# All Questions

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### Interest rate: Treasury Note, Stripped Principal

Ok, So I'm a little confused about this. I want to solve an exercise and derive an optimal product, but in order to do that, I need the interest rates for each of the maturities of my options. I ...
149 views

### How should option prices differ when using the Heston versus the Black-Scholes model?

I am running Monte Carlo simulations for a European Call using Heston Model and I am trying to compare them with prices calculated using Black-Scholes formula. I am not quite sure if the prices I get ...
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### Show that being Long a caplet & short floorlet (both with strike price K) is equivalent to a FRA where you pay the fixed rate K

How do you show that being long a caplet and short a floorlet (both with strike K) is equivalent to a Forward Rate Agreement where you pay the fixed rate K?
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### Price of a Stock: What is it?

My limited understanding of stock prices is that according to theoretical arguments, the price of an asset is generally given as:$$P_{A}=E_{0}\,\sum_{t=0}^{\infty}\frac{C_{t}}{(1+r)^{t}}$$ whereby ...
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### Transforming daily simple returns into weekly

I am trying to transform daily simple returns into weekly returns. I am using the following R code: ...
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### Through the Cycle calibration of PD values

It is a known fact that default rates seem to exhibit cyclic behavior. Most probability of default models use one-year averages of default rates to calibrate the models. The one-year averages should ...
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### Data exported from Capital IQ, FactSet, Bloomberg, Compustat

I'm looking for reliable data on US equity fundamentals, but not sure which vendor provides these features: Unlimited data export Coverage of disbanded entities (bankruptcies, M&A) Financial ...
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### PPPN: premium with real market data

A few days ago, I posted a question about PPPN's (partially principal protected notes), which can be found here:PPPN: participation rate, stocks and premium. A PPPN in short is a structured product ...
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### Trading Interview Question (Bullish, Bearish)?

I recently had a trading interview, and they asked this question. However, I had no idea how to answer it, and I was wondering if you could help me undersatnd it. Say you have a set of returns ...
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### Variable coupon Step up Step down bond

How do you price a variable step up step down coupon bond? From my understanding the coupon schedule should already be laid out and these should ideally have a call feature. However, I do have a bond ...
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### Please help me with this problem of double exponential distribution

please help me with this problem of double exponential distribution
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### Is Eurodollar borrowing close substitute for Fed funds borrowing?

It is often stated that eurodollar borrowing is clost substitute for Fed funds borrowing. In other words, when US banks cannot fund themselves domestically, they might go to the eurodollar market and ...
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### Is there a free Source for currency forward rates into Excel? [duplicate]

Is there a free (or at least very cheap) service/api out there I might be able use to get yesterday's closing currency forward rates (and spot) into excel/csv without having to copy paste values from ...
359 views

### Arbitrage opportunity interview question

I have seen this interview question mentioned in a couple of places: There are three call options on the market, with the same expiry and with strikes 10, 20, and 30. Suppose the call option with ...
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### Modelling the Cost of Risk

I would like to read something about the cost of risk. Could anyone recommend some reference about how it is calculated or modelled?
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### Are COFER unallocated resource changes meaningful?

I've been looking at the currency reserves (COFER) data on the IMF site: http://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4&ss=1408202647052 What caught my eye was the 5% drop in ...
64 views

### Hedging American Derivative

Reading the book by Andrea Pascucci "PDE and Martingale Methods in Option Pricing", pp. 84, I found something that appears inconsistent to me. It concerns the construction of the optimal portfolio for ...
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### does local volatility make any sense when I only focus on vanilla option?

can someone explain me the usage of local volatility? details will be appreciated. Is it of any importance when I now are doing market-making? Please do not laugh at me as I am totally new in this ...
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### Prove that $E[g(X_T)|\mathscr F_t] = E[g(X_T)|X_t]$

Let $T > 0$. Let $(\Omega, \mathscr F, \{\mathscr F_t\}_{t \in [0,T]}, \mathbb P)$ be a filtered probability space where $\mathscr F_t = \sigma(W_u, u \in [0,t])$ where $W_t$ is standard Brownian ...
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### Why is issued shares less than outstanding shares

We know that issued shares = outstanding shares + treasury shares. So issued shares must be greater than treasury shares by definition. However, Starbucks' fiscal 2014 From 10-K reports "Common ...
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### Turn of the year

I understand the basics of "Turn of the year" effect. But I am wondering why does this effect sometimes cause overnight rates around year end to dip below normal overnight rate levels (i.e. negative ...