4
votes
2answers
566 views

How do I determine the maturity date from a T-bill's CUSIP?

Is there a way to determine a government bill's or bond's maturity date by looking at its CUSIP? For example, the CUSIP for US T-Bills with a maturity of 12/1/11 is 9127953V1. As you probably know, ...
9
votes
1answer
245 views

Is a linear combination of GARCH processes also a GARCH process?

If two time series follow a GARCH process, and a third is a linear combination of them, is the third also GARCH process?
8
votes
4answers
448 views

Position management in presence of continuous forecast

Let's say we have an equity liquidity-providing model that was fitted on 1 minute bar periods. The model forecasts the 1-min next period return given the activity of the previous bars. Now, when we ...
-2
votes
1answer
141 views

Different stocks with the same stock code [closed]

Is it possible to have different stocks with the same stock code on different stock exchanges.
3
votes
2answers
791 views

Tick data collection

I am new to this. I am confused on what consists of a tick data. I have a trading platform in which I could collect data of exchange traded product like futures and stocks. While I am intending to ...
2
votes
3answers
553 views

How to annualize dividends paid at varying intervals?

I am attempting to write a function that will calculate the annualized rate of return for individual dividends made by illiquid investments. These dividends are paid at varying intervals and the ...
9
votes
5answers
5k views

Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?

What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
4
votes
1answer
288 views

What is a good source to learn the different nuances of electronic orders and their nature?

Today I was speaking with someone involved in high frequency trading. They were mentioning hidden orders, queue positions (which can be lost in the orderbook based on certain order modifications), ...
2
votes
2answers
1k views

What is “Flow Interest Rates”?

Looking at quant roles I keep seeing 'Flow Interest Rates' or 'Interest Rate Flow' - what does this refer to?
5
votes
4answers
2k views

How should I include the bid-ask spread as a transaction cost in a backtest?

I have two backtesting algorithms: One that uses bid and ask prices for signal generation. For example: Buy when $ask < threshold_1 $ and sell when $bid > threshold_2$. Bid and ask prices are ...
5
votes
2answers
815 views

How should I compute the Sharpe Ratio for mid-frequency pair trading strategy?

I have a pair trading strategy with positions that last 3-5 days and trades 2-3 times a month. By design, all the trades are profitable until the cointegration is broken. Should I calculate the ...
8
votes
3answers
828 views

Why isn't all market data free?

I am hoping any answers can be threaded somewhere between "don't be naive" and starting a quasi-political flame. Transparency is suppose to be good for markets and also a social good. The market ...
7
votes
1answer
3k views

What is the best live options data API?

What is the best/cheapest service to get real-time (as real-time as you can get) on stock options? I'm looking for the fastest update on the ENTIRE market, with a few stocks prioritized, so I need ...
3
votes
1answer
848 views

Commerical delayed stock quote feed that is redistributable?

I'm looking for a commercial delayed quote feed that will allow us to distribute delayed US stock market quotes to the public (ie. that will allow us to display US delayed quotes on the Internet). We ...
3
votes
1answer
869 views

What latency should I use for backtesting a high-frequency strategy?

We're developing an HFT strategy for highly liquid futures traded at Eurex. We are planning to colocate our server and to use data feed of QuantHouse and execution API of ObjectTrading. Backtesting is ...
6
votes
2answers
207 views

How to get an analytic result for option price based on this model?

I defined such a model for stock price (1).... $$dS = \mu\ S\ dt + \sigma\ S\ dW + \rho\ S(dH - \mu) $$ , where $H$ is a so-called "resettable poisson process" defined as (2).... $$dH(t) = ...
12
votes
3answers
789 views

How to account for transaction costs in a simulated market environment?

I am simulating a market for my trading system. I have no ask-bid prices in my dataset and use adjusted close for both buy and sell price. To account for this I plan to use a relative transaction ...
-3
votes
1answer
444 views

Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]

I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors. I was wondering how ...
17
votes
3answers
974 views

When do Finite Element method provide considerable advantage over Finite Differences for option pricing?

I'm looking for concrete examples where a Finite Element method (FEM) provides a considerable advantages (e.g. in convergence rate, accuracy, stability, etc.) over the Finite Difference method (FDM) ...
7
votes
3answers
3k views

What is a real world example of negative forward interest rate?

As the title says, I am looking for a real world example where a forward interest rate is negative. Theoretically this is not a problem at all, if I look for a 3M forward interest rate that starts ...
5
votes
0answers
255 views

generating (or tracking) the DJUBS commodity index

Dow Jones and UBS publish one of the most popular commodity index families, the Dow Jones-UBS Commodity Index and its subindices. They provide a detailed manual describing the composition of the index ...
6
votes
1answer
860 views

What are the steps to perform properly a risk factor analysis on a portfolio?

I have been asked to perform a factor analysis on a given portfolio, assume it's a Swiss portfolio in CHF. First step, I chose which factors I would like to see in my analysis. The first factors I ...
7
votes
1answer
930 views

Optimal execution and reinforcement learning

Suppose a fairly simple problem: You have to buy (resp sell) a given number of shares V in a fixed time horizon H with the aim to minimize your capital spent (resp maximize your revenue). There are ...
6
votes
2answers
237 views

Reseach on when people/institutions sell?

I am curious to know if there have been studies on when selling occurs and if any useful patterns exist. I am particularly interested in the behavior of sellers when they are under water on their ...
2
votes
2answers
305 views

Proof showing that dollar cost averaging always worse than lump sum alternative

I am referring to the article here. In a nutshell the article says that using data based on S&P 500 index going back as far as to 1950, dollar cost averaging is performing worse than a lump sump ...
1
vote
1answer
576 views

Historical volatility from close prices (Haug pg 166)

I have implemented a function for calculating historical volatility using close the close method as described by Haug on page 166. When I implemented the formula given by Haug, it resulted in some ...
2
votes
0answers
122 views

How to find the upper bound of a digital option given some market data?

Given the price of a call equals to 5 with Strike 100, please find the upper bound (sup) of the digital option with strike 105. I am not sure about the solution, but I write the condition like this, ...
-4
votes
1answer
558 views

How to calculate the weight of the stocks using the linear regression?

I do a simple example with the follow three series(stocks prices): ...
3
votes
1answer
8k views

How to interpret results of Johansen Test?

I have two time-series a & b. The objective is to find out whether two series are cointegrated or not. I am using Johansen Test in R to find this out. I am using urca package of R. Here is the ...
11
votes
3answers
451 views

What is a commonly accepted econometric model for volume?

What is the gold standard econometric model for volume? For example, a common model for price is the autoregressive (AR) model with GARCH(1,1) innovations. Do you know of any good survey articles ...
2
votes
0answers
83 views

Good Environment, Social, and Governance Indicators to correlate with financial performance of PE

I am trying to see if there is a correlation between the Environment, Social, and Governance (ESG) performance and the financial performance of Private Equity (PE) funds. Are there any suggestions ...
7
votes
1answer
462 views

How to model time series of illiquid stocks - 400 observations (transactions) per 8 hours?

How to model time series which are illiquid - 400 observations (transactions) per 8 hours ? Are there models suitable for this situation which incorporate not only size of the transactions but also ...
3
votes
2answers
335 views

Resources for Benchmarking Automated Trading Systems available as deltix etc.?

Is there some research resource/group working on benchmarking of software products out there with automated trading and goals of "Advanced alpha generation and execution strategies" incorporating low ...
6
votes
1answer
296 views

Measuring co-movement at non-constant intervals

Correlation measures how much two series move together over a fixed interval. Are there any techniques that measure co-movement over a variable time frame? One technique I am aware of is concordance.
5
votes
2answers
2k views

How does one go from measure P to Q(risk-neutral) when modeling an asset paying dividends?

I am really having a terrible time applying Girsanov's theorem to go from the real-world measure $P$ to the risk-neutral measure $Q$. I want to determine the payoff of a derivative based an asset ...
8
votes
1answer
351 views

Is there a closed-form solution for the partial autocorrelation function of a Markov regime-switching process?

Consider a Markov Regime-switching process $X_{t}$ with $k$ regimes represented by $s_{t}$ such that $$X_{t}=\mu\left(s_{t}\right)+\epsilon_{t}$$ and $$\epsilon_{t}\sim ...
2
votes
5answers
7k views

Exercising an American call option early

I have seen the rationale behind why it is never optimal to exercise an American call option early, but have a question about it. If the option strike price is $E=\$20$ and it expires at $T=1yr$, if ...
10
votes
5answers
626 views

Is it ever possible that---because of illiquidity---exercising an out-of-the-money option is better than directly buying the stock?

Is there a case, where due to illiquidity, exercising out-of-the-money options could be better than directly buying the stock? When a stock is too illiquid, there are some costs because of this ...
4
votes
1answer
257 views

What's the best way to test/validate an interest rate lattice model

I have some implementations of interest rate lattice models. I would like to verify their performance. What would be the best approaches? Currently I compare pricings of some interest rate dependent ...
3
votes
2answers
2k views

GJR-GARCH Model In R

Any idea how to estimate GJR-GARCH models in R? Is there any particular library like fGarch that supports such models?
8
votes
3answers
579 views

Which greeks do you need to hedge if you want to implement an implied-volatility security?

Assume you want to create a security which replicates the implied volatility of the market, that is when $\sigma$ goes up, the value of the security $X$. The method you could use is to buy call ...
4
votes
1answer
271 views

Reference on Electronic volatility trading [duplicate]

Possible Duplicate: Looking for a recommendation for a real life volatily trading book. I recently came in contact with a quant desk that traded volatility. The discussion only highlited my ...
0
votes
1answer
260 views

Where to find introductory material on leveraged loans?

What are some good, preferably free, introductions to leveraged loans, also known as syndicated loans or bank loans? The introduction should describe the basic mechanics and very importantly provide ...
3
votes
1answer
347 views

Cross Bid and Ask prices for Forex trading

I am using ITCH protocol to get the Market Data information for Forex and trying to implement LOB on it and what i have noticed is that Bid and Ask prices are crossing very often. Should that be ...
3
votes
2answers
322 views

How is someone's Sharpe ratio recorded and communicated?

When I read about, say, some hedge fund wanting people with such-and-such Sharpe ratio, how is that ratio recorded and communicated to the interested party? I mean, do people just take it on faith ...
5
votes
2answers
814 views

Is the binomial model wrong?

In the standard MBA one-period binomial model, the value of an option is $v = \frac{1}{R}\bigl(\frac{u - R}{u - d}V(sd) + \frac{R - d}{u - d}V(su)\bigr)$ where $R$ is the realized return over the ...
6
votes
2answers
3k views

How to build a mean reverting basket?

I have been playing with mean reverting pairs, but seems that most of the low hanging fruit (ie pairs) have been squeezed already. I would like to start with mean reverting baskets (>2 securities) in ...
6
votes
3answers
686 views

cointegration applied to Portfolio Construction & Risk management

There are all sorts of applications of cointegration to generating alpha on mean-reverting timeseries: comparing spot vs. futures, bond spreads, identifying mean-reverting residuals, etc. But there ...
9
votes
3answers
893 views

Implementing a Fast Fourier Transform for Option Pricing

So, I'm in need of some tips regarding a small project I'm doing. My goal is an implementation of a Fast Fourier Transform algorithm (FFT) which can be applied to the pricing of options. First ...
7
votes
1answer
294 views

When pricing options, what precision should I work with?

I'm wondering if there's any point at all in double-precision calculations, or whether it's ok to just do everything in single-precision, seeing how the difference on non-Tesla GPUs for single and ...

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