# All Questions

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### novice question on fixed coupon schedule in QuantLib

For some bonds I work with the last coupon date is not equal to bond's maturity date. E.g. the last coupon date is April 25th, 2020 and maturity date is April 25th, 2021. I looked at Schedule class ...
274 views

### Why do I have a statistically significant slope regressing R(t) on R(t-1)

I am reading Cochrane's lecture note here He mentioned that when you regress annual return on time t on that of time t-1, you will have neither statistically significant nor economically significant ...
126 views

### Adjusting for variance bias when using overlapping data

I'm in the process of constructing volatility cones for several assets and I want to make sure the data is free of biases. I know that using overlapping data introduces an artificial degree of ...
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### What are the estimation methods for SV models?

I want to know about some methods like Methods-of-Moments, Quasi-Maximum Likelihood method, Baysian methods using Markov Chain Monte Carlo methods. Is there any reference to have an idea of these ...
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### How to price an option with a “step up” feature using binomial tree?

I have a call option with expiry in two years. In my case the option is bermudan style with first 9 months w/o ability to exercise (i.e. European) and after exercise at any time (i.e. American), but I ...
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### Will pricing a Bermudan option default to a value of a European option?

I have a call option with 2 expiry in two years. For the first 9 months I cannot excercise the option. After that the I can exercise at any time. I am pricing this option using a binomial tree using ...
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### Stability of Equilibrium in 2 good exchange economy

Hello I was wondering if someone could help me with the following question relating to the stability of an equilibrium in a two good exchange economy and the Walrasian auctioneer. The setting is the ...
134 views

### Is this an inconsistency between Swap and LIBOR?

I'm a little confused by what I see as an inconsistency between quoted £ swap rates and £ LIBOR. From the FT on 25/4/14: 1-year Swap (semi-annual): Bid - $0.63\%$; Ask - $0.66\%$ LIBOR: 6-month - ...
93 views

### Bond pricing with HJM simulation

I'm using Glasserman 3.16 and 3.17 algorithm to price bonds. The algorithms evaluates the forward rates and the discount factor $B(0,t_j)$. My question is: How can I price bonds in a future time? I ...
133 views

### Constant term in linear regresion

Can someone give a mathematical proof as to why including a constant in a linear regression equivalent is to running a regression with demeaned data and zero constant? More specifically, consider the ...
84 views

### derive black scholes greeks

I am reading a paper and get a problem here, the following terms are all from standard BS models. the paper says using the well known fact $$Se^{-q(T-t)}N^{'}(d1)=Ke^{-r(T-t)}N^{'}(d2)$$ here the ...
35 views

### FTSE AIM Components From 2000, 2001, … 2013

From where can I get a list of historical component lists for the FTSE AIM Index as well as other indices? I see that there is a page for data sources here, but that page does not contain what I am ...
126 views

### A question about pricing convertible bond with two different underlying assets

I have a question regarding the pricing of convertible bond. If I value the convertible bond with two different underlying assets, how can I incorporate two volatility and the correlation in the ...
275 views

### Ornstein versus AR(1) for modeling stationary data

I've come across several posts regarding parameter estimation for O-U models given some stationary data (say, some sort of mean reverting spread), but I can't seem to find an answer as to why modeling ...
2k views

### Volatility arbitrage - how is the profit extracted?

Is there any paper that describes in detail how the profit is extracted in directional volatility bet (vol arb)? I mean in the case that I bet the realized volatility will be lower than currently ...
218 views

### Hidden Markov Models methods for selecting optimal number of states

Package RHmm (R) I have a vector which I fit into a hmm model in an attempt to select an optimal number of states for a hidden markov model. ...
189 views

### Close price or adjclose price to calculate volatility?

To calculate volatility, which price in FTSE table is used? When do we use close price for calculating volatility? Do we use adjclose (adjusted close price) for calculating volatility as well? when ...
148 views

### What happened to Mountain View Analytics?

I stumbled over Thomas Cover's work on algorithmic portfolio selection; apparently, an outfit called "Mountain View Analytics" attempted to implement the suggestions from Cover's research. ...
64 views

### Quantitative method to select tactical bands for asset allocation

Do you know a study with a methodology for selecting tactical bands (or the allowed deviation from a strategic asset allocation)? Thanks
128 views

### Distribution of Brownian Bridge

I know from Karatzas & Shreve (1991) that a Brownian Bridge $B(t)$ from $a$ to $b$ on time interval $[0,T]$ satisfies: $B(t)=a(1-t/T) + b*t/T + [W(t) - W(T)*t/T]$, where $W(t)$ is a standard ...
221 views

### Option pricing within the Black Scholes model

Have a question regarding regular option pricing. In the standard Black-Scholes model, with interest r and volatility $\sigma$. Determine the arbitrage free price at t of an option which at $T>t$ ...
98 views

### Distribution of minimum of hazard functions

Suppose I have two random variables, $X_1$ and $X_2$, that are independent (but not identically distributed) and assume both have hazard functions $\lambda_1(s)$ and $\lambda_2(s)$, for $s > 0$. ...
118 views

### Does GARCH derived variance explain the auto-correlation in a time series?

Given a time series of $u_i$ returns where i=1 to t. $\sigma_i$ is calculated from GARCH(1,1) as $\sigma_i^2=w+\alpha u_{i-1}^2 +\beta \sigma_{i-1}^2$ . What is the mathematical basis to say that ...
175 views

### What's the disadvantage of ARMA-GARCH model?

I want to ask why ARMA-GARCH is more and more popolar, and what's the advantage of this model.
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### American Swaption Pricing with PDE discretization

So I am still trying to price an american swaption. (MC approach here: American Swaption Pricing with Monte-Carlo method) I've found in Paul Wilmott, The mathematics of financial derivatives, a PDE ...