1
vote
1answer
48 views

Why implied volatility is less for the back month option even though the back month option is more expensive

Why is the implied volatility of this option at the ATM strike (18$) greater in the front month (March) than in a further month (Oct). The Oct month has 43%, but the front month has 54%. Should not ...
2
votes
2answers
64 views

hedging correlated instruments

If two instruments have a significant negative correlation but the percent change in the price of the instrument moving in positive direction is always more by a fraction than the one moving in ...
1
vote
0answers
36 views

Reputational Harm

How would you measure the reputational harm incurred on an individual by an organization. How is Market Pricing in the expected payout resulting from the law suit by an individual ? The news breaks ...
1
vote
1answer
41 views

Delta-Gamma Neutral portfolio, derivation issue

Let $C$ be an option on an underlying $S$. I want to construct a portfolio $V$ using another asset $C_0$ such that the delta and the gamma of $V$ is the same as the delta/gamma of $C$, in order to ...
1
vote
0answers
35 views

forward curve and cap/floors in nowadays environment

I'm currently trying to get the implied volatility of a vanilla Euro floor with maturity 1Y with data from bloom. I have the price ( which is not supposed to take into account the first floorlet ...
0
votes
1answer
40 views

What is the difference between a book value and a market value?

0 down vote favorite I would like to understand the following problem. A 2yr zero-coupon bond has an annual yield rate of 11% per year. A 4yr zero-coupon bond has an annual yield rate of 19% ...
0
votes
0answers
25 views

Calculating the optimal portfolio for an investor with quadratic utility

The problem is from Asset Pricing and Portfolio Theory by Back and can be found here. The relevant info from section 2.5 can be found here. Given that we have the Expected value and the variance of ...
3
votes
2answers
243 views

Why an option has sometimes and implied volatility greater than 100%?

Sometimes, in an option chain, the implied volatility of an option is greater than 100% . How is this possible? I mean, it is possible for 100$ stock to increase more than 100%, but not decrease more ...
1
vote
1answer
28 views

De-annualizing a target alpha return

apologies if this is not the correct place for this type of question, but I just want to confirm if the following de-annualization is correct. if a manager states that he will earn 200 bps of target ...
3
votes
2answers
87 views

Black Scholes: How does it help to transform uncertainty and still not be able to calculate a fair price?

Recapitulating the history of Black-Scholes: Nobody knows the fair price of options. Revolution: BS! You put in all the parameters and get a price -> A Nobel Prize for that one! Wait: Nobody knows ...
4
votes
3answers
173 views

Why is Brownian motion merely 'almost surely' continuous?

Why is Brownian motion required to be merely almost surely continuous instead of continuous? For example, this is stated as condition 2 in this article in section 1, Characterizations of the Wiener ...
1
vote
0answers
34 views

Bayes Stein Porfolio Implementation

From this paper from Jorion. Has anyone implemented this? How is the Covariance matrix estimated? It needs to estimate also the conditional distribution of the returns? Best
2
votes
1answer
86 views

Forecast 3m LIBOR USD. Budget purpose

How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years? I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
1
vote
0answers
83 views

Differential of stochastic term

Question 1: How does one come up with the equation in the red box below? It looks like some kind product rule, but I'm not sure how to apply Ito's lemma here. Bjork doesn't seem to explain it ...
1
vote
2answers
44 views

Incorrect characterization of spot rate?

Is the t in the red boxed $R(t,T)$ supposed to be the same as the S in the green boxed $R(S,T)$?
1
vote
1answer
45 views

What is the filtration described?

What is the filtration $(\mathfrak{F}_t)$ encircled below? Is it $(\mathfrak{F}_t) = (\sigma(W_t)) = (\sigma(\tilde{W_t})), t \in [0,T]$? Or is it $(\mathfrak{F}_t) = (\sigma(\hat{W_t})), t \in ...
0
votes
0answers
43 views

Self-financing strategy in the Hull-White bond model

I am having troubles with solving a particular problem concerning the self-financing portfolio in the Hull-White model (dr={phi(t)-ar}dt+sigmadW). Consider an expiry-T_0, Strike-K cll-option on a ...
1
vote
0answers
30 views

Use of Black-Scholes Model on Guaranteed Fund Investment

I am stuck with a revision question at home on Black-Scholes pricing model. The question is on a fund manager selling one unit of the fund to a customer for S(0) at time 0 and then guaranteeing at ...
4
votes
1answer
127 views

What does the “-E” mean at the end of a CBOE options symbol?

Below is are some option quotes taken directly from the CBOE website. I am wondering what the -E, -4, -8, -A, -B, -I, -J etc..that are at the end of the options ...
2
votes
1answer
39 views

Show that Z(t)/Z(0) is a positive mean-1 martingale

We look at a standard no dividends Black-Scholes model and here we have a process Z, which is defined by: Z(t)=(S(t)/H)^p , where H is a positive constant and p=1-2r/sigma^2 I am now asked to show ...
5
votes
3answers
120 views

Why does the volatility smile flatten as maturities increase?

First, I can't find a purely "financial" explanation for this. Also the only mathematical explanation I've found so far was using the large deviations theory, which is quite complex. Is there a ...
0
votes
0answers
18 views

Finding optimal ewma and number of periods usedas features in a time series regression

I am using an exponential moving average (ema) to smooth the return of a price time series. I then want to use the last n periods (features) as the independent variables of the time series to predict ...
1
vote
1answer
46 views

Share price of Precision Imaging Corporation of America on March 13, 1991

Where can I find the share price of Precision Imaging Corporation of America, Inc. on March 13, 1991? I realize the company no longer exists and the shares are now worthless but I would like to know ...
1
vote
0answers
54 views

Method to combine trading signals to achieve higher sharpe

There are a few thread with the question of methods to combine different trading signals/strategies. But is there any method that can ensure that by combining two signals, we can achieve a better ...
1
vote
1answer
24 views

computation involving independent increments

One can rather easily show that E[$\sum_{i = 0}^{i = n - 1}W_{t_i}(W_{t_{i + 1}} - W_{t_i})]$ = -T + $W_T^2$. What I'm confused about is why we can't simply say that for each i, $W_{t_{i}}$ is ...
1
vote
2answers
47 views

Heston model with Jumps

I am a relative newbie in finance and dont know most things about quantitative finance and trying to learn stuff and working on the heston model for now. My question is this: Heston model can be used ...
1
vote
1answer
28 views

Differential equation involving bond price and forward rate

Given forward rate f(t,T) and bond price P(t,T) where $f(t,T) = - \frac{\partial}{\partial T} \ln P(t,T)$, $P(T,T) = 1 = P(t,t)$, T>0 and $t \in [0,T]$ Does it follow that $P(t,T) = ...
1
vote
2answers
57 views

Numerical delta of Bond Options

I'm trying to calculate the delta for bond Call options. I'm using the vasicek model which gives the following solution for a Zero-coupon bond call option: $Z = N P(t,S) \Phi(d_1) - K P(t,T) ...
2
votes
2answers
75 views

Positive VaR when calculation on Total Return Indexes?

I recently saw a VaR calculation, and I was wondering whether that calculation made sense. Here the details: 1. Construction of a total return bond portfolio index. By total return I mean that the ...
0
votes
1answer
66 views

How to pull stock exchange names for a list of tickers, bloomberg?

How to pull stock exchange names for a list of stocks with tickers, on bloomberg? Please advise the steps so as to paste the list of tickers without having to type tickers one by one.
2
votes
0answers
95 views

Non-Negative Matrix Factorization - Estimating the Mean

How do you estimate the mean in a Non-Negative Matrix Factorization framework? It is obvious and well known how to estimate the covariance matrix, how ever I also need the estimated mean. I'm ...
0
votes
1answer
49 views

Can the Minimum Variance Hedge ratio be greater than 1?

The Minimum Variance Hedge ratio is defined as: $h = \rho * \frac{\sigma_S}{\sigma_F}$ For correlation $\rho$ and $\sigma_S , \sigma_F$ for S.D. of changes in asset and future prices accordingly. ...
0
votes
0answers
12 views

Adjusting simple volatitly for a VaR calc

I'm reviewing a VaR estimate adjusting a simple annualized volatility to an unwind period of x days - in this case for an equity position, using the following formula for a given annual volatility : ...
2
votes
2answers
47 views

Conditional expectation of a non stochastic process

In an example I was working through it was shown that $W_{t}^{2} - t$ was a martingale with respect to the Brownian motion filtration $\mathcal{F}_{s}^{W}$ with $t>s$. Everything was fine except a ...
0
votes
1answer
64 views

Computing the minimum variance portfolio

Given two risky assets and their corresponding covariance matrix, how do I compute the global minimum variance portfolio, its standard deviation and its expected return?
0
votes
1answer
51 views

Quantiles, Value-at-Risk and log normal random walks…

Sorry, that's probably quite a bunch of silly questions, but I just got lost a bit and need to dot all the i's and cross some t's :). Let's say we have a series of returns (like this one we may get ...
0
votes
1answer
65 views

Under what circumstances would one want to delta hedge a straddle

Under what circumstances would one want to delta hedge a straddle option? This link explains: ...
0
votes
1answer
39 views

Reuters RIC chain for Eurodollar midcurve options

Can someone please tell me what this is? Thanks. Edit: The RIC for the straight eurodollar options is 0#GE+, I need RICs for the 1,2,3,4 mid curve options which the IMM/IOM calls GE0, GE2, GE3, ...
0
votes
1answer
53 views

Using multiple regression to determine coefficient that feed into another multiple regression problem

Ok so it is a bit of a complicated problem so I hope I explain this well. I currently have a multiple regression formula where I input 3 items and the output is expected growth. Each of these input ...
1
vote
3answers
131 views

How to pull an exhaustive list of securities traded globally, on bloomberg?

I need to extract an exhaustive list of securities with CUSIPs and ISINs on bloomberg. This data needs to be on a global level. Can someone help with the formulae on bloomberg please? Cheers, G
0
votes
0answers
30 views

Can you use factor loadings to determine portfolio information?

Suppose that you have a portfolio whose composition is uncertain. If you regress the portfolio returns on known factors (e.g., Fama-French 3-factor), can you use the loadings to determine (in general) ...
0
votes
1answer
73 views

Actually benefiting from logistic regression to estimate probability of default

Does anyone know any events where using logistic regression to estimate probability of default has led to a bank, financial institution, government or anything really to benefit in practice? I see a ...
1
vote
0answers
46 views

Here is an approach for measuring Data Snooping; is it new?

I came up with an approach for measuring data snooping, or overfitting. My question is whether this approach was published and expanded-on already, or is it new? My approach relies on the observation ...
4
votes
1answer
117 views

Radon-Nikodym derivative and risk natural measure

I need help with my understanding of changing probability measure. Im not a mathematician so I hope for answers that are not too technical. As shown in this Wikipedia article ...
0
votes
1answer
33 views

at c(x)% “where x is a numerical figure”, what does that c mean?

When i read financial news, sometimes, there is cX% (where X is a number). Below are few examples: 1. "improving to c4% on a proforma basis" 2. "market share is now c6% of the ..." What does that c ...
0
votes
0answers
19 views

Good Exam FM book for Stocks

I am currently studying for the actuarial exam FM and I just took the practice online exam. Unfortunately I am at a 60-70% level and I would like to get that to at least an 80% by April. I think I ...
0
votes
1answer
52 views

biggest rally data collection

Where can I find data for biggest rally(price rally) in a day? If this sort of information is not readily available, how could I produce/transform such data?
0
votes
1answer
72 views

Bootstrapping zero-rates from AUD swap rates

I have a pay fixed / receive floating interest-rate-swap on the AUD BBSY that I'd like to price for the purposes of accounting. I understand the general process to be as follows (assuming ...
0
votes
0answers
19 views

Complicated American style option contract with numerous non-standard features (simultanous exercise, additional premium, etc.)

I want to value the following contract for times $0<t<T$, i.e. determine $V(t,\cdot)$ where $\cdot$ refers to all other dependences (strike, spot, volatility, etc.). The contract is long and ...
0
votes
1answer
125 views

constrained portfolio optimization by fmincon

I am working through this paper, http://www.nber.org/papers/w8922.pdf I want to implement the portfolio weight constraints see page 6-7. Here is the brief overview of my problem: Let ...

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