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
296 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
169 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
161 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 ...
4
votes
1answer
265 views
Taylor series expansion (Volatility Trading book) explanation sought
I am currently reading Volatility Trading, I have only just started, but I am trying to understand a "derivation from first principles" of the BSM pricing model.
I understand how the value of a long ...
0
votes
1answer
85 views
Reference on SDE driven by jump processes
Are there reference on SDE driven by jump proccesses? e.g. Shepard-Nielson Model
3
votes
0answers
171 views
how to represent financial data as a spatial process
Does any one have a good tutorial , introduction or overview on the web for different ways of representing financial data as a spatial process? Such as those spatial processes often used in ...
2
votes
2answers
179 views
Why FX Vanilla Options are quoted in volatility
I've been curious why vanilla options are quoted (and traded) in terms of volatility. Considering that every financial institution has its own options pricing model, volatility as an input would cause ...
5
votes
0answers
200 views
option chain data visualization, sunburst
I think option chains are not represented in the best way. With more and more options products coming out and trading on the various exchanges, I see vendors struggling to keep up with a good way to ...
1
vote
0answers
130 views
How to use financial ratios in a factor model?
I am trying to understand how factor loadings in a general factor model are computed. For simplicity sake, lets assume a simple model:
$$
R = B \times F + \epsilon
$$
$$
R = N \times 1
$$
$$
B = N ...
1
vote
3answers
120 views
Quick way to check what 'tape' a stock belongs to?
For the SIP feeds, there is the CTA and the UTP plan and they cover Tapes A,B and Tape C respectively. Is there an easy way to check on google what tape a stock would belong to? Particularly when it ...
1
vote
1answer
127 views
Regression giving the return on a stock
I have this regression equation:
$$
R_{stock} = 3,28\% + 1,65*R_{market}
$$
Where $R_{stock}$ is the expected return on a stock and $R_{market}$ being the market risk premium.
I have a one-year ...
2
votes
1answer
184 views
Can a long put trade be profitable through Vega even if the underlying moves upwards?
Generally speaking, I know when implied vol increases, option prices increase for calls.
However, does the same occur for puts?
If I am expecting implied volatility to increase for an option on an ...
2
votes
3answers
275 views
Is there an Australian Interbank Rate?
Most widely used Interbank Rates are LIBOR, EURIBOR. Then I read online on SIBOR (Singapore).
It says Canda, US are following LIBOR as well. So for Australia, is there a dedicated interbank rate like ...
5
votes
2answers
240 views
Recover full tick data from missing tick data
Due to some economics/regime problem, I can only have access to non full-tick data from an exchange.
To make the problem precise, a full tick data $X$ is a series of $(t_i,p_i,v_i)$ for $0 \leq i ...
1
vote
1answer
113 views
PIQ estimation for FIFO limit order book
Assuming that one doesn't have any kind of priveleged data feed (i.e. info is depth of book and volume executed at bid and ask), is it inherently easier to more accurately estimate position in queue ...
5
votes
1answer
248 views
Problems with dealing with GARCH models and intra-day data
Short question would be "Which type of model from GARCH family is most suitable for modeling 5-minute data returns ?" but I've added some story to it.
Long time ago I was preparing my thesis, one ...
3
votes
1answer
104 views
how to define liquidity in equity, index, and etf options
i've heard several ways to put a metric on liquidity of options.. obviously liquidity isn't a constant.. things like the Bid/Asks spread, liquidity of the underlying.. Trying to find a way to ...
2
votes
1answer
100 views
OTC Equity Options' Dynamics
This only applies to options that do not have marketable equivalents since margin can be marked to them.
I've never been able to find this on my goog.
How is margin typically calculated for OTC ...
2
votes
1answer
105 views
American Option price formula assuming a logLaplace distribution?
What are $d_1$ and $d_2$ for Laplace? may be running before walking.
When I tried to use the equations provided, the pricing became extremely lopsided, with the calls being routinely double puts. ...
3
votes
2answers
327 views
Computing the Sharpe Ratio
The building blocks of the Sharpe ratio—expected returns and volatilities—are unknown quantities that must be estimated statistically and are subject to estimation error.
The main problem I have is ...
2
votes
1answer
119 views
Implementing nonlinear optimization to find model free implied volatility using Matlab
I am trying to calculate model free implied volatility $\sigma_{MF}$ for a relative performance index using the following method:
$\sigma_{MF}^2=2\sum_{i} [\frac{C(T,K_{i})}{K_{i}^2} - ...
6
votes
1answer
172 views
Upper bound concerning Snell envelope
Consider a non-negative continuous process $X = \left (X_t \right)_ {t\geq 0}$ satisfying $ \mathbb E \left \{ \bar X \right\}< \infty $ (where $ \bar X =\sup _{0\leq t \leq T} X_t $) and its ...
2
votes
1answer
98 views
Multiple Discrete Dividends
Using the recombining tree model as described in Haug's Option Pricing Forumla one can factor in multiple future discrete dividends when calculating the option value and greeks.
What's unclear is ...
7
votes
2answers
551 views
Why do we use GARCH(1,1) to predict volatility?
What makes GARCH(1,1) so prevalent in modeling especially in academia? What does this model has that is significantly better than the others?
0
votes
2answers
142 views
Interpretation of PCs
I have computed PC1 and PC2 wts on future contracts derived from cumulative log differences. How can I use them to get back the theoretical price of each contract using those 2 pcs? Thanks in ...
2
votes
0answers
152 views
Markov-Switching E-GARCH with R
I am looking for a R library for modeling a Markov-Switching E-GARCH process.
In other questions at StackExchange related to GARCH models, the package rugarch is often mentionned. Do you recommend it ...
6
votes
1answer
329 views
What different methods of pairs selection exists? (For Pairs trading)
(I'm quite new to quant finance so I'm not sure if this is an eligible question.)
I've decided I want to backtest pairs trading on the Nordic stockmarket. So I would guess there exists different ...
5
votes
2answers
357 views
Why does the future price dominate the forward price and why doesn't the long rate fall?
There are two questions left about the book Term Structure: A graduate Course by Damir Filipovic, which bother me. The first one is about the Theorem, that the long rate never falls (p. 108). Why is ...
0
votes
1answer
127 views
how to quantify non-fundamental risk if variance is 100% discounted?
If there's better vocabulary, forgive me.
If you were required to ignore variance as risk, how would you quantify non-fundamental risk?
Many thanks in advance!
1
vote
0answers
158 views
R ARMA-GARCH rugarch package doesn't always converge
I'm trying to compute the standard ARMA(1,1)-GARCH(1,1) as shown in this answer for an entire index,just to store in a database to quickly lookup values for back ...
0
votes
2answers
221 views
What stock market indicators to model based on twitter feed? [closed]
We are developing an algorithm that models twitter users and groups of words that may indicate real world events.
One application is modelling elections, i.e which party is likely going to win. ...
4
votes
2answers
270 views
Why doesn't a simulated delta hedging process go to zero?
I put together a simple simulation of delta hedging a set of options with an underlying and it seems that the fluctuations of the price still seem to affect the final outcome. The reason, I understand ...
2
votes
1answer
82 views
How to calculate two-time scale variance?
I am having trouble understanding how to calculate two-time scale variance as I do not have a strong mathematical background. Suppose I want to calculate the TSRV at 5 min intervals. Do I calculate ...
3
votes
1answer
140 views
What continous adjustment methods are firms using for futures backtesting?
There are several methods available between data vendors and associated software programs to adjust futures contract data for historical simulations.
Some of the methods are:
1) Back or forward ...
2
votes
1answer
196 views
What are $d_1$ and $d_2$ for Laplace?
What are the formulae for d1 & d2 using a Laplace distribution?
5
votes
1answer
144 views
How to derive the formula of a European Libor call option in a Libor Market Model?
I am struggling with the following two mathematical statements. The first is from the book "Term-structure Models: A Graduate Course - Damir Filipović" Suppose we have a deterministic function ...
2
votes
4answers
496 views
Which brokers offer a Python stock trading API?
I would like to automate my trading strategies.
My strategies are not high-frequency and are written in Python.
I have a trading account in Interactive Brokers, and I know some non-official Python ...
3
votes
2answers
55 views
Imputed values in a multi-index
I have an equal-weighted index on a number of different Indices (from US, Europe and Asian markets). This compound index is constructed from a time series that has missing values (for example, those ...
3
votes
0answers
63 views
is there a mapping from Altman Z-score for private companies to bond ratings or probability of default?
On wikipedia, there is a formula to calculate the Altman Z-score for private companies:
Z-score estimated for private firms:
T1 = (Current Assets − Current Liabilities) / Total Assets
T2 = Retained ...
2
votes
1answer
220 views
Multiple (linear) regression
I am looking for some inputs on a pair trading strategy that I am trying to improve with some semi-fundamental input.
The basic idea is to use multiple linear regression to estimate the price of a ...
3
votes
1answer
151 views
time in time series database - UTC or local
I strictly store UTC time stamps inside time series files or databases, mainly to allow processing several time series together. Timezone information is kept with each time series file or item, so ...
0
votes
2answers
69 views
Intangible assets as underlying for Futures contracts
How is it possible for a Futures contract to have an intangible underlying? For example, to my knowledge, there exist Futures that have interest rates as their underlying, come delivery date, how is ...
4
votes
2answers
436 views
Daily returns using adjusted close
I want to chart the daily returns of a stock, and I'm using Yahoo finance data to download historic data. I was told to use Adjusted Close, but there seems to be an issue with this.
For ANTO.L, you ...
2
votes
1answer
156 views
Testing for stationarity in large sample sizes
I keep struggling with testing 9 samples if they are stationary. Each of these samples is a real valued time series with 714.000 values. If I use the KPSS test with the each compleete sample set, the ...
3
votes
2answers
152 views
NYSE binary data, convert to ASCII
The data product "TAQ NYSE Order Imbalances" from the New York Stock Exchange is in a format that is described pretty well in sections 4.8, 4.9, 4.10, and 5 of the document "NYSE Order Imbalances ...
4
votes
1answer
119 views
Quantitative risk model for an open real estate mutual fund in Europe
How useful are quantitative techniques for the risk analysis/management of a open real estate fund?
I am thinking about an approach for Europe (US and other markets are probably quite different - ...
