1
vote
0answers
193 views

Modeling asset performance to Bitcoin revenue

I'm attempting to model asset performance to Bitcoin revenue, which is a driving force in the Bitcoin community. Question Is there any model, or research being done that tracks "hashes per second" ...
1
vote
1answer
225 views

Fastest algorithm for extracting 25% and 75% marks

I'm hand rolling some visualization algorithms. Extracting the min/max of a time series is $O(n)$, for n entries. If I want the 25% and 75% mark, I could use an $O(n \log n)$ time sort, then get the ...
2
votes
1answer
351 views

Unsystematic and systematic risk of a portfolio

I have 8 country stock indexes and 1 world stock index. I do not actually have time series data but I'm given the following data: $\mu$, the vector of expected future returns for all 8 country ...
4
votes
3answers
1k views

Markowitz mean-variance optimization as “error maximization”

I hear it said a lot that standard MV optimization "maximizes errors". But I can't find a good explanation for what exactly they mean by this "maximization" of estimation error. I understand that if ...
2
votes
1answer
102 views

Aftcast Generation

Aftcast is a way of simulating equity curves for different start years, usually from a large sample data ~100 years. Its kind of like start date sensitivity testing but in my case, I incorporated ...
2
votes
1answer
894 views

Calculate the “ten year zero rate” given two bonds with two prices

I have a little question and need some help with the notation. So, the question goes as follows: A bond with a maturity of ten years that pays annual coupons of 8% has a price of \$90. A bond with ...
1
vote
2answers
395 views

What is the instantaneous P&L of a Variance Swap?

What is the instantaneous P&L of a variance swap. Is it $(\sigma^{2}_{t}-\sigma^{2}_{implied})dt$?
1
vote
1answer
400 views

Does amortization of bond start accumulating on trade date or settlement date?

I am sorry if this is not appropriate here. We are building a wealth management system and I really would like to know whether amortization of bond start accumulating on trade date or settlement date ...
2
votes
1answer
802 views

Modelling VIX Futures for risk management

I would like to model VIX futures. The aim is not pricing but risk management. Thus I want to get risk measures like volatility right and be able to accurately calculate correlations when the VIX ...
1
vote
2answers
542 views

Evaluating forecasting algorithm

I am trying to evaluate a forecasting algorithm for stock price prediction. However, the performance of the algorithm may be very much tied to the trading strategy. Is there a systematic way for ...
3
votes
1answer
320 views

mortgage prepayment model

I am trying to develop my own MBS prepayment model. I am confused by the terms SMM and CPR. Are they estimates/models in themselves or are they ACTUAL data for the MBS pool. where can I find actual ...
1
vote
1answer
479 views

Portfolio Greek Exposure Equations

What are the calculations for calculating greek exposures in a portfolio of equities and equity options? I think I have them but I want to be sure. Are these correct (for vanilla options)? ...
4
votes
1answer
1k views

SP500 sector weights - how do they change?

The weights of the nine S&P equity sector indexes vary over time. One can find measures of them in a number of different formats: S&P 500 Sector SPDRs - historical sector weights Here's ...
0
votes
0answers
104 views

Textbook / Reports on Alphanomics

Look at ACCT 340 @ http://www.gsb.stanford.edu/research/courses/acctg.html I've read some of the research papers written by the Professor, and the material is very interesting. However, I'm looking ...
1
vote
2answers
154 views

How can I estimate the parameters of an option value model of retirement?

I am modelling an option value model of retirement, see for instance Stock and Wise (1990). I am however not sure to which class of problems this model falls into and hence which optimization method I ...
5
votes
0answers
259 views

Can Hurst exponent be used to characterize nonlinear dependence in time series?

It appears to me that the answer is no, because Hurst exponent measures persistence in terms of autocorrelation, which is a linear measure. So even if a time series of asset returns is driven by ...
2
votes
3answers
633 views

How to compute interest rate futures spread ratio?

I am confused on how to compute the spread ratio. For example, this is example I came across with my broker - Consider 2 contracts Bobl and Euribor. The DV01 of Bobl i 44.8 and Euribor is 25. To ...
1
vote
1answer
346 views

Does Ito/Malliavin calculus have any applications helpful for direction based trading?

I'm an aspiring computer scientist who want to move into algorithmic trading at some point. At the moment I'm mostly focusing on courses in machine learning/data analysis etc. but I've noticed that ...
2
votes
1answer
147 views

Historical data on short rates

I would like to backtest a short-equity strategy. I'm looking for historical data on the availability of shares and cost to short certain stocks. Does anyone know of such data being available ...
1
vote
1answer
118 views

Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?

The bonds which Greece has paid had been valued by market as junk once, just before there payment. Given that the observed market value is the net present value of the instrument, why were they so ...
3
votes
1answer
687 views

Computing FX forward delivery dates

I'm looking for a precise definition of how FX outright delivery dates are computed. Chapter 1 of the book 'Foreign Exchange Option Pricing: A Practitioners Guide' (this chapter can be found here) ...
0
votes
1answer
326 views

Question on OptionMetrics: “Strike Price times 1000” differs too much from Index price

I have a question regarding the strike price that is given on OptionMetrics. My goal is to primarily retrieve options prices of a specific maturity with strike prices that are 20% in-the-money, ...
5
votes
1answer
324 views

NYSE Early Close Rules (July 4th and Dec. 25th)

Does the NYSE provide a list of rules for determining when to close at 1:00 for a holiday? I have found a list of upcoming half-days here but I would like to know the rules so that I don't have to ...
3
votes
2answers
2k views

Interpolating FX forward points

When computing an FX forward rate for an expiry that is not explicitly quoted, it seems to me that a reasonable way to do it is log-linear interpolation of the two nearest outright forward rates, ...
2
votes
4answers
3k views

Data source for historical Share Outstanding totals for individual stocks?

Data is normally adjusted for splits/reverse splits, etc. The current shares outstanding is usually available. Is there a data repository that captures the shares outstanding for any point in the ...
2
votes
2answers
774 views

ROC: difference between discrete and continuous?

Using the ROC function in the R package TTR, there is a choice between continuous (the default) and discrete, but with no guidance on which you choose when. In the code the difference is: ...
3
votes
2answers
2k views

How to define the objective function for a custom optimization problem?

I would like to find the allocations that would minimize some user-defined metric (Sortino, minimum drawdown, etc) for a portfolio of assets. How would one go about formulating the objective ...
5
votes
2answers
985 views

VIX = Vega of S&P500 options?

ok, so let assume I can predict the daily change in the VIX itself (in points) every day. what would be the best way to play this with OPTIONS? well, obviously VIX options, but if I can look at the ...
1
vote
2answers
777 views

Multi asset option portfolio risk management (greeks and FX exposure)

I am running an options book containing listed options across multiple products. I trade mostly equity and index related options - with a preference for European expiration products. I trade products ...
2
votes
1answer
363 views

Is there any evidence that an option delta approximates ITM expiry probability?

Several sources (online and offline) that discuss the delta of a listed vanilla option, state that its delta is a (guesstimate?) of the probability of said option expiring ITM (in the BSM framework). ...
5
votes
3answers
613 views

Strategy Risk and Portfolio Allocation Model (copy from nuclear phynance)

Here is a very interesting question that I found at Nuclear Phynance (original author: Strange); I though it is so interesting that it is worthwhile to ask it here: I have $N$ strategies, across a ...
1
vote
1answer
128 views

Brent Crude Data

I am trying to locate historical volatility data (5+ years) for Brent Crude? Does anyone know where I might be able to source such data?
5
votes
1answer
765 views

Can the Heston model be shown to reduce to the original Black Scholes model if appropriate parameters are chosen?

Summary For Heston model parameters that render the variance process constant, the solution should revert to plain Black-Scholes. Closed from solutions to the Heston model don't seem to do this, even ...
5
votes
1answer
381 views

Benfords law and quantitative finance

Benford's law has been applied in various ways for detecting fraud (e.g. elections or accounting). But what are the most useful applications of Benford in quantitative finance? Are there any? I have ...
3
votes
2answers
388 views

Backtesting VaR model violation independence

I am interested in hearing about the practitioner state of the art for testing the time independence of a VaR model (i.e. that VaR violations are independent in time). There are a number of tests in ...
3
votes
1answer
423 views

Long-term vs short-term strategies \ investing

Suppose most investors have very short investing horizons and use appropriate (for them) strategies, but investor X has a very long horizon. He would like to trade some advantages (early withdrawal ...
4
votes
2answers
171 views

Indexes/stocks with flat implied volatilities

After the 1987 crash, the S&P500 index implied volatility changed from nearly flat to negatively sloped. According to Rubinstein the Black-Scholes model was not so wrong when applied to the ...
2
votes
2answers
433 views

Why don't options traders use charts? Or do they?

Retail trading platforms typically offer equity charts but only instantaneous quotes on options. It seems like even a few minutes of historical data would be useful when entering an order. Are charts ...
1
vote
0answers
65 views

Neglect the positive values in negative interest rates modelling?

The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads. Could their volatility / correlation ...
0
votes
1answer
70 views

Separated software and physical cash flows modelling and pricing to be used with negative interest rates?

The physical cash presence in the final transactions is one of the issues in the presently observed negative interest rates bonds. Such a situation has historically been modelled within the "liquidity ...
0
votes
0answers
56 views

Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?

Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...
3
votes
1answer
238 views

Is inverted Japanese style curve persistent when negative rates are real / market - observed?

Are the inverted (Japanese style) governmental yield curves being a sign a recession/credit risk or should they be modelled as being due to a lack of liquidity? (...with such curves evolving into a ...
9
votes
2answers
181 views

St Petersburg lottery pricing & short investing horizons

I am a statistician (no solid background in finance). Please forward me to a book \ chapter \ paper to resolve the following general question. Suppose we have a stock with the following monthly return ...
11
votes
2answers
1k views

Modelling with negative interest rates

For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...
4
votes
2answers
2k views

What is the meaning of subadditivity in a risk measure?

The subadditivity reads: $\rho(X_1+X_2) \leq \rho(X_1) + \rho(X_2)$ What is the meaning of this condition? I can vaguely accept that one should diversify the investment portfolio. Or, I can ...
2
votes
1answer
426 views

Question on OIS and fed funds rate

If i am considering the 0-5 year irs spread for the USD market, would it be more accurate to use the fed funds rate or the OIS rate? I believe the OIS rate is calculated based on the fed funds rate, ...
4
votes
0answers
164 views

How to estimate CAViaR (Engle and Manganelli 2004) using non linear quantile regression?

I am trying to replicate results from Engle and Manganelli (2004). The following is one of their specifications, $q_t(\theta)=\gamma_0+\gamma_1q_{t-1}(\theta)+\alpha|r_{t-1}|$, $q$ is the quantile of ...
3
votes
3answers
345 views

Basic question about Black Scholes derivation

In the derivation of the Black Scholes equation, the value of the portfolio at time $t$ is given by $$P_t = -D_t + \frac{{\partial D_t}}{{\partial S_t}}S_t $$ where $P_t$ is the value of the ...
4
votes
1answer
338 views

Sufficient conditions for no static arbitrage

In Carr and Madan (2005), the authors give sufficient conditions for a set of call prices to arise as integrals of a risk-neutral probability distribution (See Breeden and Litzenberger (1978)), and ...
8
votes
4answers
679 views

Is this a common variation of sharpe ratio?

As an aside on his answer on another question Freddy said: Sharpe ratio is an often cited metric, though I do not like it too much because you are penalized for out-sized positive returns while ...

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