2
votes
3answers
239 views

Leveraged and inverse leveraged ETFs - what is the exact defintion?

I just had a quick look at the daily returns for a few pairs of leveraged ETFs - it appears that the percent daily returns do not match perfectly. For instance, looking at FAS/FAZ, the returns for the ...
5
votes
1answer
2k views

How to use Newey West covariance corrector?

I have implemented the following model: daily_vol(t+1) = A*daily_vol(t) + B*weekly_vol(t) + C*monthly_vol(t) + error where vol means volatility, and A, B, C are ...
3
votes
1answer
99 views

How can I evaluate how poor a fit a parametric VaR result would be for a given holding?

I'm currently working on an application that, among other things, computes a one-day parametric VaR for security positions. I understand that the parametric method of computing VaR is a poor fit for ...
5
votes
1answer
1k views

Taylor series expansion (Volatility Trading book) explanation sought

I am currently reading Volatility Trading, I have only just started, but I am trying to understand a "derivation from first principles" of the BSM pricing model. I understand how the value of a long ...
0
votes
1answer
107 views

Reference on SDE driven by jump processes

Are there reference on SDE driven by jump proccesses? e.g. Shepard-Nielson Model
3
votes
0answers
213 views

how to represent financial data as a spatial process

Does any one have a good tutorial , introduction or overview on the web for different ways of representing financial data as a spatial process? Such as those spatial processes often used in ...
4
votes
2answers
2k views

Why FX Vanilla Options are quoted in volatility

I've been curious why vanilla options are quoted (and traded) in terms of volatility. Considering that every financial institution has its own options pricing model, volatility as an input would cause ...
5
votes
0answers
442 views

option chain data visualization, sunburst

I think option chains are not represented in the best way. With more and more options products coming out and trading on the various exchanges, I see vendors struggling to keep up with a good way to ...
1
vote
1answer
249 views

How to use financial ratios in a factor model?

I am trying to understand how factor loadings in a general factor model are computed. For simplicity sake, lets assume a simple model: $$ R = B \times F + \epsilon $$ $$ R = N \times 1 $$ $$ B = N ...
5
votes
3answers
1k views

Quick way to check what 'tape' a stock belongs to?

For the SIP feeds, there is the CTA and the UTP plan and they cover Tapes A,B and Tape C respectively. Is there an easy way to check on google what tape a stock would belong to? Particularly when it ...
1
vote
1answer
215 views

Regression giving the return on a stock

I have this regression equation: $$ R_{stock} = 3,28\% + 1,65*R_{market} $$ Where $R_{stock}$ is the expected return on a stock and $R_{market}$ being the market risk premium. I have a one-year ...
3
votes
1answer
255 views

Can a long put trade be profitable through Vega even if the underlying moves upwards?

Generally speaking, I know when implied vol increases, option prices increase for calls. However, does the same occur for puts? If I am expecting implied volatility to increase for an option on an ...
2
votes
3answers
3k views

Is there an Australian Interbank Rate?

Most widely used Interbank Rates are LIBOR, EURIBOR. Then I read online on SIBOR (Singapore). It says Canda, US are following LIBOR as well. So for Australia, is there a dedicated interbank rate like ...
5
votes
2answers
372 views

Recover full tick data from missing tick data

Due to some economics/regime problem, I can only have access to non full-tick data from an exchange. To make the problem precise, a full tick data $X$ is a series of $(t_i,p_i,v_i)$ for $0 \leq i ...
1
vote
1answer
236 views

PIQ estimation for FIFO limit order book

Assuming that one doesn't have any kind of priveleged data feed (i.e. info is depth of book and volume executed at bid and ask), is it inherently easier to more accurately estimate position in queue ...
5
votes
1answer
795 views

Problems with dealing with GARCH models and intra-day data

Short question would be "Which type of model from GARCH family is most suitable for modeling 5-minute data returns ?" but I've added some story to it. Long time ago I was preparing my thesis, one ...
3
votes
1answer
237 views

how to define liquidity in equity, index, and etf options

i've heard several ways to put a metric on liquidity of options.. obviously liquidity isn't a constant.. things like the Bid/Asks spread, liquidity of the underlying.. Trying to find a way to ...
2
votes
1answer
143 views

OTC Equity Options' Dynamics

This only applies to options that do not have marketable equivalents since margin can be marked to them. I've never been able to find this on my goog. How is margin typically calculated for OTC ...
2
votes
1answer
131 views

American Option price formula assuming a logLaplace distribution?

What are $d_1$ and $d_2$ for Laplace? may be running before walking. When I tried to use the equations provided, the pricing became extremely lopsided, with the calls being routinely double puts. ...
3
votes
2answers
1k views

Computing the Sharpe Ratio

The building blocks of the Sharpe ratio—expected returns and volatilities—are unknown quantities that must be estimated statistically and are subject to estimation error. The main problem I have is ...
2
votes
1answer
234 views

Implementing nonlinear optimization to find model free implied volatility using Matlab

I am trying to calculate model free implied volatility $\sigma_{MF}$ for a relative performance index using the following method: $\sigma_{MF}^2=2\sum_{i} [\frac{C(T,K_{i})}{K_{i}^2} - ...
6
votes
1answer
261 views

Upper bound concerning Snell envelope

Consider a non-negative continuous process $X = \left (X_t \right)_ {t\geq 0}$ satisfying $ \mathbb E \left \{ \bar X \right\}< \infty $ (where $ \bar X =\sup _{0\leq t \leq T} X_t $) and its ...
3
votes
1answer
286 views

Multiple Discrete Dividends

Using the recombining tree model as described in Haug's Option Pricing Forumla one can factor in multiple future discrete dividends when calculating the option value and greeks. What's unclear is ...
8
votes
2answers
3k views

Why do we use GARCH(1,1) to predict volatility?

What makes GARCH(1,1) so prevalent in modeling especially in academia? What does this model has that is significantly better than the others?
0
votes
2answers
167 views

Interpretation of PCs

I have computed PC1 and PC2 wts on future contracts derived from cumulative log differences. How can I use them to get back the theoretical price of each contract using those 2 pcs? Thanks in ...
2
votes
0answers
414 views

Markov-Switching E-GARCH with R

I am looking for a R library for modeling a Markov-Switching E-GARCH process. In other questions at StackExchange related to GARCH models, the package rugarch is often mentionned. Do you recommend it ...
6
votes
1answer
1k views

What different methods of pairs selection exists? (For Pairs trading)

(I'm quite new to quant finance so I'm not sure if this is an eligible question.) I've decided I want to backtest pairs trading on the Nordic stockmarket. So I would guess there exists different ...
0
votes
1answer
141 views

how to quantify non-fundamental risk if variance is 100% discounted?

If there's better vocabulary, forgive me. If you were required to ignore variance as risk, how would you quantify non-fundamental risk? Many thanks in advance!
2
votes
1answer
543 views

R ARMA-GARCH rugarch package doesn't always converge

I'm trying to compute the standard ARMA(1,1)-GARCH(1,1) as shown in this answer for an entire index,just to store in a database to quickly lookup values for back ...
0
votes
2answers
313 views

What stock market indicators to model based on twitter feed? [closed]

We are developing an algorithm that models twitter users and groups of words that may indicate real world events. One application is modelling elections, i.e which party is likely going to win. ...
4
votes
2answers
697 views

Why doesn't a simulated delta hedging process go to zero?

I put together a simple simulation of delta hedging a set of options with an underlying and it seems that the fluctuations of the price still seem to affect the final outcome. The reason, I understand ...
2
votes
1answer
163 views

How to calculate two-time scale variance?

I am having trouble understanding how to calculate two-time scale variance as I do not have a strong mathematical background. Suppose I want to calculate the TSRV at 5 min intervals. Do I calculate ...
3
votes
2answers
833 views

What continous adjustment methods are firms using for futures backtesting?

There are several methods available between data vendors and associated software programs to adjust futures contract data for historical simulations. Some of the methods are: 1) Back or forward ...
2
votes
1answer
222 views

What are $d_1$ and $d_2$ for Laplace?

What are the formulae for d1 & d2 using a Laplace distribution?
3
votes
2answers
75 views

Imputed values in a multi-index

I have an equal-weighted index on a number of different Indices (from US, Europe and Asian markets). This compound index is constructed from a time series that has missing values (for example, those ...
3
votes
0answers
167 views

is there a mapping from Altman Z-score for private companies to bond ratings or probability of default?

On wikipedia, there is a formula to calculate the Altman Z-score for private companies: Z-score estimated for private firms: T1 = (Current Assets − Current Liabilities) / Total Assets T2 = Retained ...
2
votes
1answer
713 views

Multiple (linear) regression

I am looking for some inputs on a pair trading strategy that I am trying to improve with some semi-fundamental input. The basic idea is to use multiple linear regression to estimate the price of a ...
4
votes
1answer
272 views

time in time series database - UTC or local

I strictly store UTC time stamps inside time series files or databases, mainly to allow processing several time series together. Timezone information is kept with each time series file or item, so ...
0
votes
2answers
81 views

Intangible assets as underlying for Futures contracts

How is it possible for a Futures contract to have an intangible underlying? For example, to my knowledge, there exist Futures that have interest rates as their underlying, come delivery date, how is ...
5
votes
2answers
4k views

Daily returns using adjusted close

I want to chart the daily returns of a stock, and I'm using Yahoo finance data to download historic data. I was told to use Adjusted Close, but there seems to be an issue with this. For ANTO.L, you ...
2
votes
1answer
228 views

Testing for stationarity in large sample sizes

I keep struggling with testing 9 samples if they are stationary. Each of these samples is a real valued time series with 714.000 values. If I use the KPSS test with the each compleete sample set, the ...
3
votes
2answers
296 views

NYSE binary data, convert to ASCII

The data product "TAQ NYSE Order Imbalances" from the New York Stock Exchange is in a format that is described pretty well in sections 4.8, 4.9, 4.10, and 5 of the document "NYSE Order Imbalances ...
4
votes
1answer
292 views

Quantitative risk model for an open real estate mutual fund in Europe

How useful are quantitative techniques for the risk analysis/management of a open real estate fund? I am thinking about an approach for Europe (US and other markets are probably quite different - ...
6
votes
1answer
535 views

What do eigenvalues/eigenvectors of the yield/forward rates covariance matrices mean?

I have 5 bonds (with maturities 1,2,3,4,5 years) which I calculated the yield curve for 10 days. I also calculated the forward rates from the yield rates. Now I've been told to calculate the ...
8
votes
2answers
2k views

Kelly criterion and Sharpe ratio

Whats the relationship between the Kelly criterion and the Sharpe ratio? $$ f=\frac{p(b+1)-1}{b} $$ where $f$ is a percentage of how much capital to place on a bet, $p$ is the probability of ...
-4
votes
2answers
195 views

How to use mean-variance weights in practice (when going short is allowed)? [closed]

I have calculated my optimal portfolio weights following the mean-variance framework where I go $w_1$ in the risky asset and $1-w_1$ in the risk free rate. I get the following result: $w_1$ = 1.5, ...
3
votes
2answers
905 views

Position management and market-making techniques

Suppose, there is a HF strategy (agent) that is based on order book microstructure, and it is able to make good executions locally. More formally, in average its execution price is better than asset ...
5
votes
4answers
905 views

Usage of Random forests in Quantitative analysis of stocks

I have a question about Random forests and how they could be utilized in trading? I heard Random forests are used for classification, is that accurate? If so, could someone give an example of what ...
2
votes
1answer
699 views

How to calculate implied volatility and greeks in Bull Put Spread option strategy?

Ok, obviously I am buying lower strike put and selling higher strike put. What is the recommended volatility and greeks to consider in my trade? Volatility: Average volatility between both legs? ...
3
votes
3answers
156 views

How to work out weights for a portfolio based on an inverse ratio with positive and negative values?

I am trying to work out how to determine weights for the assets in order to form a portfolio. The ratio I am using is EV/EBIT, hence the smaller the better. The problem is I don't know how to handle ...

15 30 50 per page