All Questions
1
vote
1answer
132 views
Yield on Fixed income futures
I am trying to get a simplified model of the DV01 for the US 10YR Note futures but I cant figure out what the current yield is. When I back out the implied interest rate on the current TYM3 futures ...
5
votes
3answers
229 views
Calculate the expectation of a shift CDF
Suppose $X$ is a normal random variable with mean 0, and variance $\sigma^2$. $F(x)$ is the CDF(cumulative distribution function) of a standard normal random variable(mean 0 and variable 1), how to ...
3
votes
1answer
152 views
Pairs trade CDS contracts using cointegration
Recently I have looked at some sovereign CDS spreads (of the Nordic countries to be precise) and have tested for cointegration in the levels (i.e. untransformed) and logs of the spreads. Tests ...
2
votes
1answer
111 views
backtesting a 5% quantile model of a discrete value random variable?
If a random variable is discrete, and we are interested in its quantile value, how to define a proper back testing procedure?
For example, the underlying variable with a discrete value is
$$
...
5
votes
2answers
304 views
Square root of time
I am writing about VaR and I am wondering about the following:
We can scale the VaR to different time horizons by using the square root of time, which means, that the volatility is adjusted by square ...
1
vote
1answer
47 views
Annual Percentage Rate and Yield
I found references relative to US where the Nominal Annual Percentage Rate or simply APR is defined as the simple interest rate (i.e. proportional to time and without compounding).
Instead the ...
3
votes
1answer
177 views
What is the proper way to calculate returns for Pair Trading?
Edit
I am assuming that I don't need to use margin account to short here:
What is a standard way to calculate return for pairs trading strategy? For example, I bought 100 dollars worth of a loser ...
1
vote
0answers
145 views
Data feed that shows individual orders
Does anyone know how I can obtain time and sales data for a stock?
Lots of feeds provide the total volume but I would like to see the breakdown of what buy/sell orders made up the day's volume.
I ...
1
vote
1answer
94 views
Find a paper about portfolio management
Where to find the following paper of the noble prize Paul Samuelson (2003) “When and Why Mean-Variance Analysis Generically Fails,”. I was looking for it desperately on Google and Google Scholar but ...
3
votes
0answers
106 views
Fitting a non linear AR + GARCH(1,1)-M model
I want to fit the following model to a time series:
$$
y_{t}=\alpha_{0}+\alpha_{1}y_{t-1}+\alpha_{2}y_{t-1}^{2}+\lambda h_{t}+\varepsilon_{t}
$$
$$
...
3
votes
0answers
113 views
compute time from FX forward, how use DEPO rates?
assume I have following delta-term vol data from broker:
...
4
votes
2answers
297 views
Predict Market Direction, What is forecastable/unforecastable?
Let's decompose the return process $R_t$ as follows :
$$R_{t} = sign(R_{t}) * |R_{t}| $$
What's part of the equation is forecastable?
5
votes
0answers
141 views
VaR model Unconditional Coverage Tests: Is this extension of Kupiec POF test correct?
Background: Kupiec P. in 1995, published paper "Techniques for Verifying the Accuracy of Risk Management Models" on Journal of Derivatives, v3, P73-84, it's a Unconditional Coverage Tests designe for ...
0
votes
2answers
193 views
0
votes
2answers
245 views
Pairs trading: Question on non-negative profits, size of the positions and trading signals
I'm trying to backtest Pairs Trading but have become a bit confused on the different methods of selecting pairs, how to look for trading signals and what size of the positions to take in the assets.
...
7
votes
2answers
129 views
Is there a comprehensive reference book on US fixed income conventions?
In Canadian fixed income markets there is a nice handbook called Canadian Conventions in Fixed Income Markets (PDF). It contains detailed market standard pricing formulas for calculating prices, ...
5
votes
1answer
150 views
Improving GARCH modeling approach
Modeling Exchange Rate Using GARCH
Let's consider the following exchange rate : USD/JPY
For each sequence, we consider changes in the daily difference between the highest price and the open price of ...
3
votes
1answer
64 views
How to calculate tracking error given mismatches in available data
Apologies if this is an overly simple question. I have a series of stock returns, and I would like to estimate my portfolio's ex-ante tracking error versus the benchmark (S&P 500) given the ...
2
votes
2answers
130 views
Comparing Cash Equivalent of risky portfolios
To compare two risky portfolios, Mean-Variance (M-V) portfolios for example, many compare their Cash Equivalent ($CE$). $CE$ is defined as the amount of cash that provides the same utility as the ...
4
votes
1answer
172 views
Stability of correlations and volatility
I had a discussion recently about the stability of volatilities and correlations. If we take for example stocks and bonds (think of DAX and Bund) then I have seen changing volatilities (something like ...
1
vote
1answer
54 views
How to model housing loan market?
Housing loan market vibrates according to the policies, such as
LTV rate, for example, if must pay 20% downpayment, LTV rate would be 80%
interest rate, for example, lifting the loan rate, the ...
2
votes
3answers
492 views
How to distinguish between different types of algorithmic trading
Algorithmic trading involves the use of algorithms to optimally execute trading instructions. Then there are algorithms which initiate trades, based on various quantitative strategies (e.g. pairs ...
2
votes
0answers
81 views
EUR/PLN and EUR/USD delta-term-vol surface quoting convension
does anyone know for sure what is the FX market convension to quote delta-term pairs for EUR/PLN, for EUR/USD. I know that for EUR/PLN it should be delta p.a forward, for EUR/USD it should be delta ...
0
votes
1answer
72 views
7
votes
0answers
72 views
Regression in liquidity risk model of Jarrow/Protter
In the paper "Liquidity Risk and Risk Measure Computation" authors describe a linear supply curve model for liquidity risks in presence of market
impact, i.e. impact-affected asset price $S(t,x)$ is ...
5
votes
0answers
69 views
How to perform Empirical Mode Decomposition?
I am trying to use the EMD applied to EURUSD open price to train a machine learning algo (RVM).
I have run only once the EMD on my training set and once on the training+test set.
The results on the ...
3
votes
2answers
110 views
Geometric Brownian Motion with non-negative random increments
I am attempting to model a cumulative time-series of a positive integer variable across independent entities. The cumulative series appears to follow a process of Geometric Brownian Motion (GBM) based ...
4
votes
3answers
204 views
How to implement a long-term trade on oil?
I believe that one of the most compelling case of long-term trade is the long position on oil. Fundamentally, it seems quite clear that demands is going to grow in the future as emerging markets start ...
2
votes
1answer
230 views
Does DOM trading using broker data make any sense?
Can I use DOM information from Interactive Brokers? Does it make sense?
I assume that it makes sense to apply some volume based algorithms only then when you know this order book, that you can get ...
0
votes
1answer
67 views
volatility Table and BS formula
assume I have implied FX volatility Delta-Term table from broker. I have time noticed as 2M, 3M. what do I have to put into BS formula, is it 2/12 or "count the business days"/"daycount basis"?
I am ...
0
votes
0answers
108 views
effectiveness of linear regression in prediction [closed]
How effective is linear regression in predicting asset Price ?
If not, which is the most effective way to predicting an asset price?
Also,price movements are non-linear, why is linear regression ...
1
vote
1answer
88 views
Good Model Calibration Books/Papers for Common Option Pricing Models
I am trying to find a good book which focuses on the model calibration. I just want to know generally, what are the most common methods of model calibration(such as Black-Scholes Model, Stochastic ...
2
votes
3answers
191 views
Is it worth preserving orderbook structure when building it from individual orders?
Say I'm building an order book and two bids come in at price $p$ and volumes $v_1$ and $v_2$. Which option is better
To store the order as $\{p, v_1+v_2\}$ or
To store the order as $\{p,v_1\}$ and ...
1
vote
0answers
81 views
How to calculate the Transfer Pricing from the FTP curve?
According to some articles, Fund Transfer Pricing procedure is
setting the FTP curve.
First it's to select instruments and grid points, namely
overnight to 1 week: rates from interbank money ...
4
votes
4answers
228 views
how to derive yield curve from interest rate swap?
According to some textbooks, to derive the yield curve, quote
overnight to 1 week: rates from interbank money market deposit,
1 month to 1 year: LIBOR;
1 year to 7 years: Interest Rate Swap;
7 ...
6
votes
0answers
117 views
Optimization procedure for entropy pooling
I was wondering if those who used the entropy pooling code provided by Attilio Meucci had issues with the optimization procedure (especially regarding the fminunc function in Matlab). When I stress ...
2
votes
3answers
127 views
Logarithmic returns for realized variance?
I am wondering which method makes more sense when computing log returns. I am trying to compute log returns for realized variance, and I have the opening and closing prices for every minute.
Since ...
5
votes
1answer
157 views
Toy models of asset returns
When making simple agent-based models of banking systems to look at global properties (say systemic risk) one of the basic decisions you have to make is how to model returns on external (to the ...
0
votes
3answers
340 views
Why C is still in use especially in area of numerical optimization (instead of C++)? [closed]
Why C is still in use especially in area of numerical optimization (instead of C++) ?
C and C++ aren't fully compatible so mayby you know some differances that make the difference ?
7
votes
2answers
430 views
Applications of Fourier theory in trading
What are fashionable applications of Fourier analysis in trading? I have heard vague ideas of applications in High Frequency Trading but can somebody provide an example, maybe a reference?
Just for ...
2
votes
2answers
90 views
Fair swap rate of an amortizing swap
Recently I came across the problem of amortizing swaps. This is an agreement, where fixed payments and floating payments (e.g. 3-months LIBOR + spread) are exchanged based on a notional that is ...
5
votes
2answers
126 views
Market weights for Black-Litterman
I'm trying to implement Black-Litterman for an arbitrary selection of assets.
One of the input for BL is the "Equilibrium market capitalization weights for each asset".
In most examples I've seen, ...
3
votes
0answers
40 views
Looking for a recommendation for a Fund Transfer Pricing modelling book
Recently I started working in a bank as a modeler, one of the possible topic is FTP - Fund Transfer Pricing.
After I studied that subject a little on wiki and read a website or two in that field I ...
3
votes
0answers
40 views
Credit spreads vs default events dependence
Reading this note it strikes me that credit spreads and defaults seem not to be commonly modeled jointly (e.g. more or less directly in structural models), but at best with some kind of "ex post" ...
4
votes
2answers
295 views
Fastest news feed APIs targeting high frequency trading?
The Dow Jones elementized news feed API seems to stand out but are there any other machine readable news feeds out there that provide very low latencies that high frequency operations may peruse? I am ...
1
vote
3answers
168 views
How to hedge the fixed leg of a swap contract?
I happened to get this question for Fixed Income Swap contract. (let's assume it's it's not cross currency).
If the fixed leg is paying 10% interest rate in this contract, but in the market the ...
4
votes
1answer
212 views
Do futures have predictive value?
Futures closely mirror their underlying, as can be seen in the charts below. Eventually, at expiration, they reach the value of the underlying. However, they seem to show no extra information about ...
2
votes
3answers
171 views
Leveraged and inverse leveraged ETFs - what is the exact defintion?
I just had a quick look at the daily returns for a few pairs of leveraged ETFs - it appears that the percent daily returns do not match perfectly. For instance, looking at FAS/FAZ, the returns for the ...
4
votes
1answer
155 views
How to use Newey West covariance corrector?
I have implemented the following model:
daily_vol(t+1) = A*daily_vol(t) + B*weekly_vol(t) + C*monthly_vol(t) + error
where vol means volatility, and A, B, C are ...
3
votes
1answer
68 views
How can I evaluate how poor a fit a parametric VaR result would be for a given holding?
I'm currently working on an application that, among other things, computes a one-day parametric VaR for security positions. I understand that the parametric method of computing VaR is a poor fit for ...
