All Questions

3k 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 ...
164 views

Is stock price priced in the uncertainty?

Consider a one step binomial tree model for stock price. The classical setup is as below: At time $t=0$, the stock price is $S_0$. At time $t=1$, the stock has probability $p$ to jump up to price ...
140 views

Option payoffs and replicating payoffs

I've come across the below question which has no answers to it and I was hoping someone could provide some help. I know it quite a long question and I appreciate any help with this. An investment ...
163 views

Understanding the conditioning in a GARCH process

In a GARCH model like the following $$y_t=\sigma_tz_t,\\ \sigma_t^2=\omega(1-\alpha-\beta)+\alpha y_{t-1}^2+\beta \sigma_{t-1}^2$$ where $z_t$ is assumed to be iidN(0,1), we say that conditional on ...
50 views

Which more topic should be covered in my undergraduate program? [closed]

Below is the topics covered in my undergraduate economics program. I want to know which course should I take to get a full overview of topics in finance today. Econometrics Micro, Macro Economics ...
305 views

Why does [dz(t)]^2 converge to dt over infinitesimally short time periods?

I have some trouble understanding a chapter in George Pennacchi textbook "Asset Pricing". Here the author shows that the square of a Wiener Process $[dz(t)]^2$ converges to $dt$ for infinitesimally ...
145 views

Intuitive understanding of Black-Scholes pricing

The Black-Scholes formula entails market completeness, so the price of an option is only the cost associated with dynamically hedging the option. Where does this cost come from? I don't see how ...
493 views

What is the tau parameter in the Black-Litterman model?

Could someone please provide me with a clear and concise definition of the $\tau$ parameter in the Black-Litterman model? It seems one is rather hard to come by. I understand it to be the 'weight on ...
118 views

investors hold efficient portfolios because generally they are risk averse

I'm trying to find a concept on this question,in my understanding investors differ on risk preference,the question said investors hold efficient portfolios because they are generally risk averse? ...
132 views

Basis Risk for Futures/Options

I am just reading about basis risk. It is being described as risk of the price of the hedging instrument not fluctuating the same as the instrument itself. I was just wondering, if we bought a ...
207 views

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 ...
475 views

The option values are different from two r package - foptions,rquantlib

The results are very different.I know the code from quantlib and the result of quantlib seem right(close to market price). Is there anyone know why the value from fOptions is so large or fOptions used ...
392 views

Controling ex-post volatility by ex-ante limits

In the context of mutual funds the KID directive forces us to calculate 5 year ex-post volatility of a (market) fund (weekly returns). Thus each week we look back in the past and calculate volatility ...
233 views

Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t$ ...
202 views

Is the market really Normal. Is Implied Volatility Historically Correct?

Ok. So as of 6/10/2014's market close the SPY was 195.6 and the VIX closed at a ridiculous recent low of 10.99. Now because the VIX (IV) is the implied volatility of 1 month contracts on the SPX and ...
222 views

BInary Option implied volaltility

How is implied vol calculated if the quoted prices are out of the range for any possible volatility? E.g. Current quote on CBOE for options expiring on Aug 16, 2014 ...
3k views

Is node.js being used in systematic trading software?

I have a project where I would like to track some tick data and create some indicators to follow it. I am thinking of using Node.js for this project, but I would like to know from those in industry if ...
444 views

VaR mapping - Forward Foreign Currency Contract

I have a question about VaR mapping for FX forwards. Please bear with me while I outline the problem. Philippe Jorion's book discusses VaR mapping; a means to break down complex instruments into ...
485 views

PDF Calculation by Fourier Inversion of Characteristic Function for Affine Intensity Process in Matlab

I'm trying to use the Fourier inversion formula to plot the PDF of an Affine Stochastic Intensity Reduced Form Credit Model, given its characteristic function. The characteristic function of an ...
743 views

calculate gamma value using finite difference method

I try to use the finite difference method to get the approximately gamma value, but there is an issue I can't solve. First, I set $h$ to 1 basis point of underlying asset value, but the result is not ...
146 views

Estimating the Hurst exponent in short terms in developed markets

In the Proceedings of the Estonian Academy of Sciences, Physics and Mathematics (2003), I saw the following sentence: Surprisingly, in the case of developed markets, short-term $H$ results showed ...
739 views

Directional/Non-Directional Risk

Can someone explain to me what is direction/non-directional risk? Went through few sites but couldn't understand much.