2
votes
2answers
109 views

Need help on cointegration

I tried to test stock pairs for pairs trading. There are two questions I am not sure. I am not using ADF to test the log difference between two stocks. But I also see people using Johansen test. ...
4
votes
2answers
195 views

Difference between a warrant and an option?

What is the difference between a warrant and an option on a stock? Apparently both represent the same right to receive a share of stock at the strike.
1
vote
3answers
268 views

Is this arbitrage?

Assume the stockprice as in the Black-Scholes model (Geometric Brownian Motion): $$S_t=S_0e^{(\mu-\sigma^2/2)\cdot t+\sigma W_t}$$ Wouldn't there be an immediate arbitrage opportunity, to just buy ...
1
vote
2answers
201 views

Exchange rate model and Martingales

In exchange rate model explanation, "...If under the domestic risk neutral measure $Q_d$, the process $X(t)$ satisfies $\displaystyle \frac{dX(t)}{X(t)}=\sigma dZ_d(t)$ Since $Z_d(t)$ is ...
2
votes
0answers
38 views

Discretization Schemes

I am working with two correlated SDE's and I was wondering if I could use two different discretization schemes for them. Is there maybe a reference of this being done? And can something be said about ...
4
votes
2answers
170 views

question on Leif Andersen's “Interest Rate Modeling, vol 2 Term Structure Models”

I'm reading Leif Andersen's "Interest Rate Modeling, vol 2 Term Structure Models" and met a problem on Chapter 14 LM Dynamics and Measures, $\S$ 14.2.5 Stochastic Volatility, Lemma 14.2.6, on page ...
2
votes
1answer
60 views

Correlation Multiple Currencies

If i have a portfolio of stocks from different currencies and i want to generate a correlation matrix from the stocks, how is the correct procedure ? Imagine a portfolio which the base currency is ...
2
votes
0answers
35 views

Formal Proof of Immunization Techniqu

Please correct me if I am wrong in understanding the Immunisation Technique behind bond interest rate risk management. It says that any change in interest rate can be neutralised by reinvesting the ...
2
votes
1answer
202 views

Johansen Cointegration Test

I just performed a Johansen Co-integration test on two stocks. The results I get are: ans = r0 r1 t1 true false I am using Matlab. Can ...
0
votes
1answer
115 views

Book recommendation for time series analysis

I have been trying to wrap my head around Engel-Granger test and jcitest etc. I have failed thus far. If possible can someone guide me about which books to start with and possibly reach to ...
6
votes
3answers
253 views

Starting mathematics reading for quants

What book should I start with in order to learn about the mathematics behind financial (derivatives I think!) trading that would be used in HF's & IB's (Not sure whether there would be a ...
3
votes
1answer
74 views

CDS - Accumulated Default Risk?

Say I issue insurance contracts covering fire damage in personal households. Fires occur with a probability of $x$% in a household (and they obviously occur independently from one another). If the ...
0
votes
1answer
148 views

News on ETF sector performance

I am interested to find historical news (if any) associated with intraday volatility burst in a particular ETFs like ishares IYF (Financials). So say that between 12:00 - 12:10pm, the ETF IYF's stock ...
6
votes
1answer
118 views

Natural gas forward price modelling

I'm looking to learn about gas price modeling, in particular models of forward prices. I've studied "classical" mathematical finance, fixed income theory et cetera. I'm looking for good references ...
0
votes
0answers
47 views

Which size of constant range bar gives the most persistent chart?

A constant range bar chart is like a candle chart, only the candles don't close after a certain amount of time (i.e. 30 min, 4 hours), but after a certain range (i.e. 5 ticks) has been crossed. So if ...
2
votes
1answer
78 views

Concise way of learning Bond & IR models

What is the most concise way to learn about bond and interest rate models from the book Mathematical Models of Financial Derivatives by Yue-Kuen Kwok? I have studied Oksendals Stochastic Differential ...
4
votes
1answer
187 views

Popular R packages for Quantitative Finance

Which R packages (in this list or not) do you use in quant finance, why not an alternative, do you use it in production and if so, how? There is a list of most of the R packages related to Finance by ...
1
vote
0answers
26 views

Handling IQFeed events in Matlab

I need to get some specific market data for my studies, and it seems like the most convenient way for me to do this is to use IQFeed data feed and MATLAB. But unfortunately, since I'm not a seasoned ...
0
votes
3answers
85 views

What is the effect of dividend yield being greater than the risk-free rate to American options pricing?

Even though dividends are discrete, literature often makes the assumption of continuous dividends (mostly in the case of indices but the individual stocks as well). The dividend yield denoted by q is ...
0
votes
0answers
20 views

Is it compulsory for feed to send orders/levels for particular symbol on same multicast line?

Multicast feeds have several lines some of which are dedicated for sending current order-add/modify/delete. Its is a implicit restriction that for a single security order-add/delete/modify will be ...
3
votes
2answers
117 views

Resources for finding quantitative finance examples using excel, VBA and access

I am seeking to increase my knowledge in the quantitative finance field. I would be grateful if someone could point me to useful resource online, where I can find working examples of they types of ...
0
votes
1answer
43 views

How do I find the mappings between sedol and isin codes?

I am looking at data for Unit Trusts and OEICs in the UK. They are identified by SEDOL or ISIN codes. Given an SEDOL, how can I find the ISIN associated with the same product? And given an ISIN, ...
0
votes
0answers
63 views

How to display stock prediction results?

I'm not sure if this is a question for "Quantitative Finance" or "Personal Finance & Money" so forgive me if this one is irrelevant for this site. The Situation So I wrote a program (in vb.net ...
1
vote
1answer
167 views

Bond Portfolio Immunization - Duration Matching

**Question is at the bottom** Suppose you have a portfolio of bonds A, B, and C with the following characteristics: (the "Frequency" column is the # of coupon pmts per year and also the # of ...
1
vote
1answer
67 views

Why doesn't VG flatten volatility skew for short term options?

The VG process, from my inexpert point-of-view, seems to nearly perfectly model equity distributions. For longer term options, there is little to no volatility, skewness, or kurtosis parameter skew. ...
1
vote
2answers
170 views

Backtesting with Simulated Historical Data?

The trading strategies that are going to backtest well are the ones that pick the winners from the past. For example, if a trading strategy simply bought apple stock it would backtest extremely well. ...
1
vote
0answers
87 views

Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
1
vote
2answers
217 views

Correlation between S&P500 returns and 10y US Treasuries yields

I'd like to investigate the comovement of stock index returns with bond yields but I don't know which return's duration to use (1-year, 1-month or anything else) to get a better view of the ...
0
votes
0answers
26 views

How to compute return of a variance swap?

How does one calculate the investment of a zero initial investment asset, specifically a variance swap? In this asset the payoff is given by the difference between the realized variance in a certain ...
5
votes
1answer
217 views

QuantLib: Black / BSM processes and pricing via volatility surface. Different results?

I start this question with a couple of C++ functions that will be useful to show some results. So start your Visual Studio C++ Express or Ceemple or whatever you want and copy & paste this: ...
0
votes
0answers
26 views

Real-World Cash Account Implementation and Return

Often in financial math, the concept of the risk-free cash account, with return R, is invoked as an instrument for calculating prices - when constructing an option-replicating portfolio, for example. ...
0
votes
2answers
127 views

Are there providers of delayed market depth data (DOM, Level II, Order-by-Order, etc)?

I have market depth data visualization software, and I want to create a free version for introduction. As far as I know, exchanges allow to distribute their data for free for the end-users, but only ...
2
votes
1answer
44 views

Recommended Literature for creating Factor Mimicking Portfolios

Is there a textbook that contains the basics for creating Factor Mimicking Portfolios? Although there is a lot of peer-reviewed literature on this, I cannot find textbooks on Asset Pricing that ...
4
votes
2answers
99 views

law of one price, understanding

I am reading about mathematical finance, and I was tipsed to ask the quesiton on this site. It is about the "law of one price". Just first I'll make precise the model my book uses: I have a single ...
8
votes
1answer
157 views

Strictly local martingales: what is the intuition behind them?

A process $X_t$ is a local martingale if for each increasing sequence of stopping times $\{\tau_k,k=1,2,...\}$ the stopped process is a martingale. All true martingales are local martingales, but the ...
3
votes
2answers
124 views

Cross-sectional volatility vs temporal volatility

Volatility is usually defined as the standard deviation of returns, but sometimes it is calculated as the standard deviation of cross-sectional return divided by the square root of time, where other ...
3
votes
0answers
74 views

How to de-seasonalize natural gas term structure data?

I need to de-seasonalize Nat Gas futures data for a project and am hoping to get good suggestions. As we all know natural gas futures are priced higher for the winter months and to analyze/model the ...
1
vote
1answer
82 views

How low can HFT transaction costs go?

When evaluating an HFT strategy, transaction costs are clearly an important question. When looking at commercial discount brokers for retail clients, costs can be as low as 0.005 USD per share, but ...
6
votes
2answers
135 views

Looking for Research Paper on Creation of Currency Baskets

I came across a paper, not sure it originated from academia or a blog or such, that reported on applying principal components to build currency baskets from a set of individual currency pairs and to ...
1
vote
0answers
39 views

proper choice of risk aversion parameter in the risk-sensitive cost-criterion

Suppose I want to minimize certain risk sensitive cost. Is it a valid question to ask what is the proper (also in which sense) choice of risk aversion parameter in the risk-sensitive cost-criterion ? ...
1
vote
1answer
48 views

What is the distribution of stock splits?

I want to know how rare are splits more extreme than, say, 7:1 (and reverse splits similarly). An answer here points to announcements on Yahoo Finance, but apparently only monthly views. What is a ...
5
votes
1answer
149 views

Heat/Diffusion Equation

I am working on a problem where I have successfully reduced a version of Black Scholes to the Heat Equation and then shown the solution to be: ...
6
votes
2answers
254 views

Why are we obsessed over normalizing financial data?

I have recently began work on some high frequency financial tick data. I have been told to 'normalize' the data as much as possible and run linear regressions through them. In fact, the data doesn't ...
3
votes
1answer
137 views

Inflation-Linked Bonds & Asset Swap Spreads

I am trying to plot the asset swap spreads of government inflation-linked bonds (ILBs) versus the asset swap spread of government nominal (plain-vanilla) reference bonds. I used the article in the ...
0
votes
0answers
53 views

Negative Risky vs Negative Butterfly

I understand that in regard to FX options, a volatility smile with negative Risk Reversals is effectively indicating that the spot market for a given currency pair is in decline (puts over). In ...
1
vote
0answers
61 views

Underlying changes impact on implied volatility

What are some valid techniques that can be used to simulate how changes in the underlying are most likely to impact implied volatility along with the skew of all strikes for options with the same ...
1
vote
2answers
128 views

Probability of Hyperinflation as a function of Probability of Soverign Default

I'm looking for some academic research on modeling risk of hyperinflation. Specifically, I'm interested in modeling the probability of hyperinflation over some time interval (e.g., probability of ...
0
votes
0answers
22 views

Chaikin Money Flow Persistence Formula

I am trying to create an approximation of the Accumulation/Distribution Rating using the Chaikin Money Flow Persistance indicator. I have the Chaikin Money Flow Formula as below, could anyone assist ...
1
vote
1answer
68 views

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
1
vote
2answers
82 views

Non-Negativity of up-factor and down-factor in Binomial No-Arbitrage Pricing Model

Consider a stock which is trading at $S_0$ at time $t=0$ and is expected to be trading at price $uS_0$ or $dS_0$ at time t=1 where $u$ and $d$ are up-factor and down-factor. The theory says that to ...

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