. ...
34 views

Compound Discounting(?)

I am a programmer interning at a small contract furniture company. This company receives multiple discounts from the manufacturers, and I am trying to calculate the end discount. For example, the ...
51 views

Understanding portfolio weights and purchasing stock in modern portfolio theory

Recently I've been learning about the markowitz algorithm. It's pretty interesting, but I'm curious how we apply this in practice. Lets say I have some optimal portfolio: $R_p = x_aR_a + x_bR_b$ ...
91 views

About the boundary conditions of the Black-Scholes-Merton PDE

I have a question about the solution of the Black-Scholes PDE for the European call option when I read the book Stochastic Calculus for Finance II of Steven E.Shreve. Let $c(t,x)$ be the value of the ...
114 views

Calculating discount factors using Nelson Siegel Svensson model

I am trying to understand how to calculate the discount factors $disc(TTM)$ mentioned on Page 9 of this pdf. When I'm calculating the discount factors, mentioned each bond has its own cash flow and ...
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Libor OIS basis swap equation

I'm a little embarrassed about this because I have a PhD in math, but I'm having a little trouble working out how to bootstrap an OIS curve from libor rates and basis swap rates. If I had an equation ...
219 views

Understanding how to obtain Nelson Siegel Svensson parameters

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non- Linear Optimization problem to do this. I am using the procedure presented in this paper. The way I ...
146 views

Numerical Solutions for PIDE

I want to solve an exotic options of PIDE by Numerical Methods.I just focus on the integral part of PIDE and want to underestand some tips on numerical solution of how to numerically solve it. Exactly ...