2
votes
2answers
444 views

performance attribution

I am trying to do some performance attribution for a few portfolios we manage. What I am trying to examine are three different sources of returns: The general asset allocation Security Selection The ...
2
votes
1answer
444 views

Unsystematic and systematic risk of a portfolio

I have 8 country stock indexes and 1 world stock index. I do not actually have time series data but I'm given the following data: $\mu$, the vector of expected future returns for all 8 country ...
2
votes
1answer
109 views

Aftcast Generation

Aftcast is a way of simulating equity curves for different start years, usually from a large sample data ~100 years. Its kind of like start date sensitivity testing but in my case, I incorporated ...
2
votes
1answer
1k views

Calculate the “ten year zero rate” given two bonds with two prices

I have a little question and need some help with the notation. So, the question goes as follows: A bond with a maturity of ten years that pays annual coupons of 8% has a price of \$90. A bond with ...
2
votes
1answer
427 views

Is there any evidence that an option delta approximates ITM expiry probability?

Several sources (online and offline) that discuss the delta of a listed vanilla option, state that its delta is a (guesstimate?) of the probability of said option expiring ITM (in the BSM framework). ...
2
votes
2answers
468 views

Why don't options traders use charts? Or do they?

Retail trading platforms typically offer equity charts but only instantaneous quotes on options. It seems like even a few minutes of historical data would be useful when entering an order. Are charts ...
2
votes
1answer
598 views

Question on OIS and fed funds rate

If i am considering the 0-5 year irs spread for the USD market, would it be more accurate to use the fed funds rate or the OIS rate? I believe the OIS rate is calculated based on the fed funds rate, ...
2
votes
1answer
131 views

Analyzing an incomplete set of trades

Say I have access to logs of all trades executed on an ECN with the price maker and taker named. These traders are only executing some of their flow on this ECN (anywhere from 5%-80% of their ...
2
votes
1answer
3k views

How do I model GARCH(1,1) volatility for historical indexes in Matlab?

I'm currently working with historical index data from Yahoo Finance and would like to plot the GARCH(1,1) volatility of these indexes. I'm working with the Datafeed and Finance Tollboxes in Matlab ...
2
votes
1answer
264 views

Risk Decomposition of Index linked Bonds

Do you know how to decompose the risk of index linked bonds? To value a inflation linked bond, one plugs the real zero curve into the bond PV calculation, the real interest rate is as the fisher ...
2
votes
2answers
487 views

definition for “the viscosity” in financial market data series

I am willing to calculate and monitor the evolution of extreme-viscosity in the financial markets data series. Wikipedia says "Put simply, the less viscous the fluid is, the greater its ease of ...
2
votes
1answer
610 views

Reduce correlation in output of Minimum Variance Portfolio Optimization

After running a minimum variance portfolio optimization on a universe of ETF's I see the resulting portfolios tend to be composed of bond ETF or related treasuries/government ETFs. I suppose that ...
2
votes
1answer
1k views

Home/hobbyist quant trading - possible to profitable or just an intellectual hobby? [closed]

I've been researching algorithmic (non discretionary) trading at the several-day to month timescale, i.e. not HFT. I am not interested in voodoo i.e. no technical analysis, I am looking for solid ...
2
votes
1answer
383 views

Techniques for forecasting short-frame data?

I'm having a problem in which a time series of 24 data points is given to forecast the next 12 data points. This 24 data points might be sparse (many are missing). Do you have any suggestion on what ...
2
votes
1answer
802 views

What exactly is the annualized forward premium?

A forward contract has a premium of $ 0$ because it is an obligation to buy or sell something in the future (hence there is more risk). Call and put options, on the other hand, have premiums of $C$ ...
2
votes
2answers
785 views

What are binomial trees and how are they used? [closed]

What are the applications of binomial trees?
2
votes
1answer
99 views

Self-Frontrunning Arbitrage

If I have a large order to fill, shouldn't I always buy a derivative in the same direction to profit from the market impact? E.g. I sell 1 million shares and so I buy a put, which will hence almost ...
2
votes
2answers
103 views

American vs European Options on equity index options

I have a question regarding the usage of European vs American Options. According to Professional Risk Mgr Handbook 2010, American-style options are used mostly on equities whereas European-style ...
2
votes
1answer
81 views

Fit linear model to higher moments of CAPM

How can one fit a linear model to the higher moments of CAPM in R? Fitting a linear model to the second moment (classical CAPM) would be ...
2
votes
2answers
159 views

Real world monte-carlo (P-measure)

Consider the 2 following approaches to pricing a security: Monte-carlo ($\mathbb{Q}$-measure) $\begin{equation} C = \frac{1}{N} \sum_{i=1}^{n} e^{-rT} max(S_i(t) - K, 0) \end{equation}$ Monte-carlo ...
2
votes
3answers
98 views

How free are we in risk-neutral distributions?

Suppose we do not have a particular pricing model, we have just a frictionless market with constant interest rate (say $0$), and some traded stock $S$ which does not pay dividends. For any expiry $T$ ...
2
votes
2answers
131 views

Why are Quantquote historical trades different vom ActiveTick historical trades

I bought quantquote.com historical data of AAPL on second basis. To comapre I also got activetick.com For activetick I used the historical trading API. If you look at around 15:13:53 you see that ...
2
votes
2answers
67 views

What are Barra style factors useful for?

I'm reading the paper's summary of: Beckers, Stan, and Jolly Ann Thomas. "On the persistence of style returns." The Journal of Portfolio Management 37.1 (2010): 15-30. about how some of these ...
2
votes
1answer
74 views

VaR calculation methods of options

I am a little bit confused about VaR in Options and I need a clarification for. I collected the following formulas, can you suggest what is the best formula and explain me why, please?
2
votes
1answer
55 views

Geometric Brownian Motion in a general interval $[t_1,t_2]$

I know that the Geomtric Brownian Motion, with the expresion $dX_t = v X_t dt + \sigma X_t dW_t$ has the next solution $$X_t = X_0 e^{\sigma W_t+ (v-\frac{\sigma ^2}{2})t}$$ on the interval [0,t]. ...
2
votes
1answer
80 views

What is the best data structure/implementation for representing a time series in C#?

I'm looking for a tick by tick high performance container. So far I've been using List where Tick is a simple struct with a DateTime and double field. I'm using Linq for date lookups but it's ...
2
votes
1answer
46 views

Distribution of stochastic integral

Suppose that $f(t)$ is a deterministic square integrable function. I want to show $$\int_{0}^{t}f(\tau)dW_{\tau}\sim N(0,\int_{0}^{t}|f(\tau)|^{2}d\tau)$$. I want to know if the following approach is ...
2
votes
1answer
47 views

According to Lo and MacKinlay (1990), momentum profits can be divided in 3 parts. What do they represent exactly?

At first, Lo and MacKinlay (When are Contrarian Profits Due to Stock Market Overreaction?, 1990) didn't do it for momentum precisely. However,Kyung-In Park and Dongcheol Kim (Sources of Momentum ...
2
votes
1answer
64 views

Measure the effect of a natural disaster on a stock market index

I am very new to using stata and very new to using Garch models. I am currently doing my final dissertation for my MSc in Finance studies and regarding my topic I understood that i had to use garch to ...
2
votes
1answer
82 views

How can one value a Bermuda option?

A Bermuda option allows early exercise at predefined dates, e.g. at maturity equal to $t_1$, $t_2$, $t_3$,...; hence , would its value be the sum of 3 discounted European options with 1-year ...
2
votes
1answer
97 views

Boundary conditions of PDE from SV model with stochastic interest rate

The PDE for the American put option price $P(S,\sigma ,r,t)$ is \begin{align*} 0 =& P_t+P_SS(r-\delta)+P_\sigma a(\sigma)+P_r\alpha (r,t) \\ +& \frac{1}{2}P_{SS}S^2\sigma ^2 + ...
2
votes
1answer
78 views

Options on Volatility Control Index

I have two question. Does an option on volatility control index exist? If I google it, it seems like there is such an option, but I can't find the option on any of exchanges. So this is my first ...
2
votes
1answer
105 views

Why is my YTM incorrect? How does accrued interest play into Yield to Maturity?

I'm writing some software that includes a feature to calculate Yield to Maturity for a Bond. I'm using an HP 10bii Financial Calculator to double check the answers produced by my software. I'm running ...
2
votes
1answer
110 views

How to use calibrated Standard Stochastic Volatility?

I'm considering the standard stochastic volatility model: $$x_t = \rho x_{t-1} + \sigma \epsilon_x$$ $$y_t = \beta \exp\left[ \frac{x_t}{2} \right] \epsilon_y$$ where $y_t$ is the log-returns and ...
2
votes
2answers
64 views

Measuring Volatility from Execution Prices

I was told of a way of measuring the volatility of a stock by looking at the reported execution prices (from Level III or Level II data.) I'm well aware of how to measure volatility by looking at the ...
2
votes
1answer
23 views

Calculating the rate of return over a year then the data for a year before does not exist

I am trying to find the growth rate of a stock over a given year. Let's say I wanted to find the growth rate from today, June 11, 2015 to June 11, 2014. This is easy enough when you have perfect ...
2
votes
1answer
71 views

Value of European Call equals Value of American Call, Question on Explanation/Proof

I am reading S. Shreve, Stochastic Calculus for Finance, Vol. I. There he proves that American Call Options have the same value as European Call Options. In the proof he uses that for a Call option ...
2
votes
1answer
112 views

Black-Scholes under stochastic interest rates

I'm trying to implement the Black-Scholes formula to price a call option under stochastic interest rates. Following the book of McLeish (2005), the formula is given by (assuming interest rates are ...
2
votes
1answer
52 views

Zero rates coupon bond calculation

In order to do cash flow mapping I need zero rates for corporate bonds , where to find or how to find the o rates ?
2
votes
3answers
65 views

Questions on the relationship between option price and maturity

From the plot of volatility surface, as maturity goes up, the implied volatility will decrease. Dose it mean that options with the same strike have higher value when maturity is larger. If so why ...
2
votes
1answer
122 views

Using FX ATM/RR/BF Volatility to Estimate Smile

Suppose $S$ is some FX rate, EUR/USD say, and $\sigma_{S}(K,T)$ is the implied volatility for some option written on $S$, sourced from the surface $\sigma_{S}(\cdot,\cdot)$ (alternatively, consider ...
2
votes
1answer
44 views

the incremental value of Kelly Criterion under difference circumstances

I know that the Kelly Criterion maximizes bankroll, but i was wondering how much value it contributes to the total return and under what circumstances. I'm trying to understand the difference between ...
2
votes
1answer
64 views

Black Scholes Model and Dividends

My question can be summarised as such: Consider a portfolio. Say it has a price $\Pi = x$. Portfolio consists of a stock and a sequence of call options underlying on the stock. It has been announced ...
2
votes
1answer
82 views

The source of “Cost of hedging” in the Black Scholes model

I am trying to get some intuition for the fact that a Black-Scholes price for an option is equal to the cost of replicating the option. Say the interest is 0. The option is obviously still worth ...
2
votes
1answer
65 views

Why Variations of order higher than two vanish for Brownian motion?

Let $W_{t}$ be a Brownian Motion. Verify that variations of Brownian Motion of higher order, say, of order three, vanishes. I try to prove that ...
2
votes
2answers
41 views

Leverage on ETF the same effect as on portfolio?

While we know that leveraged ETFs do decline in value to zero given infinity, can we also say the same with our portfolio value if we use leverage in our trading activity and seeing our portfolio ...
2
votes
1answer
60 views

Systematic Views in Black-Litterman?

Are there any literature on selecting systematic views for Black-Litterman along with methods to specify the uncertainty parameter? For example, rather than specifying a portfolio manager's subective ...
2
votes
1answer
338 views

S&P 500 total return since 1956

I'm looking for monthly data of the S&P 500 total return since 1956. I have looked into Bloomberg and Datastream, but it looks like there are data only from 1988.
2
votes
1answer
157 views

Why is the volatility smile important

One thing I can't understand clearly is why there is so much focus on the volatility smile. Given my knowledge of the Black and Scholes model, this is what I get: People use the volatility smile as a ...
2
votes
1answer
53 views

How to measure the performance of an systematic option strategy

I have a strategy based only on option instruments and I am trying to measure its performance to optimize some parameters. But how does one measure the performance of such strategies? For Sharpe ...

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