1
vote
1answer
70 views

Calculate CVaR for a portfolio

I would like to calculate the Conditional Value at Risk for a portfolio. To be honest, I'm trying for a few days to find an example to calculate for an entire portfolio, not just for one security and ...
2
votes
2answers
94 views

Braess's paradox in quantitative finance: When optionality leads to lower value…?

One of the standard tenets of quantitative finance is that options should have an intrinsic value because optionality as such (in the sense of having more choices) should bring about value. This ...
1
vote
0answers
39 views

Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned ...
1
vote
3answers
76 views

How to differentiate a brownian motion?

By definition a wiener process cannot be differentiated. But when we use Ito's lemma on F = X^2, where X is wiener process we have total change in ...
1
vote
1answer
32 views

Stock price is a martingale if the riskless interest rate is zero?

I came across a question as such: Suppose company IBC is trading at \$75 per share. What does it cost to construct a derivative security that pays exactly one dollar when IBC hits $100 for the ...
0
votes
1answer
54 views

Binomial tree vs trinomial tree in pricing options

Very new to pricing models. Is there a general guideline when to use binomial tree and when trinomial tree is preferred? As far as I know, unlike binomial tree, trinomial tree only gives a range ...
6
votes
0answers
89 views

Quantum Mechanics and Economics… What

I was reading this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2002698&download=yes The author has the model presented here: ...
2
votes
2answers
135 views

Transforming Variables in Regression

I have a very simple problem that hopefully someone could help me with or at least point me in the right direction. I am testing to see which factors affect index returns the most and would like to ...
0
votes
0answers
11 views

use of recurrence quantification analysis for deterministic signal identification and classification

The recurrence quantification analysis (RQA) is a method of nonlinear data analysis which quantifies the number and duration of recurrences of a dynamical system presented by its state space ...
-1
votes
0answers
24 views

building a portfolio without knowing the initial capital

Lets say I have the trades made by trader X on multiple stocks and I want to aggregate them into a portfolio to compute the portfolio return over time. For instance, I know that X bought 10 shares of ...
0
votes
1answer
79 views

IbPy download historical price data

How can i download historical price data from interactive brokers using IbPy and python?
-1
votes
0answers
35 views

API for paper trading service

I have recently created an HFT algorithm and before attaching it to a real trading service I would like to test with paper money. The API for the paper trading would need to be compatible with C++ and ...
0
votes
1answer
23 views

A problem involving random walks from Shreve

Problem 5.4i in Shreve examines a symmetric random walk. Let $\tau_2 $ be the first time that the random walk reaches 2. For $\alpha\in (0, 1) $, we are given that $$E [\alpha ^ {\tau_2}] =\sum_{k = ...
-1
votes
0answers
14 views

Calculate herfindahl of pcs

I would like to calculate the herfindahl of principal components of a cap weighted portfolio. Not sure how to do that if anyone could provide some guidance that would be great. Thanks for your help
-1
votes
0answers
28 views

RESTful trading API

Looking for providers or software layers of a RESTful trading api. I would like to read option chain data (amongst other things), do some calculations server side, and send orders back to the broker ...
-2
votes
1answer
33 views

Finding historical data monthly data [duplicate]

Where can I find historical data for WTI Price, gold price, CRB index for my research work? Is there any website from where I can download these data?
2
votes
2answers
165 views

Is implied volatility flawed?

Was going through how Implied Volatility is used by option traders and in delta hedging. Correct me if I am wrong, doesn't IV consider a standard deviation of the stock price over say the past 1 year? ...
2
votes
0answers
29 views

How to calibrate volatility surface for Interest Rate Cap&Floor pricing

I'm using Black model to do interest rate Cap & Floor pricing. The volatility is determined by using the bootstrapping methodology. However, afterwards, how should I do the calibration, or ...
1
vote
1answer
33 views

Discount Curve built-up

For a particular currency, let's say for USD, I'd like to know how to construct a discount curve? I've an impression that one professor told me that for USD, less than 3 months, it's using Libor ...
0
votes
0answers
8 views

How to calculate margin costs for a brokerage account?

I wanted to calculate total margin costs for an account that started with 5,000 cash and held for 6-months? I managed to get some sample rates online . My assumption is that I would borrow another ...
0
votes
1answer
26 views

KeyError in Python code used to determine a trade signal for Pair Trading

I'm basically running some code as follows. Basically I'm just retrieving pairs of stocks (laid out as Row 1-Stock 1,2, Row 2-Stock 1,2 and so on, where Stock 1 and 2 are different in each row) from a ...
2
votes
1answer
87 views

Why is IV different between put and call of same strike

In his book 'Dynamic Hedging' Nassim Taleb says that the volatility of an OTM put should be exactly equal to that of a corresponding in the money call of same strike. But in option chains, the ...
1
vote
1answer
41 views

Technical Analysis - OBV indicator calculation in R

Here is a few references about OBV calculations: http://ta.mql4.com/indicators/volumes/on_balance_volume ...
2
votes
0answers
53 views

Calibration of Heston version of CIR

I'd like to calibrate a variant of Heston model for interest rates which is describe by this couple of SDE \begin{aligned}dr_t&=a(b-r_t)+\sqrt{r_t}\sigma_t dW_t^1 \\ ...
1
vote
1answer
26 views

Value-at-Risk of the sum of three independent lognormal random variables with different confidence level

there are three Business units in a firm, each has operational VaR value which are independent from eachother. the quantile for each opVaR is different from the others. can I simply add the VaRs to ...
1
vote
1answer
35 views

Differences between editions of Security Analysis by Graham and Dodd?

Where can I find a comparison of the contents, a list of everything that changed or the differences among the different editions of the book Security Analysis by ...
0
votes
0answers
27 views

Value-at-Risk - Currency Swap

Can someone explain to me how to calculate the VaR (delta-normal-method) for a Currency Swap? Thanks in advance. Regards Alexander
1
vote
1answer
48 views

Using Gordon's Growth Model to find value of corporation

This is a question posed to us by my professor in my finance class. I was under the impression that the Gordon Growth Model was used to find the intrinsic value of a stock, but I am unsure how to plug ...
3
votes
2answers
129 views

What is the use of options pricing formulas

This may seem like a dumb question, but if the EMH is generally true, wouldn't options already be correctly priced? Why do we need all these intricate formulas, unless we think the prices are wrong or ...
1
vote
1answer
50 views

Discounted Stock Price

I have the following Question : Prove that under the risk-neutral probability p the stock and the banjaccount have the same average rate of growth. In other words, if $ S_0 , S_N $ are the initial ...
0
votes
0answers
28 views

Distribution of running maximums of a log normal process

I've been searching for quite some time and would appreciate any guidance! What I'm looking for is the distribution of running maximums for a log-normal process. If anyone is familiar with any ...
0
votes
1answer
16 views

Complete Multiperiod Binomial model

I have the following deifnition of a Complete multiperiod binomial model: A multi period binomial model can be called complete if every derivative security can be replicated by trading in the ...
0
votes
1answer
38 views

Validation of Bates SVJ model

I have just finished implementing the Bates model for pricing European call options. To check results, I have been looking for a validation set where I could see the Bates parameter values and ...
1
vote
2answers
76 views

Using Black-Scholes to price a geometric average price call

Sorry if this is the wrong exchange for this question. It seems to be the most relevant, anyway. I'm trying to learn and understand the Black-Scholes framework, with a focus on the stochastic ...
3
votes
0answers
39 views

Dynamic Hedging for a Bond

Sorry if this question is duplicate. Analyzing the scenario to hedge bond credit risk with CDS. but if Bond price changes CDS notional will not change. is there any way i can hedge this ?
0
votes
0answers
25 views

Difference between Risk avoidance and Risk transfer

I was hoping some could explain the two terms namely, risk avoidance and risk transfer. Also, can a risk be avoided by transferring it?
2
votes
0answers
69 views

Empirical distribution function of overlapping time series data

If we model asset return volatility for periods of more than one (say more than one day) there is the square-root rule which holds true under some assumptions. The situation is more tricky if we look ...
0
votes
1answer
32 views

Replication of the portfolio in single step binomial model

I would be grateful if anyone would comment how to construct this: Assume $S_{i}^k$ is a stock price at time level $i$ and at price level $k$. Assume option is written on $S$ with a a payoff ...
3
votes
1answer
171 views

US options market/microstruture research

Can someone point out where to find up to date market/microstruture research in the options market?
2
votes
1answer
96 views

rollapply with Arima model: testing for stability of coefficients

I am trying to fit an arima model on a rolling window using rollapply.My aim is to plot a graph of the evolution of the coefficient, plot the error and the standard deviation. well i encountered the ...
1
vote
0answers
61 views

Monte Carlo simulation returns not normal distributed

I am generating 100,000 paths of SPX out to 1 year using Euler discretization. I look at how S is distributed for 100,000 paths at the 1 year point and I find it is lognormally distributed. I look at ...
0
votes
0answers
16 views

Principal Protected Notes

I have a few questions on the structuring of principal protected notes. Let's say that the note has a call option on the S&P500 so that it has the following payoff at maturity: $PPN_T=100\% + A ...
0
votes
0answers
14 views

Simulated Price Data via Harmonic Logarithmic Walks?

Hi I came up with this equation last week and was wondering if: 1) There was already a name for this mathematical process. If so, where I might find more information. 2) Also, I am not adept at ...
2
votes
2answers
150 views

Futures fair value with spot in different currency

The fair value, $F$, for a futures contract is $ F = S(1+rt) - D,$ where $S$ is the underlying spot price, $r$ is the interest rate, $t$ is the time to maturity, and $D$ is the dividends. What is ...
1
vote
1answer
59 views

What is a Basis Swap Curve?

I know what a Swap Curve is. But I don't understand what a Basis Swap Curve is and how it is constructed? Need some guidance on this.
4
votes
3answers
103 views

Technical analysis - Calculating Aroon Indicator Serie

I'm trying to build a class to create Aroon series. But it seems I don't understand the steps well. I'm not sure about what purpose I have to use the period parameter. Here is my first attempt: ...
1
vote
0answers
24 views

Implementing Minimum Leverage in an SOCP Portfolio Optimization

I'm optimizing a portfolio of n assets and my optimization variable is of the form $$x = [t,w,w_L,w_S]$$ where $$t:= \text{slack variable for turning my QP objective into SOCP constraint}$$ ...
0
votes
1answer
47 views

out-of-sample variance using rolling window

I am currently working on the comparison of the constructed portfolios using out-of-sample variance criteria. I am going to use rolling window procedure for the comparison. First, I choose a window ...
3
votes
1answer
71 views

Sortino Ratio calculation

I've been using an excel template to calculate the sortino ratio for my automated trading strategies. http://investexcel.net/calculate-the-sortino-ratio-with-excel Basically i input my monthly ...
0
votes
1answer
36 views

Portfolio of Assets

The following represents a model for an economy. At time $t=0$, four assets have the value $X_1= £5$, $X_2=£5$, $X_3=£10$ and $X_4=£4$. Three possible states of the world exist ($\alpha_1$, ...

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