# All Questions

26 views

### Define some finance terminology for me, please. Live options vs. crossed options

What is a "live" option vs. a "crossed" option? Does a cross option just mean that it is hedged? If someone is buying an option and says "I want to buy a November 5.00 (strike price) put cross at ...
78 views

### What makes investors risk averse?

There are some regularly-occuring events that coincide with a rise in the implied volatility of an asset. For example, in advance of an firm's annual earnings report, it is typically expensive to buy ...
67 views

### Practitioner's criterion for MC pricing convergence

Let's say I have some Interest Rates (IR) pricing model which relies on Monte Carlo pricing and I'd like to benchmark its quality and find out optimal settings (time steps & iterations) per asset ...
233 views

### What kind of front end/ gui is used with trading applications?

I was wondering what kind of front end is used for trading applications. Coming from a quant background, I was always only concerned with research and back end of the application but am at a total ...
57 views

### Intuition behind American Option pricing

The price of an American option is given by $$V_n = \max\left(G_n,\frac{1}{1 + r}(pV_{n +1}H^d + qV_{n + 1}H^u\right)$$ where p, q are the risk neutral probabilities. I have two questions: How ...
53 views

### What do “Exposure Bounds” mean in Portfolio Optimization?

I've just started reading up on Portfolio Optimization models and have come across the use of exposure bounds to mitigate the sensitivity of the optimized model solution, owing to parameter estimation ...
62 views

### Constructing Volatility Smile from Implied Volatility & Delta

I have implied volatility data for call and put options (expiring in 1 month from any given date) for a particular stock. In addition, I have the delta for the options. However, I have no information ...
110 views

### What software should I use for forex arbitrage?

These are my requirements: Speed of lookup & update Speed of crunching large numbers and combinations The exchanges I want to connect to will mostly provide json feeds to their orderbooks & ...
40 views

### Yahoo OHLC data reflects nonexistant stock split

Can anyone explain why the OHLC data I'm getting from yahoo appears to reflect stock splits during times when no significant corporate actions have occurred? For example, I'm looking at ABT and yahoo ...
42 views

### Fixed volatility portfolio with max returns creates skewed results

I am trying to create a portfolio of only four components using the mean-variance optimization (MVO). I am setting up my problem such that I want to maximize the expected returns with a fixed vol ...
75 views

### State Space models with Short Time Series

My problem is that I have a state space model that I estimate using the Berndt–Hall–Hall–Hausman (BHHH) algorithm. The state space model is relatively simple in that the hidden part follows a pure ...
222 views

### Algorithm to detect the aggressor side of a trade

Most of the exchanges provide aggressor side property of trades (e.g. Tag=5797 AggressorSide on CME) in their raw data. But many data providers do not provide this information via their datafeed ...
99 views

### Explicit solution SDE

I have the following SDE: $$dY_{t}=A\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{1}+B\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{2}$$ where ...
87 views

### Which is the better risk sensitive measure?

Consider the two following optimization problem 1) $$\min_{\theta} \ln E_{\theta}[ e^{X}]$$ 2) $$\min_{\theta} E_{\theta}[ X]$$ with the constraint $$Var_{\theta}[X] <c$$ Is it true that ...
43 views

### Contribute to Finance related projects [closed]

I am currently a student and in the future would like to work as a software developer for a financial institution such as Bloomberg, Factset etc. I was looking to contribute to some open source or ...
97 views

### Nested volatility

The introduction VIX options makes the concept of "volatility of volatility" a real life concept. The idea of "nested volatility" seems interesting, and I am wondering if there are any academic ...
61 views

### Art market specificities

I am looking for some reference on the art market in light of quantitative finance. I am interested in some things: The market in general, how is it compared to financial market ? What about common ...
63 views

### CVA/CDVA - Worsened Credit Quality implies profit?

In the book Counterparty Credit Risk, Collateral and Funding by Brigo et al I found the following: credit quality of investor WORSENS $\Rightarrow$ books POSITIVE MARK TO MKT credit quality of ...
76 views

### How does this follow from the separating hyperplane theorem?

This is from Pliskas book in mathematical finance. I do not know what was best to write the question so I included the pages from the book. He has not written what form of the separating hyperplane ...
149 views

### How to create a model or formula for evaluating trade opportunities

I want to build a formula to produce a score for a potential trade based on 4 variables, time, return, liquidity of security, and probability of failure. For a set of potential trades I first ...
54 views

31 views

### Doubt on risk cost criterion

I want to minimize some kind of risk sensitive cost. But, I am confused what cost criterion should I use. I am aware of only expected exponential utility. I want to know what are the other such ...
62 views

### hedging with a 3 month fx forward every month

I think this is a bit odd question. Let us say I want to hedge my fx exposure every month but using 3 month forwards . How can I do that ? Is it not easy just to use 1 month forwards ? I recalculate ...
96 views

### Probability of stock closing over a certain price

A stock has beta of 2.0 and stock specific daily volatility of 0.02. Suppose that yesterday's closing price was 100 and today the market goes up by 1%. What's the probability of today's closing price ...
181 views

### Valuation of barrier options in Jump diffusion model

I am trying to evaluate the value of a Barrier option using Monte carlo method. The stock follows a jump diffusion model. I am using the method described in Metwally and Atiya. The authors describe ...
62 views

### ADR vs Foriegn Stock Price Arbitraguers

So I am sure you all know about the whole Argentina default that has been in the papers lately, no need to delve into it. This so called "technical" default has lead some interesting investment ...
73 views

### How can theta be so large on this option?

The AAPL Sep 95 put currently has a theta of -.21. The put midpoint is .84. 84/21 = 4 days. However, the put has nearly a month before expiration, at which time it will be zero. Not 4 days from ...
146 views

### multiperiod optimization using R

I'm interested in multistage optimization problems. Are there any good R packages around to solve such problems over time? I'm not at all an expert in it, so maybe someone knows a good paper / lecture ...
28 views

### Stock Price Evolution Equation Clarifications [closed]

What is the dimension of Δt? Is it second [s]? What are the expected return and the expected volatility? How can I calculate them for any given stock? Should I use the return and volatility values for ...
32 views

### what kind of test for volatility and where find the data

I am working on a model for stochastic volatility. In short, the model try to capture that the volatility goes up suddenly after a shock (war, policy, financial events, etc) and then goes down slowly, ...
109 views

### Explain drop in Correlation between two time series in consecutive periods

I have a time series for a security list with 2 parameters calculated for each time period. For example, for a stock XYZ, I have Param1 and Param2 calculated over various time periods stacked against ...
52 views

### CVA formula proof

I'm struggling to prove the CVA formula in this paper. Equation (3) is the result of computing the expectation of formula (1). Could you please show me how to prove that?
141 views

### Volatility of Futures

Apparently: Under a constant interest rate, the futures price is given by a deterministic time function times the asset price (I think I understand this). This means that the volatility of the ...
163 views

### M&A hedging an equity portfolio against an index

Quick Note This question was already posted under the userID user8170. Reason being I could not access my account. Now I am able to login to my account I am reposting the question here and will ...
107 views

### one-step-ahead Stochastic Volatility for 5-minute VWAP prices

I'm trying to run an SV model against prices of Euro/USD. For those not familiar with SV, its a volatility model in which each point gets its own volatility parameter $h_t$ with 3 main parameters that ...
34 views

### Testing for the presence of a positive or negative gamma effect

I am currently analyzing a statistic that I believe will have the effect of hedgers having a positive or negative gamma position in certain stocks. In the case where I believe hedgers have positive ...
49 views

### Impact of NZD mid-day EST Roll forward

Was taking a look at an NZD spot deal that was traded on a Friday for value the following Tuesday (t+2). Somehow this trade became classified as a forward by our back office systems (dealer says they ...
60 views

### Incoherence in Bloomberg Data in Swap Curve Builder (ICSV)

When working on calibration for LMM model, we need to have Initial Libor quotes and Swaptions Black vol quotes on the market data. We have data provided by Bloomberg. However, before performing the ...