# All Questions

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### Approximating the PDE price of an option with a binomial model

I'm trying to replicate, with a binomial model, the price of an option obtained with a PDE. It doesn't really work, so I was wondering, if there are some caveats when doing that. The PDE model use a ...
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### MonteCarlo simulation of stock prices using milstein scheme with dividend yield?

While performing a montecarlo simulation of stock prices using the milstein scheme is it possible to take into account the dividend yield into the simulation itself somehow, if we are given a ...
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### A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

[I already posted this question on the math forum of stackexchange and I was advised that I should post this question here] In Evans and Jovanovic (1989) you will find a model for entrepreneurs with ...
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### Weak convergence of Lookback payoff with correction term

In this article on the Multilevel Monte Carlo method on page 8, http://people.maths.ox.ac.uk/gilesm/files/mcqmc06.pdf, Giles uses a correction term to improve the weak convergence rate of the lookback ...
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### Quantitative fraud detection techniques

I am trying to develop a short equity strategy that dedicates some, currently arbitrary, percentage of short capital to potential frauds. I am aware of Benford's Law, but this is not my specialty. ...
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Recently I created a simulation of a GBM. The time between the prices were sampled from an exponential distribution. The log rate of return was sampled from $\sigma \sqrt { { t }_{ i }-{ t }_{ i-1 } } ... 0answers 72 views ### Calculate display and plot relative spread using Sierra Chart I'm trying Sierra Chart for trading Bitcoin. I would like to display relative spread for a given volume. spread_rel = 200.0 * (ask - bid) / (bid + ask) where ... 0answers 53 views ### How To Regress Returns Vs Price as Pct of 52 week high? I would like to do a linear regression of daily stock price returns, vs the price as a percentage of the 52 week high. i.e. [next week return] = A * [Price / 52 Week High ] + B where A and B are ... 0answers 87 views ### How to estimate market integration parameter in Singer-Terhaar model for E(r)? Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ... 0answers 86 views ### How to determine risk-free rate of Ecuador? I have a question in determining the risk-free rate of Ecuador. For developed countries like United States and Great Britain, the risk-free rate can be obtained in financial database such as Reuter or ... 0answers 96 views ### Fixed Income Var calculation I'm trying to calculate var for a portfolio of fixed income securities. I initially want to just calculate undiversified VaR for each instrument. I'm doing the following for each instrument Take ... 0answers 83 views ### default probability Suppose the hazard rate is$\lambda$the default probability density function follow exponential$f(t) = \lambda e^{-\lambda t}$and cumulative probability function is$F(t) = 1 - e^{-\lambda t}$... 0answers 36 views ### what is General IB2 Restriction in Basel II credit risk model I was reading Basel II wiki page, it says: The first pillar The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: ... 0answers 99 views ### Solvency II Assets-D1 - aggregation of line items by CIC code The revised version of Assets D1 (now S.06.02 – List of assets under CP13) requires the following aggregations (page 24): CIC 71 (Cash), only one line per currency is to be reported; CIC 72 ... 0answers 117 views ### What is the right group of durations? It seems that the group of durations commonly used in quantitative analyse is$\mathbf{R}$but it seems to me that$\mathbf{R_+^*}$could also be an interesting choice. While I am not aware of ... 0answers 140 views ### For pricing, what types of Exotic Options are suitable using Local Volatility Model / Stochastic Volatility Model? I understand that Stochastic Vol Models should be used when Exotic Option payoff is Volatility dependent (such as Variance Swaps and Volatility Swaps). Stochastic Vol Models should also be used when ... 0answers 180 views ### pairs trading or long short strategy given volatility of the stocks Suppose I have 2 stocks and the only thing I know about them is their volatility and that they cointegrate. Let's say vol of stock A is 25% and B is 20%. Will I be able to find a hedge ratio only ... 0answers 124 views ### Credit Rating vs Bond Yield I am looking for some references on quantifying the dependence between credit rating and bond yield. I have some data (found some Bloomberg indices which give average yield based on credit rating), ... 0answers 189 views ### Comparing Backtests of Value-at-Risk and Expected Shortfall My goal is to test if ES (CVaR) empirically is a better risk measure than VaR for a set of given variables (assumed underlying distribution, confidence level, sample size) for different asset classes. ... 0answers 187 views ### European Swaptions: does implied volatility of swap rates decreases both with start and tenor? Does implied volatility of swap rates decreases both with start and tenor? Given a Swaption price and a discount curve I calculate the swap_rate from the curve, then I define implied volatility as ... 0answers 43 views ### Valuation of Mortgage Backed floating notes Does anybody have experience in valuation of mortgage backed floating notes? I have task to value the 4 different MBS floating notes. I know that it should be done through montecarlo, refinancing ... 0answers 199 views ### Quadratic utility function May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function$U$. This simply means that ... 0answers 206 views ### Obtaining the default probability and recovery rate for each credit rating? I have the following questions for obtaining the credit rating: Given that I have cumulative default probability of each credit rating from Global Corporate Average Cumulative Default Rates ... 0answers 418 views ### Question about Merton model to estimate default probability and recovery rate of the company I recently come across Merton's model to estimate the default probability and recovery rate of the company. Here is the inputs ... 0answers 145 views ### Forecasting Equity returns using state-space models I have data for 3 yrs of 5 min prices of various equities. I can construct a linear regression model and try to see the in-sample model performance. But I was wondering whether fitting a state-space ... 0answers 70 views ### Adjusted option prices? I am trying to calculate IV of options for a ticker over the last 10 years. Problem is that some option prices don't make sense (for example, closing price \$31.94, but 30-day call option with 18 days ...
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Consider a non-liquid option market with a wide bid-ask spreads across all strikes. Spot: \$52 A snapshot of the \$50 strike shows: ...
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### Market Standard Pricing Models for Fixed Income Securities (Vanilla)

To clarify my heading, I have been searching for a material that consolidates all standard Fixed Income Security Pricing. E.g. ...
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### How to choose a window for curve fitting and prediction?

I am using Pareto distribution to fit a serie of survival rates (with least square). My ultimate goal is to use this fitting curve for prediction. Thus I would mainly focus on the tail of the ...
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### How to show that the risk contribution function is or is not injective?

Assume a portoflio $w \in \mathbb{R}^n$, you can get the total risk contribution $\psi_i$ of asset $i$ by doing: \psi_i = w_i \frac{\partial \sigma(w)}{\partial w_i}= \frac{1}{\sigma(w)} \left[ ...
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### Long/Short portfolio return

Suppose I have a Po with one long, one short positions and some cash (to balance the short + 50% margin) as shown below: ...
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### Do you use software for finite element valuation or do you roll your own?

Engineers put a lot of time and effort in developping high quality finite element (FE) software (deal.II, Dune, Elmer,...). So I was wondering if some of those tools would be suitable for quantitative ...
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### Test for stationarity and make use of non-stationary points in financial market?

I have two questions to ask: What are the best methods to determine stationarity in a financial market (such as stocks) using MATLAB? What methods would you recommend to use in order to change from ...
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### Example code for “Gauge Invariance, Geometry and Arbitrage” paper

This paper describes an algorithm for computing arbitrage opportunites using a gauge connetion. Has anyone written a python program or C++ or C# program that shows how to follow the steps outlines in ...
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