0
votes
3answers
64 views

Distribution of pay-off of an exotic option

Can any assumptions be made about the pay-off of an exotic option? For example, might we say the distribution of the pay-off a vanilla option would be Normal? I have built a valuation tool that ...
0
votes
1answer
32 views

long fra and a short ed future with same fixing dates, is convexivity negative or positive?

If you are long a FRA (forward rate agreement) and short a ED (Eurodollars) future with the same fixing dates, do you have positive convexity or negative convexity? Why? According to the following ...
0
votes
1answer
48 views

Calculating PCA hedge ratio for 3-leg spread

I'm wondering how can I find PCA hedge ratio for a 3-leg spread? I've taken the simple steps laid out in here. I've taken some treasury futures data for 2yr,5yr,10yr and ran the PCA. The first ...
0
votes
1answer
23 views

Which rate of return to use in portfolio weight estimation?

I am learning the basics of portfolio management. I am confused about different ways to calculate rate of returns mentioned in the text investment and portfolio analysis. There are three methods to ...
2
votes
0answers
42 views

Capital increase: which stock price to use as input to Black-Scholes formula?

For an exercise we have to calculate the theoretical value of a scrip / preferential right on its issue day (23 April) in the context of a capital increase. The scrips are issued on 23 April. The ...
0
votes
1answer
39 views

question regarding carry & roll of a bond

I have a simple (and might be a dumb) question regarding the calculation of a bond's carry. If someone doesn't take into account cost of financing (e.g. the repo rate) then the bond's approximate ...
0
votes
1answer
42 views

How to create time series with lagged in R [closed]

Would anyone else advise me, how to create time series with lagged in R. I would the result is the difference with lagged, there is a function Delt() but the result is the percentage change. Please ...
1
vote
0answers
11 views

How we can use adjusted price in combination with price limit in a stock market?

How we can use adjusted price in combination with price limit in stock market? suppose that we have a price limit in a stock market. For example if yesterday last price is ...
2
votes
2answers
46 views

What does it mean to 'receive outright'?

What does the following statement mean: "after accounting for levels of market volatility, we favor receiving outright in 6-month forward-starting 2-year swaps."? Specifically, what does "receiving ...
1
vote
1answer
55 views

What causes discontinuities with stock prices

With reference to the figure above, why is it that the price at which the stock closed at on monday not equal to the open price on tuesday? Is this discontinuity due to an adjustment in the price ...
1
vote
1answer
28 views

Old CBOE SPX options data: listing and expdate issue

I can't figure out the logic behind SPX option data for 2008-2009 years. First, all traditional SPX options have exp_date on the third Saturday of each month. How can it be? Why not Friday? Second, ...
3
votes
1answer
58 views

How to find volatility of Asset given volatility of Stock in Merton model?

I encounter a problem in one of my project to find the 1 year, 2 year and 3 year Asset volatility. We are given 2015 Bell Canada's financial report and a software to do this. The financial report can ...
1
vote
0answers
27 views

Performance measure

Can anyone give some intuition behind the relative performance measure that is a percentile raking of trading activity. It indicates the percentage of total activity the investor outperformed the ...
-1
votes
1answer
34 views

How does a small recovery in oil prices equate to risk appetite? [on hold]

I was reading an article yesterday that the Aussie/Dollar pair fell due to a sharp fall in oil prices (38.20 down to 36.70) which the market sentiment considers as "Risk off", and as oil prices ...
2
votes
1answer
49 views

Trinomial model converges to Black-Scholes weakly

Consider risk-neutral trinomial model with $N$ periods presented by $$S_{(k+1)\delta}H_{k+1}, \ \ \text{for} \ \ k=0,\ldots,N-1$$ where $\delta:=\frac{T}{N}$ and $\{H_k\}_{1}^{N}$ is a sequence ...
0
votes
0answers
13 views

Optimize a function in R [migrated]

I was looking since a long time for a programm code that optimize a parametric portfolio (a parametric portfolio is a portfolio whose weights depend on state variables). Recently, I received the ...
0
votes
1answer
35 views

How to estimate parameters for 2 correlated Ornstein-Uhlenbeck processes with maximum likelihood?

I would like to use maximum likelihood to estimate the parameters of two correlated Ornstein-Uhlenbeck processes from empirical data. Do you have any good references for this? If you have any hints as ...
1
vote
1answer
64 views

How to price a stock under Q and stochastic interest rates?

I am interested in pricing a stock under $\mathbb{Q}$ when I assume that $$dS(t) = \mu(S(t))dt + \sigma(S(t))dW(t)$$ where $W(t)$ is a Wiener process under $\mathbb{P}$ and $$dr(t) = a(b-r(t))dt ...
3
votes
1answer
108 views

Simple question on jump-diffusion

In the textbook by Shreve in sec. 11.7.2 a jump-diffusion process is introduced. More precisely $$ dS_t = \alpha\,S_t\,dt+\sigma\,S_t\,dW_t+S_{t-}\,d\left(Q_t-\beta\,\lambda\,t\right)\quad (1) $$ ...
1
vote
0answers
21 views

Methodologies behind shocking a composite index instrument, what assumption distinguishes these?

Suppose I have a composite index (rebalancing or non-rebalancing) that at present time has some base value $B_{\text{base}}$ in some base economy. I am in the process of shocking the economy on which ...
1
vote
3answers
40 views

How to compute the foreign exchange volatility within a portfolio

Suppose I have a portfolio of 5 assets. Assets 1 and 2 have foreign exchange exposures and therefore foreign exchange volatility. How can I calculate the marginal contribution to the total portfolio ...
1
vote
0answers
24 views

How can I discover dark pool orders in an order book?

I'm learning order flow. I would like to differentiate between aggregated dark pool volume and aggregated algo trading volume. Is there a way to tell orders coming from a dark pool from algo orders? ...
2
votes
0answers
24 views

Heston Model Maximum Return Distribution

What is the joint probability distribution of the maximum of the return between time $0$ and $t$ and the return at $t$, for the Heston model, when the return drift is $0$ and the correlation between ...
1
vote
0answers
26 views

Beta in Capital Structure [closed]

Can anyone please explain how do I get this: $$\beta_e = \beta_a +(\beta_a - \beta_d) \times D/E$$ from $$K_e =K_a +(K_a − K_d) \times D/E.$$
2
votes
1answer
22 views

how to compute the risk free rate for a given maturity of an option contract?

i'm working on options with different maturities. I need to correspond a risk free rate for each maturity. What rate should i consider as risk free rate? thank you.
0
votes
2answers
50 views

Calculating floating P&L of a FIX-order [closed]

How to fetch floating p/l(current) of a "filled" FIX-Order (either buy/sell)?(by its FIX-ID/order ID) I asked my FIX provider(Integral) & they said, there's no specific tag for that/not a ...
2
votes
1answer
60 views

distribution of AR, MA coefficients estimation in ARMA-GARCH models

could anyone give me an information about distributions of AR and MA coefficients via estimation? So, for example, I have ARMA(1,1)-GARCH(1,1) model with the same AR(1) and MA(1) parameters ...
3
votes
2answers
155 views

Which Database (MySql or NoSQL) for a Stock market App

I'm re-creating an app for Stockmarket Screening & Realtime charting Display. The database wireframe which i propose to design is as follows: 1. Company master - Where all the information of ...
1
vote
1answer
48 views

Symmetric probability and subjective return

Let $\{Z_k\}_{k=1}^{N}$ be a sequence of i.i.d. random variables with the following distribution $$Z_k = \begin{cases} \alpha &\text{with probability} \ \hat{\pi}\\ -\beta &\text{with ...
1
vote
1answer
39 views

Greeks across different underlying

To monitor risk of a client portfolio, does it make sense to accumulate Greeks across different underlying? If yes, how can Greeks be normalized across different underlying?
2
votes
1answer
77 views

Mean reversion and adjusted beta for pairs trading

Trying to evaluate model for pairs trading. Consider classic formula: $\frac{dP}{P} = adt+b\frac{dQ}{Q}+dX$, where $P$ and $Q$ are stock prices, and $X$ is a mean reverting process (MRP) and $a$ is ...
7
votes
1answer
132 views

How do different models impact option Greeks?

If I trade an option using delta, vega, Prob OTM, etc. these are derived from a model. How do leading models impact valuations in terms of the Greeks? I suppose to form a baseline it would have to be ...
1
vote
1answer
99 views

Pricing of Black-Scholes with dividend

Consider the payoff $g(S_T)$ shown in the figure below. Consider Black-Scholes model for the price of a risky asset with $T = 1$, $r = .04$, and $\sigma = .02$ and dividends are paid quarterly with ...
1
vote
2answers
77 views

Counting random paths

Assume the path of a certain stock can be modeled using a binomial tree. The initial price of the stock at time $t=0$ is 1024. The upstage factor of the stock price is $x=1.25$ and downstage factor of ...
3
votes
2answers
69 views

What is the name of all 1-day movements, 2-day movements etc

When looking at historical data (index or stock), one can find all 1-day differences/movements, all 2-day, all 3-day etc and graph the extremes of each of these. This gives two line graphs forming a ...
1
vote
1answer
45 views

Getting quote stream via fix-api 4.3

I'm new to FIX api,so far i did following (on QUICKFIX) logged on to quote-session subscribed to market data sent "single-message" quote-request for an instrument (EUR/USD for example) ...
1
vote
0answers
18 views

Local volatility grids - Monte carlo - Implementation [closed]

I read the paper "Monte Carlo pricing with local volatility grids" (authors: D.F. Abasto, B. Hientzsch and M.P. Kust) and I would like to know if anyone on this forum had a chance to implement it as I ...
1
vote
0answers
54 views

Bloomberg Currency Exchange Rate Data (London and New York)

I'm new to Bloomberg terminals (a paper I'm reading uses data from a terminal - my first exposure) and I'm having trouble figuring out how to download a few different time series: (1) daily closing ...
2
votes
0answers
84 views

Finance Projects in Python [closed]

I am new to this forum. I work in the Market Risk Domain at a leading Investment Bank. I am currently learning Python. And the best way to learn is to experiment with some Real Live ...
7
votes
2answers
96 views

Are there any integrated framework that I can back-test and paper/live trading in one place?

I'm trying to start working on a fully automated algorithmic trading system, and I'm a little struggling with the framework to use. The requirements I have in my mind are: Needs to support ...
1
vote
1answer
95 views

Relations between Call and Put

I am trying to solve a question in finance but I am pretty much stuck and would need your help :) Suppose you know the following information about a market: Future is at 66 70 strike straddle is ...
2
votes
1answer
43 views

Backtesting Strategies - Sampling and returns types

I am back testing a strategy in R and I have some questions about testing design. I have a universe of around 500 stocks to test filtered based on liquidity. To test the trading strategy I have ...
2
votes
0answers
54 views

Simulate correlated Geometric Brownian Motion in the R programming language

In response to this question: How to simulate correlated Geometric brownian motion for n assets? One of the responses provides an implementation in MATLAB: ...
2
votes
1answer
135 views

Black-Scholes Equation with dividend

Consider a European option with payoff $$g(S_T) = S_T^{-5}e^{10S_T}$$ Assume that the interest rate is $r = .1$ and the underlying asset satisfies $S_0 = 2, \sigma = .2$, an pays dividend at ...
1
vote
1answer
44 views

Parametric VaR of a portfolio including a swap

I am calcualting the parametric VaR of a portfolio that includes among other things an IRS swap that begins in the exact same day the valuation is done. Therefore, its NPV is 0 and I do not which ...
1
vote
1answer
37 views

Having Difficulty With Sharpe Ratio and Optimal Portfolio

I have begun by using such equations as: By finding the $Rp$ and $\sigma p$ with the weighted values, and then I followed the equation using a value of $.02$ for the fixed asset, $rf$, but this ...
1
vote
3answers
39 views

Where can I get json currency data feeds every millisecond?

I have been looking for free or paid json data feeds on currencies for long. I have come across: currencylayer.com Oanda XE The problem is that I really need millisecond based updates. Can ...
2
votes
0answers
47 views

Johansen cointegration test interpretation in R

I want to test my time series for cointegration using the Johansen test in R. I got the following result and so I know now that at least 5 out of 9 of my time series are cointegrated. My question is, ...
1
vote
0answers
40 views

Calculating expected annual returns [on hold]

An economy contains these three assets: Asset A has standard deviation of returns (per annum) of 25% and market capitalisation $600m Asset B has standard deviation of 20%, market capitalisation ...
1
vote
0answers
15 views

How to enter to economics/finance sector [closed]

Although my question is a general question, I would appreciate your suggestions or help me to find a proper "stack exchange" in order to ask my question: I am a Ph.D student in (Pure)Mathematics and ...

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