1
vote
1answer
121 views

How do exchanges make money?

How does NASDAQ make money? How much of it is from selling market data, and how much of it is from commissions from trades?
1
vote
0answers
75 views

How to implement the herding measure proposed by Lakonishok et. al (1992) in python

I would like to test for herding behaviour using the herding measure developed by Lakonishok et. al (1992) on a dataset containing trader transactions during 2013, however, i am having some trouble ...
2
votes
3answers
109 views

Calculate bond returns from yields

I have to construct and evaluate portfolio of bonds and stocks, namely I need to get return on portfolio, standard deviation and sharpe ratios. I have weekly data that contains stock prices, and I ...
4
votes
1answer
320 views

What are the textbooks used to teach Quantitative Trading at universities?

For example, Stanford has a class on quantitative trading. But i am not able to determine what are the textbook(s) used in this course. The same also applies for similar courses at Stony Brook, ...
1
vote
2answers
49 views

Distribution of the value of a portfolio

Suppose there are k different stocks in a stock market. All of their prices are independent from each other. One year from now the price of the i-th stock will be $X_i^2$, where $X_i \sim ...
2
votes
2answers
305 views

How to price a bond without paper during interview?

I heard that this kind of questions appear a lot in the interviews. Here is one I saw from Galssdoor: Price a bond with coupon rate 3%, yield 9% and maturity 10 years. What is the typical way to do ...
0
votes
0answers
6 views

Institutional compliance : is reference data available via the browser?

That is, assuming one has the correct accounts and credentials, is it possible to access reference data (counterparty, trading, and other categories of related meta-data) over the web? The reason I ...
5
votes
4answers
358 views

Is there anyone still using Markowitz modern portfolio theory?

I was reading about the MPT (Use standard deviation as risk measure) on "Mathematics for Finance by Marek Capinski". I was just wondering is there anyone actually applying this theory to their ...
0
votes
2answers
142 views

Daily option data

I am wondering where I can pull daily (hourly, by-the-minute, etc. even better) option data for a particular underlying. I would prefer a database I could scrape through and API, but would not mind ...
2
votes
2answers
72 views

Problem when calculating the daily return on a forex trade, what is the best way to do such a calculation?

I intend to calculate the daily return on my investment in forex. Assume a trader invests $\$$40 at a leverage of 100:1, so in total he is trading $\$$4000 worth of currency, and assume the position ...
4
votes
2answers
250 views

CDS Spread and Par Bond Yield Spread

It is claimed that the credit default swap (CDS) spread should approximate the risky par bond yield or coupon rate spread from the riskless bond on the same entity. This comes about when we assume ...
0
votes
1answer
89 views

Set up sharpe ratio with 2 risky portfolio

You are considering an investment in the stock. In the stock market, there are two risky stocks (A and B) and a risk free claim, C (you can think of it as the t-bill). The covariances and returns of ...
0
votes
1answer
32 views

Currency Portfolio G10 vs USD allocation

Given that I have fundamental data such as GDP growth rate for G10 countries .Now I want to build a currency pairs portfolio of G10 currencies vs USD .How can I translate country scores to currency ...
1
vote
3answers
148 views

forward implied volatility skew

I would like to calculate implied forward volatility skew. I have stochastic volatility monte carlo. What kind of payoff do I need to price and how to use Black() formula to calculate the implied ...
0
votes
3answers
53 views

What is meant by “position at a given time” in the context of a series of forex trades?

Suppose you are only talking about a single currency pair, say EUR/USD. Throughout some period of time, you engage in trades with various other parties, sometimes buying, sometimes selling. The rates ...
1
vote
1answer
83 views

Elicitability of risk measures

I read that CVaR (Conditional Value-at-Risk, also Expected Shortfall), satisfies coherence, but not Elicitability. On the other hand, VaR satisfies Elicitability, but not coherence. What is ...
2
votes
1answer
50 views

Bond Interest Rate Swap Growth Rate [closed]

this should not be here because it shouldn't be here forever and eve
2
votes
1answer
73 views

Volatility estimation: sampling frequency and scaling

I have a year long stock data sampled at 5 min frequency and would like to estimate monthly volatility using it. I am thinking using GARCH or TGARCH for volatility estimation. However, I am not sure ...
2
votes
1answer
101 views

option pricing with limitation on the change of underlying daily changes

how are we supposed to price an European option given the fact that the daily return of the underlying is limited within -X% to X%? For example, if X = 5, the price of the underlying cannot go up 8% ...
0
votes
2answers
98 views

What is the fastest way to decode the FAST protocol for market data?

What kind of technology are people using these days for decoding FAST? Can FPGA be used in that area?
0
votes
0answers
26 views

Value of a portfolio with a collar option and shares as function of a log return …?

I could use some help with a question I've been stuck with. It's stated as follows, A private investor owns a large quantity of shares of a single stock and is worried about the position being too ...
5
votes
3answers
311 views

Why are interest rates and stock prices positively correlated?

If I've been looking at graphs correctly, there is a strong positive correlation between stock prices (or P/B values) and interest rates over time, i.e. P/B values tend to be high when interest rates ...
0
votes
0answers
62 views

How to reduce fx currency pairs ? PCA or other tools?

I have 19 currency pairs like USD.AUD, USD.CAD, etc. Also 82 cross currency pairs like AUD.CAD, EUR.AUD,EUR.CAD etc. When I look to their graphs, most look similar, so I want to reduce number of pair ...
2
votes
1answer
49 views

“Adding” risk-free asset to covariance matrix after the fact

Given a covariance matrix that was calculated from the returns of a number of risky assets. Is there a way to "add" a risk-free asset to the covariance matrix without calculating its covariance with ...
2
votes
0answers
50 views

seasonality and generalized additive model

I am reading a report which talks about seasonality. There is a chart showing the average returns for each month of the year. In the chart it appears the last 3 months of the year tend to be negative. ...
3
votes
3answers
185 views

Show that $E[B_t|\mathscr{F}_s] = B_s$

Given prob space $(\Omega, \mathscr{F}, P)$ and a Wiener process $(W_t)_{t \geq 0}$, define filtration $\mathscr{F}_t = \sigma(W_u : u \leq t)$ Let $(B_t)_{t \geq 0}$ where $B_t = W_t^3 - 3tW_t$. ...
4
votes
3answers
164 views

Determine $E[W_p W_q W_r]$

Given prob space $(\Omega, \mathscr{F}, P)$ and a Wiener process $(W_t)_{t \geq 0}$, define filtration $\mathscr{F}_t = \sigma(W_u : u \leq t)$ Let 0 < p < q < r. Determine $E[W_p W_q W_r]$. ...
0
votes
1answer
48 views

finding the strike / maturity of warrants given their ISINs

I have a list of French traded warrants identified by their ISINs. I do not know, however, to which stock they refer and what is their strike/maturity. Which datasets allow me to retrieve this ...
1
vote
0answers
80 views

What are the roles of “Game theory” and “optimisation (linear, integer, conic)” in Finance, Mathematical Finance? [closed]

Would you please give me some information about application of "Game theory" and "Optimisation" in Finance and Mathematical Finance? which is more important to know and learn? How about ...
0
votes
1answer
75 views

CAPM (SML) Problem

I got 1.3636 for beta for the problem below(165/121). But I became so unsure about the answer when I solved (c) because then the market risk becomes larger than the variance of Stock A. ...
1
vote
0answers
43 views

How to map shocks from VAR to news? (Academics)

I am trying to map shocks from VAR to discount-rate and cash-flows news following the paper of Campbell and Vuolteenaho (2004). It is said that news are a linear combination of shocks from VAR at ...
2
votes
1answer
156 views

Calibrating an Ornstein Uhlenbeck process on residuals of regression

I am trying a basic statistical arbitrage strategy as follows: Perform PCA on a log return series of a basket of stocks Regress returns against top principal components identified Calculate the ...
1
vote
1answer
24 views

Interest rate on loan for purchasing Sterling bond

I am struggling trying to find out where they get the $8$% interest rate for the loan you make to purchase the Sterling Bond in the following strategy: Problem: Suppose that $A(0)$ = $100$ and ...
2
votes
2answers
140 views

Portfolio Turnover Constraint

I have a few bonds and OAS and Duration for each. I had a Linear programming type of problem where I had to maximize OAS and keep duration <= constraint. There are few other constraints. I could ...
3
votes
1answer
79 views

Time Lag for Market Inefficiency

I recalled reading a academic paper that studied how long a market exploitation took to get priced into the market. I am trying to find that article. I remember it stating that the market priced in ...
3
votes
0answers
78 views

ISLAMIC FINANCE WACC

I need to calculate WACC for copany operating in the coutry with islamic finance system. I used build-up method to calculate cost of equity. But still searching for cost of debt in the economy. Has ...
0
votes
1answer
123 views

Level II market data (equities)

I have been playing around with some equities historical market data and I understand that different exchanges have different definitions of what Level II (Limit Order Book) data means. What I'm ...
2
votes
1answer
74 views

Which quantitative tools are actually used for hedging energy price and volume risk?

I'm a finance professor and I am looking for someone with actual trading and risk management knowledge within the energy sector who can tell me about pricing and hedging energy (especially electricity ...
1
vote
1answer
101 views

quadratic programming portfolio optimisation

I am using MATLAB to do an optimisation. The QP minimisation problem is set up in the standard form shown below. The optimisation is used to calculate the weights (x vector in the equation below) of a ...
1
vote
1answer
74 views

Efficient Frontier Derivation: why minimize half the portfolio variance instead of just the variance?

In Robert Merton's derivation of the efficient frontier of a portfolio, he minimizes $\frac{1}{2}\sigma^2 $ over the investment weights in each asset, where $\sigma^2$ represents portfolio variance. ...
2
votes
3answers
84 views

Interpolating probabilities of default

I have a table of cumulative probabilities of default of industrial bonds, in time and credit rating. It is similar to S&P whitepaper here. Basically, it looks like this (sample numbers): ...
2
votes
1answer
92 views

Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?

I have discussion with my colleague on why a general assumption $$ud=1$$ in binomial tree option pricing model would be necessary? I take it a simplification of the problem, otherwise, there will be ...
1
vote
0answers
134 views

How to interpret ACF and PACF plots

I just want to check that I am interpreting the ACF and PACF plots correctly: The data corresponds to the errors generated between the actual data points and the estimates generated using an ...
2
votes
0answers
97 views

Law of a geometric brownian motion first hitting time (formula dont match Monte Carlo Simulation)

I posted this question before on MSE I need to use it in a small step in the middle of a simulation and I think I'm not getting correct results to this probabilities and so for my all ...
0
votes
0answers
19 views

What's the best filter to implement in order to assess the persistency of a FX devaluation?

I'm trying to to analyze the impact of a FX devaluation in companies' exports and earnings?
1
vote
1answer
533 views

What's the intuition behind DTS(duration times spread) in fixed income?

I am having some difficulty grasping the concept of using DTS to measure credit risk. In the equity world, one typical measure of risk is beta, which is quite well-defined as the exposure to a common ...
1
vote
3answers
61 views

Data provider for daily futures settlement prices

Is there a data provider that has historical daily settlement prices for download? I'm interested in a provider that spans multiple exchanges.
4
votes
3answers
124 views

What are the most effective market variables to measure liquidity/illiquidity in the market?

I'm trying to find/create a variable that measures liquidity in financial markets in order to assess, for instance whether credit conditions tightened? Does anyone know any relevant literature ...
1
vote
2answers
49 views

Is it possible that a security with a positive variance can have a required return that is less than the risk free rate?

I'm not sure of the answer but I think it's possible. What I don't get is what characteristics this asset would need to have and why it would mean that an investor would accept a return less than the ...
0
votes
0answers
68 views

Book chart plotting library identification

can you help me identify how those charts are constructed? To your knowledge, is it generated from Python, R, Java, C++? What packages can you identify? I've tried the ggplot2 library in R and I have ...

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