0
votes
1answer
55 views

completeness of the binomial model - proof

I am reviewing the steps of proof that the binomial model is complete and don't understand the marked in red transition. Could anybody explain this step? If $P^{**}$ is a risk-neutral measure, so ...
0
votes
1answer
61 views

Leveraged ETF calculation - dropping below zero?

I'm running some simulations with a leveraged ETF to investigate that notorious leveraged-ETF decay effect I keep hearing about. When I put in a typical Black-Scholes lognormal model of returns on the ...
0
votes
1answer
55 views

Where to get price data on Credit Default Swaps?

I trust market-driven CDS more than credit ratings. Where can one get the CDS of corporate bonds of major companies? Are there any good internet links? If charts on the historical end-of-day prices ...
1
vote
0answers
38 views

How are CDS prices calculated for financial institutions?

If you need to estimate the fair price of a credit default swap on a financial institution, can it be done? Typical structural models tend to break down for the complex debt and asset characteristics ...
0
votes
1answer
25 views

Reshuffling the weighting of assets in an investment portfolio

An investor has a £40,000 portfolio, 40% of which is invested in bonds.The investor wishes to add funds to the portfolio by purchasing bonds so that 52% of the entire portfolio is invested in bonds. ...
3
votes
1answer
65 views

Cubic spline interpolation function within Matlab

I want to use the Cubic spline interpolation technique so I can interpolate yield curve points. Now I wonder if I can use the standard matlab function interpl1 (and then using the 'spline' method) or ...
0
votes
1answer
58 views

Reference request: Quantitative Trading Strategies [closed]

I intend to thoroughly prepare for an internship that I will start in a couple of months, and therefore wanted to clarify what topics I need to study and some recommended references for them. The ...
1
vote
2answers
45 views

Unrecovered debt

When reading an article about banking industry I came up with two questions. I'd be very pleased If somebody could clarify them: How concepts of unrecovered debt and NPL are related? When banks ...
0
votes
0answers
36 views

Bond Convexity: Relationship between discrete and continuous interest rate

The interest rate risk of a bond price $P$ is measured by its Duration: $$D=-\frac{\frac{dP}{P}}{dr}$$ However, the explicit formula for the Duration given a function $P$ is different if $r$ is ...
0
votes
0answers
25 views

polynomial time trend

I'm attempting to model historic operating margin data and to achieve stationarity I ran the ADF test with 4 lags (quarterly data) and first incorporating an intercept and time trend. The alpha was ...
2
votes
1answer
48 views

decompose correlation swap pnl

For a Variance swap we can split the pnl into a realized part and a "forward going" part. To be more precise: Assume we enter the trade at t0, and the variance swap has tenor T and a strike $Kvar$. ...
0
votes
0answers
31 views

Leland's model of non-linear Black-Scholes equation

Leland's model of non-linear Black-Scholes equation: (http://i.stack.imgur.com/EkqQb.png) where с is round-trip transaction costs and S is price of stock. c is said to be constant, ...
-1
votes
0answers
21 views

measurement not only direction of momentum, but also its strength

sirs, would anybody help with the best measurement of momentum that incorporates not only its direction, but also strength? ex. 6M momentum is 20%, however, 1M momentum is -20%. the simple measurement ...
1
vote
0answers
10 views

Optimizing Monte Carl integral calculation with control variate

For an exercise I am asked to calculate an integral with a monte carlo simulation, after that I need to optimize the results with a control variate. This was the given integral: $\int_0^1 \! ...
0
votes
0answers
39 views

Need to know What is not available in RQuantlib

If we explore CRAN RQuantlib package it says The 'RQuantLib' package makes parts of 'QuantLib' accessible from R. When I tried the package I have found vanilla/some exotic options, fixed income ...
3
votes
1answer
55 views

Pricing bonds of float coupon rate by stochastic interest rate

So I am not sure whether the following pricing of the bond is possible. Given the stochastic interest rate, one wants to price the bond with the floating coupon rate or the coupon rate being unknown. ...
1
vote
1answer
32 views

Is there any package in R for conditional autoregressive range model (CARR)?

I am working on a project which requires volatility estimation using range based volatility. Is there any package in R which helps me in estimating the CARR model proposed by Chou (2005).
0
votes
0answers
15 views

Monte Carlo - Inflated Asset Paths Due to Correlation

I built a MC generator for 12 assets based on Brownian Motion and noticed some strange results. Formula Used S(t) = Exp(S(t-1) + (mean - (vol. / 2)) + (stdev * Normal Distribution #)) S(0) = Ln(1) ...
0
votes
0answers
13 views

Quantifing quality of cointegration

I'm trying to replicate instrument which is untradable. My approach is analysis of cointegration between it and three another time series (four variables in model) which correlates with it. I found ...
0
votes
0answers
10 views

Obtaining non-central moments from the central moments

I have a question regarding moments of the Gaussian and t distributions. I am working in the GARCH framework with Gaussian/t distributed innovations. I need to know the forecasts of the first four ...
3
votes
1answer
140 views

Portfolio with lots of subportfolios

An account manager has $N$ distinct, equally-sized pots of money, which will be used to make $N$ distinct subportfolios, each of which is drawn from a slightly different (but potentially overlapping) ...
0
votes
0answers
16 views

Relation of survival and non-survival Marshall-Olkin copula

Let us have two random variables $A$ and $B$ representing lifetimes of two elements of a system, where $A$ has cdf $F_A(x)$, $A \sim Exp(\lambda_1 + \lambda_{12})$ and $B$ has cdf $F_B(y)$, $B \sim ...
0
votes
3answers
50 views

How to interpret negative log return more than -100%? [closed]

I'm doing some analysis on log returns and I notice that returns can exceed 100%. For example, if a security's close price \$1 today and \$10 yesterday, the log return is $ln(1) - ln(10) = -230\%$! ...
4
votes
1answer
80 views

Call options and portfolio of the same options worth less?

A portfolio of long positions in call options with the same maturity and strikes on different assets is worth more than a call option on a portfolio of the same assets with the same weight; i.e. ...
3
votes
0answers
72 views

Strategy Testing

Firstly I am a newbie so I will apologise in advance if this is in the wrong forum. My question concerns testing for an equity trading strategy and I would appreciate any comments as to whether my ...
1
vote
1answer
38 views

Where are the prices of real European Call options listed?

In order to solve an exercise, I need data from real European Call Options (on the same underlying). It sounds definitely trivial, but actually I feel a bit lost...do you mind giving a link/suggestion ...
1
vote
1answer
66 views

Options and bond related to convexity

Relevant definition: Assumption 2.1 (No dominance). If the payoff $P$ of a financial instrument is nonnegative, then the price $p$ of the financial instrument is nonnegative. Notation: $T$ - the ...
0
votes
1answer
61 views

Price of call/put is convex in $K$ (strike price)

Let $\lambda\in(0,1)$. Then $$C(T, \lambda K_1 + (1 - \lambda)K_2, S, t) \leq \lambda C(T, K_1, S, t) + (1 - \lambda)C(T, K_2, S, t)$$ $T$ - the maturity $K_1$,$K_2$ - Strike prices $S$ - stock ...
1
vote
1answer
30 views

Commodity market. Why would actual sellers / buyers bother about speculative price?

Investopedia says: The following are two types of futures traders: hedgers speculators An example of a hedger would be an airline buying oil futures to guard against potential ...
2
votes
1answer
99 views

How to download efficiently intraday data with Bloomberg API?

I'm downloading intraday bar data using Bloomberg API and C#. I have adapted the official Bloomberg c# "IntradayBarExample” to suit my needs. However downloads are really slow, I found this post ...
1
vote
0answers
46 views

Looking for most current Financial API that is fast and accurate for NYSE NASDAQ AMEX OTC and PINKs

Looking to build a real time data feed, stock monitor window. Pretty much the same as equityfeed.com market viewer window, just with a few addedfeatures and or different filter columns with more up ...
1
vote
0answers
15 views

Regression on default rates and backward extrapolation

Suppose that we have bankruptcy data representative for Small and Medium-sized enterprises in a country. We can therefore calculate default rates. Furthermore suppose that we found that GDP, ...
3
votes
2answers
70 views

American call and put prices, increasing in maturity

Show that American call and put prices are increasing in maturity $T$. Does this mean I need to show that as $T$ increases than the American call and put prices increase as well? If so, how do I go ...
2
votes
1answer
75 views

Determining maximum strategy capacity and optimal order size for low frequency equity strategy

I have developed a low frequency equity trading strategy that seems to work well with stocks in the S&P 500. Someone asked me about the maximum capacity of the strategy (how much AUM I could ...
1
vote
2answers
53 views

Normal Inverse Gaussian distribution - any consensus on an accurate quantile function?

I am making use of the Normal Inverse Gaussian distribution in my work to model underlying interest rate implied volatility risk drivers. What is particularly nice about this distribution for my ...
1
vote
1answer
23 views

Calculate control variate for monte carlo simulation

For an exercise I need to calculate $\mathbb{E}[X]$ with a Monte Carlo simulation. I need to use control variate $Y$ with $\text{Var}(Y)=2$ and $\text{Cov}(X,Y)=1$. I am asked to give the optimale ...
1
vote
1answer
45 views

Rblpapi / bdh - how to download prices for all weekdays - regardless if it is a bank holiday

Using bdh(), I am trying to download historic weekday prices regardless if the weekday is a holiday or not. The default does not return weekday bank holidays. The ...
2
votes
0answers
44 views

Dual discounted forward curve

I was wondering how to calculate the forward rates based on OIS discounting for the half year terms. I know how to do this for the full year terms -> just making sure that the two legs are equal to ...
0
votes
1answer
79 views

Augmented Dickey-Fuller Questions

I've been searching in bibliography about this test applied to an AR(p) model. $$Q(L)(Y_{t})=c+\epsilon_{t}$$ Where L represent the Lag Operator and $Q=1-\phi_{1}x-.....-\phi_{p}x^{p}$ is the ...
0
votes
3answers
60 views

Interpretation of portfolio standard deviation

I have computed an efficient frontier using quadratic optimization algorithm for some stock data and then plotted it. However, I have troubles understanding how to interpret standard deviation of ...
1
vote
0answers
70 views

VXV vs. VIX futures: arbitrage opportunities?

At a first glance, VXV and VIX futures should not be compared at all: VXV is an underlying index, whilst VIX futures are derivatives written on a different underlying index, that is, VIX. As ...
1
vote
2answers
48 views

Martingale correction for Andersen scheme with Interest Rate

I have implemented martingale correction to my Andersen scheme for Heston model, as it is in the paper (page 19-22): ...
3
votes
1answer
81 views

How to get Correlation using Options data?

I can calculate the "Implied Beta" using implied volatility for the option stock, and implied volatility for the market (VIX). Is there any way to calculate also the correlation without performing a ...
0
votes
1answer
51 views

What are “risk” or “risk numbers?”

I work in finance but do not have any formal education in the subject (I do have a PhD, but not in finance). I've picked up a lot of the jargon but there's one thing that I haven't figured out, and it ...
0
votes
1answer
46 views

Is Value-at-Risk translation invariant?

Let: $X=V_1-V_0R_0$ where $R_0$ is the interest rate. Then, is it so that this risk measure is Translation Invariant as: ...
0
votes
2answers
56 views

How can I find stocks that have had a X% price swing within Y days, sorted by recency of said swing? [closed]

Let's say that I want to find stocks that have moved +-20% within a 10 day period. ABC would match if at t, ...
5
votes
4answers
175 views

Self study references for a Mathematician

I just finished my undergraduate (BSc) degree in Pure Mathematics & Applied Mathematics. I am starting my postgraduate degree in Pure Mathematics in a month's time. I am considering pursuing a ...
0
votes
0answers
24 views

Is NYSE Arca an exchange or an ECN?

the US Equities / stocks market seems to be the very complicated one. And I'm trying to understand what market participants it consists of, what their roles and functions are. Also, what I'm trying to ...
5
votes
1answer
123 views

High frequency trading and trading costs

What kind of deals do high frequency traders have with brokers or exchanges regarding commissions for stock trading? For an individual, it is nowadays possible to get to as low as 10 basis points per ...
1
vote
0answers
86 views

Generating financial data

I am trying to generate monthly stock data using a one-factor model: $$R_{a,t} = \alpha + BR_{b,t}+\epsilon_{t}$$ The description says: $R_{a,t}$ is the excess asset returns vector, $\alpha$ is the ...

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