1
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1answer
77 views

Arbitrage Strategy Proof in Bjork

In Tomas Bjork's Arbitrage Theory in Continuous Time (or here), $\exists$ this proposition Proposition 2.9 Suppose that a claim X is reachable with replicating portfolio h. Then any price at t=0 of ...
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1answer
111 views

Black–Karasinski - Market Price of Risk

In the past I have calibrated simple short rate models to the term structure by using maximum likelihood to get the parameters of the Vasicek/CIR sde, and then use the ZCB formula and the current ...
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1answer
344 views

robust open source Kalman filter library in C++

I would like to know if anyone has experience with a good open source kalman filter implementation in C++ that I could use. I require an implementation that supports computation of likelihood similar ...
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1answer
129 views

Short-term directional trading

Did value of ratio between informed and uninformed traders at market, making difference to profitability of short-term directional trading on that market? My guess is yes and better play short-term ...
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1answer
79 views

regarding Basel II III model

I may have to get involved in some projects using Basel II, III model for risk modeling, to which I have no background. Are there any good book/tutorials to recommend? What are the underlying ...
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3answers
66 views

Obtaining Expense Ratio Data

I have a list of tickers (~11,500) in a .txt/.csv file and accompanying fund data from yahoo finance. I'm wondering if there is a reasonably easy/accessible way to use this list to obtain expense ...
1
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1answer
59 views

Regression of TAQ half-hourly stock volume data against news volume

I am planning to run regression of half-hourly stock volume against the half-hourly news volume for that particular stock. I am looking at 2 years of data for my analysis. However, I am stuck thinking ...
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3answers
128 views

Is there any other way to measure option pricing model performance than proximity to market prices?

Short version Why do we take market prices as the prices to be estimated and predicted? The common answer is efficient markets hypothesis as in "Market agents do their best effort given their ...
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1answer
104 views

Volatility of Option

I hope I'm asking this at the right place. This pertains to actuarial exam MFE/3F on Financial Economics. If $\sigma$ is "volatility" and $\Omega$ the elasticity of the stock, one formula that is ...
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1answer
25 views

How to define the median for bivariate function?

I know if we define a function f(x) and its cdf is F(x). The inverse function of cdf is inverseF. I can define its median as follows: median = inverseF(0.5). But if I want to get the median for a ...
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1answer
90 views

Forward rates diffusion

I used a simple market model (Black 76) to price an american swaption. It's a formula similar to B&S, with another numeraire and forward rate as underlying. I used the SDE: $$ dF = \sigma * ...
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1answer
42 views

The role of micro credit in finance

The concept of micro credit has been around for a while. Recall that Muhammad Yunus together with Grameen Bank were awarded the Nobel price in this context. I don't have references at hand but I ...
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1answer
147 views

High correlation will help detect spurious regression over cointegration?

I'm analyzing two financial time series with Johansen method. A high Correlation coefficient using the Pearson method will help me to detect spurious cointegration models to avoid? If this is not ...
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1answer
57 views

Adjusting open, highs and lows for past monthly stock prices?

I'm looking into modelling monthly stock prices and want to start off by using data from Yahoo Finance. I know that the closing prices given there are adjusted for stock splits and dividends, but ...
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1answer
30 views

How to reason about leverage in terms of elasticity

Return of an investment for a given period is by definition: $$r = \frac{P}{W_0} - 1$$ where $P$ is the price of the investment at the end of the period, and $W_0$ is the initial investment. I want ...
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4answers
174 views

How can I calculate Value at Risk?

Is it possible calculate Value at Risk on an asset without a time horizon? What kind of variables do you need? Variables that are on the table are value, standard deviation, beta, market return, risk ...
1
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1answer
88 views

novice question on fixed coupon schedule in QuantLib

For some bonds I work with the last coupon date is not equal to bond's maturity date. E.g. the last coupon date is April 25th, 2020 and maturity date is April 25th, 2021. I looked at Schedule class ...
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1answer
67 views

Will pricing a Bermudan option default to a value of a European option?

I have a call option with 2 expiry in two years. For the first 9 months I cannot excercise the option. After that the I can exercise at any time. I am pricing this option using a binomial tree using ...
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1answer
111 views

Constant term in linear regresion

Can someone give a mathematical proof as to why including a constant in a linear regression equivalent is to running a regression with demeaned data and zero constant? More specifically, consider the ...
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1answer
543 views

GARCH model and prediction

I have a question about the prediction of volatility and returns of a time series. Basically it is a question about prediction in the ...
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1answer
138 views

How would you correct a GARCH model to deal with non mean reverting volatility?

I am currently attempting to model and forecast volatility of bitcoin but have not been able to find a GARCH model that fits the data appropriately. I've used tick data sampled at 1 hour intervals ...
1
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1answer
114 views

Bond Spread Drivers

I have some work to do on the drivers of government bond spreads - ie. across terms (not across governments) of the yield curve, say 5yr and 20yr bond spreads from the same government issuer - and am ...
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2answers
183 views

Are power contracts traded on any stock market?

Are power contracts traded on any stock markets ? What about OTC markets ? I ask about the derivatives where payoff is some exponential function of difference between strike and spot price.
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1answer
32 views

Integration in the context of modelling with the Meixner Process

I failed to evaluate the integral of $\frac{e^{ax}}{x\sinh(bx)}$ with respect to $x$ from negative infinite to positive infinite, What techniques can I use to evaluate the integrals of such kind for ...
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1answer
116 views

Price volatility and yield volatility

This question is a bit confused, but please bear with me. Now and then I see people use the terminology "price volatility" and "yield volatility" in connection with bond options. I understand the ...
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1answer
131 views

How can I use PCA to determine spread ratios for multiple legs?

I would like to generalize Paul Teetor's A Better Hedge Ratio, which uses prcomp() to determine a ratio between two legs. I am hoping to extend this to multiple legs, but am having trouble finding ...
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1answer
158 views

Given future price probability distribution, what is a strategy that maximizes return?

Say I know the price probability distribution, e.g., lognormal(p,s), of a stock X at a future time ...
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3answers
101 views

How often do banks update forward points?

My understanding is that forward rates are calculated by comparing interbank interest rates of the 2 currencies for a currency pair, with the points being the difference between spot and the forward ...
1
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1answer
65 views

Baye's rule for conditional expectations (Proof review)

The Baye's rule for conditional expectations states $$ E^Q[X|\mathcal{F}]E^P[f|\mathcal{F}]=E^P[Xf|\mathcal{F}] $$ With $f=dQ/dP$ - thus being the Radon-Nikodyn derivative and $X$ being ...
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1answer
102 views

Direct exchange data via a Vendor

I am considering the option between using direct exchange connections vs using a vendor like Bloomberg for market data. I am interested in daily data and potentially tick by tickdata. Initially I am ...
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1answer
236 views

Value Weighted Return

I recently have started to look at some data from CRSP, and they have a metric called Value Weighted Return (two versions with and without distributions). When I looked it up, it seemed that this ...
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1answer
173 views

List of financial derivatives Ito's Lemma does not apply

According to Ito's Lemma there is no restriction on the continuity of the stochastic process. The restrictions are on the continuity of the pay-off so that second derivatives with respect to ...
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1answer
92 views

Discount rate, convertible debt and the effect of time

The way I understand it is that there are three main parameters to a convertible debt investment. An investment amount A discount rate A trigger event Now under most of the examples I have seen, ...
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1answer
249 views

Ex-Ante tracking error how to determine the look back period

I am looking to compare the ex-ante predictions against the post values. I am using a look back period of ranges from 1 year to 5 years to construct my covariance matrix that I am using for my ex-ante ...
1
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1answer
109 views

Volatility tools / web sites?

Could someone give recommendations regarding volatility tools / web sites that they find useful? I am looking for information that my brokerage platform does not provide. Specifically, I want to see ...
1
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1answer
197 views

Implied state price density (Question 1 - derivation of the formula)

I came upon the term "implied state price density" in a couple of papers. As far as I understand the concept one basically tries to extract the "pricing density" from the market data. For the sake ...
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3answers
71 views

Who is the issuer and the counter part of this instrument?

I have the following SWAP contract : T1UH4 which is a 2-Year Deliverable Interest Rate Swap. Product info : ...
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1answer
201 views

Markit PMI vs ISM PMI

What is the difference between the Markit Manufacturing PMI and the ISM Manufacturing PMI? The monthly number differs a lot, my understanding is that they are trying to indicate the same thing.
1
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1answer
212 views

Pre-trade evaluation and risk assessment of option trading strategies (in market practice)

When a trader gets conclusion of the volatility is being underestimated (via volatility cone or some other technology), actually there are multiple ways for his trading. (Let's assume the underlying ...
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1answer
163 views

How to hedge a forward contract

I was asked this in an interview and I messed it up lol. This might actually be really basic. Let's say I signed a forward contract to buy NASDAQ at 4000 one year from now. How can I hedge this cash ...
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2answers
173 views

Reading XBRL Data from the SEC FTP SITE

After I ftp into the SEC Edgar site (ftp.sec.gov) I am able to pull the appropriate financial statements (i.e., 10-k, 10-q, 8-k, etc.) onto my local computer. However, when I go to open these files, I ...
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2answers
320 views

where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
1
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2answers
154 views

why is the BNS model the way it is

what I am puzzled about is, why dont we instead of having \begin{equation} dX_t = \sqrt{V_t} dB_t - (\frac{1}{2} V_t^2-r-\lambda\Phi(\rho)) dt - \rho dZ_{\lambda t}\nonumber \end{equation} we just ...
1
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2answers
154 views

Basket Option weight sensitivity calculation

I am looking to find/estimate the "greeks"/option price sensitivities/derivatives for a basket option situation. In specific the change in price of a put option associated with a change in weight of a ...
1
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1answer
151 views

binary tree options pricing model with dividend value - How should I discount the option at?

the expected value of the option given the next period up, down values is: $ Pexp = (p Price_{next, up} + (1 - p) Price_{next, down})/R$ where p is defined as $p = \frac{\exp(-r \times \Delta t) - ...
1
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1answer
268 views

Interpolating spot rates given intermittent coupon-bond prices.

I'm trying to bootstrap spot rates given coupon-paying bond data. To simplify my problem, assume we are working with only 3 given data, the price/coupon rate on semi-annual bonds maturing in 0.5, 1, ...
1
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1answer
132 views

Volatility calculation for intra-day cash-or-nothing call binary option

Firstly, I do not have a quant finance background. This is new to me, and I imagine that this is a basic question for this group. I am calculating the price of a binary/digital option with ...
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1answer
73 views

Is it illegal for a publicly traded company to publish inaccurate financial data?

If you are the book keeper for a publicly traded company and you misrepresent the financial earnings of the company (even if by accident) for an earnings quarter, is this illegal?
1
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1answer
121 views

probablity expiring in the money ..basic question

Everyone says $N(d_2)$ is the probability of the option being exercised but stocks that have really high volatility have really expensive options indicating a high likelihood of expiring in the money. ...
1
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1answer
137 views

How does Vega of a call/put behave under the Black-Scholes model?

I have two questions. I would prefer a reference if possible. Is the value of vega bounded for $\sigma\in [0,\infty)$? (I assume so, I imagine it goes to 0 as $\sigma$ go to infinity.) Are there any ...

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