1
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0answers
31 views

Relation between Parkinson number and historical volatility

In his book 'Dynamic Hedging', Nassim Taleb gives the relation: P = 1.67*historical volatility, where P is the Parkinson number. What is the basis of this relationship. Does this hold under special ...
1
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0answers
21 views

Show that in an arbitrage-free and non-redundant market a certain set is compact

Some notation: We consider a financial market with $d+1$ assets, the $0$-th asset is considered the risk-free asset, the others are the risky ones. The vector $\overline \pi \in \mathbb R^{d+1}$ ...
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0answers
68 views

Filtering my own orders from a UDP multicast market data feed

I am wondering what is the policy practiced by most exchanges from different market segments (FX, equities, futures, etc.) about the privacy implications of order identification in their market data ...
1
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0answers
25 views

Budget Constraint in Duffie's book

On Page 5 of Duffie's Dynamic Asset Pricing Theory, the budget-feasible set is defined as: $$X(q,e) = {e+D^T\theta \in R_+^s:\theta \in R^N, q\theta \leq 0}$$ Compared to Kerry Back's presentation of ...
1
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0answers
59 views

B-S Put Option Formula: Derivation using expected value under Q

I have been working on an old problem in one of my finance classes and, since no solution has been provided and I won't be able to contact my teacher anytime soon, I was hoping I could ask you guys to ...
1
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0answers
71 views

Black Scholes Model Replicating Strategy Delta Hedged Exam Question

A share is currently priced at 640p. A writer of 100,000 units of a one year European put option with an exercise price of 630p has delta-hedged the option with a portfolio which holds cash and is ...
1
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0answers
52 views

Modelling turnovers with a random walk. Is it right?

I need to analyse a bunch of weekly time series that reflect the turnovers of various companies. I already read that return rates or share prices show stochastic patterns that can be modelled by a ...
1
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0answers
53 views

What is the most efficient way to periodically download all new 10-K filings from SEC's EDGAR?

I found this website which uses a perl script to download all the filings. It states: "There are 200K+ 10-K (and equivalent) filings, which will take considerable harddisk space and time to download. ...
1
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0answers
85 views

forecasting trading costs with end of day data

I am trying to create a model that forecasts trading costs (using end of day data, so no intra day data). My trading cost (also called Implemented Shortfall (IS) is defined as such for a single stock, ...
1
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0answers
50 views

Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned ...
1
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0answers
92 views

Monte Carlo simulation returns not normal distributed

I am generating 100,000 paths of SPX out to 1 year using Euler discretization. I look at how S is distributed for 100,000 paths at the 1 year point and I find it is lognormally distributed. I look at ...
1
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0answers
38 views

Implementing Minimum Leverage in an SOCP Portfolio Optimization

I'm optimizing a portfolio of n assets and my optimization variable is of the form $$x = [t,w,w_L,w_S]$$ where $$t:= \text{slack variable for turning my QP objective into SOCP constraint}$$ ...
1
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0answers
20 views

What does it mean to change the currency of a spread between bonds from 2 different countries?

On reuters I charted the spread between the 10yr US bond and the 10yr UK bond. It gives the me the option of choosing the currency. For just the standard spread(ie: yield(US)-yield(UK)) you select ...
1
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0answers
45 views

Why do leveraged and inverse leveraged WTI ETNs have this price relationship?

UWTI: 3x leveraged exposure to WTI DWTI: 3x leveraged inverse exposure to WTI The inverse relationship between these two symbols seems to trend toward the origin on a log-log plot (using log base ...
1
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0answers
43 views

excel yearfrac 30u/360 across feb month end

Why are both of these formulas returning 1? One of them should be 3. =YEARFRAC(DATE(2015,2,27),DATE(2015,2,28),0)*360 =YEARFRAC(DATE(2015,2,28),DATE(2015,3,1),0)*360 Based on every description of ...
1
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0answers
34 views

Calculate minimum IV increase to offset theta

How would one calculate the minimum implied volatility increase necessary to offset theta decay? IV is typically a percentage, while theta is a dollar value. In theory I think I could look at what ...
1
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0answers
25 views

EDGX, EDGA, Nasdaq and Bats-Z Pricing in 2011

I'm trying to find the fee and rebate structure of these 4 exchanges during year 2011, in the specific, I'm interested in the cost of posting a hidden Limit Order, in the cost of removing a visible ...
1
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0answers
51 views

How to make the algo decide over a optimal selling point?

Please don't bully if its a basic question.Kinda new to the topic hence experimenting. Problems to construct trading algorithm.For the example I assume I am getting a buy signal from the DMI/ADX ...
1
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0answers
41 views

Hedge volatility decreases

My particular options positions are typically a long delta, and long vega. Decreases in implied volatility, or specifically the VIX, can drastically alter the profitability of my position. Is there a ...
1
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0answers
74 views

How can I do a dynamic GARCH model using extended Kalman filter in R?

Today I was reading an article quoted here, in this article is proposed an adaptive (dynamic) Garch model. How can I do it in R? The use of extended Kalman filter or particle filter is indifferent. I ...
1
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0answers
45 views

About OpenMAMA, OpenMAMDA and OpenMDM

In the Linux Foundation are hosted the OpenMAMA and OpenMAMDA (found in that link too) projects and I'm wondering if has someone worked with those projects and if he/she could give me a more detailed ...
1
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0answers
37 views

Charting order depth over time periods

I do a lot of analysis on order flow, tape reading, as it gives insight into what market participants want, or may be willing to do. In comparison, price charts show what happened, and technical ...
1
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0answers
83 views

modeling regime switching for Correlation matrix

I am trying to estimate covariance in multiple time series. However, I want to do this using a regime-switching framework. So, I start with fitting a GARCH(1,1) model and then de-volatalize the ...
1
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0answers
35 views

is there any calibration method to calculate FX forward rate? How Bloomberg define FX forward rate

there is any calibration method to calculate FX forward rate? How Bloomberg define FX forward rate
1
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0answers
60 views

How to measure interest rate risk of an equity?

What is the best method to measure interest rate risk of an equity? For example: I am looking to determine the change in price based on a change in yield. I currently have a position in XLU and ...
1
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0answers
46 views

Investing in all assets with positive expected return and allowing for positive correlation

How does the answer to this question Risk minimization by investing in all assets with positive expected return change if assets can be positively correlated (but not perfectly) and short sales are ...
1
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0answers
102 views

Tangent portfolio weights without short sales?

Consider a mean-variance investor in a world with a risk-free asset. Let $R_f>0$ be the return of the risk-free asset, $\mathbb{E}(R_i)>R_f$ the expected return of the risky asset $i$ and ...
1
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0answers
49 views

MLE estimate of normal distribution

Probably a naive question. I am quoting this from Greene's econometrics book: "The occasional statement that the properties of the MLE are only optimal in large samples is not true, however. It can ...
1
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0answers
50 views

Finding relative price strength as defined in CANSLIM stock picking methodology

I am wondering if there is any website that provides relative price strength as is defined in CAN SLIM stock picking methodology. For the CAN SLIM difinition I am looking at this article: ...
1
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0answers
78 views

Conversion stock symbols Google Finance vs. Reuters

I'm working on a project that will fetch data from Google Finance and Reuters. In order to avoid keeping two separate lists of stock symbols, I'm looking for some kind of conversion or database or API ...
1
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0answers
116 views

How to calculate global exposure via commitment approach for FX swaps?

How would you calculate global exposure for FX swaps using the commitment approach? In particular, would you take into account both legs? CESR guidelines (CESR/10-788) defines that the exposure for ...
1
vote
0answers
22 views

Using Forward Equity Returns to Value Stream of Equity Return Cash Flows

Can I value the equity leg of an equity swap using the projected forward equity returns? In other words, for a sequence of times $t_{0}<t_{1}<\ldots<t_{n}$, where $t_{0}$ begins a brand new ...
1
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0answers
36 views

Please recommend a book regarding Monte Carlo simulation in OAS

I couldn't find a book that explains in details how to use Monte Carlo Simulation to generate a number of interest rate scenarios. And then based on the interest rate scenarios, how to calculate the ...
1
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0answers
37 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
0answers
51 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 ...
1
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0answers
99 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
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0answers
37 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 ...
1
vote
0answers
91 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
0answers
105 views

How to hedge a long stock with the corresponding volatility ETF

Let us say I want to establish a market neutral position. So if I buy 50 shares of stock (SPY) and I want to delta hedge, I sell an ATM covered call. So that brings the position delta to 0. Now, I ...
1
vote
0answers
44 views

How to estimate constrained a constrained VAR(1) with MATLAB?

Suppose I want to estimate the following VAR(1) model: $$ Y_t = \mu + \Phi Y_{t-1} + \varepsilon_t $$ where $Y_t=(y_{1t}, y_{2t},…,y_{kt})'$, $\mu=(\mu_1,…,\mu_{k})’$ and $\Phi$ a matrix of ...
1
vote
0answers
26 views

Why the growth of the American Economy is going to cause the Fed to raise interest rates?

Due the growth of the American economy the Fed have published that interest rates are likely to increase. Why is that the response of the Fed?
1
vote
0answers
66 views

Time-Varying Copulas (GAUSS)

Could anyone suggest me how to begin with Time-varying Copulas or Stochastic Copulas? I'm looking for the GAUSS code, however it seems there are only MATLAB code available over the internet. I'm ...
1
vote
0answers
12 views

Annuity Duration Based on Closed Derivative is half of Effective Duration?

I am analyzing an annuity with a stub. I calculate the effective duration as (P(-10bps) - P(+10bps))/(2*Principal * (.001)) I then take the derivative of the standard annuity formula discounted by ...
1
vote
0answers
45 views

How to apply the chain rule for partial derivatives to transformations?

I'm currently working to solve the Black-Scholes model partial differential equation (it's a model for a.o. stock option prices). The Black-Scholes equation for a calloption C(S,t) is given by $ ...
1
vote
0answers
44 views

Comparing cost of two alternative given their distribution

I have distribution for cost of two alternative through Monte Carlo simulation. The distributions are not normal. Given the benefit of the two alternatives is the same but ungiven, I want to choose ...
1
vote
0answers
49 views

Interpretation of Correlation Matrix

I have past data which is in vector form. The information shows the probabilities of a AAA rated company to migrate to another credit rating. So for example, (x1, x2, x3) has the probabilities of ...
1
vote
0answers
48 views

Convolution of inverse gaussian and power law distributions

I am trying to understand how the first passage time density of Brownian motion with drift is modified by the presence of waiting times that are distributed as a power law In other words, what is the ...
1
vote
0answers
62 views

Straddle neutral strategy

What does it mean to implement a delta-neutral strategy for straddle ? A straddle consists in buying a call and a put simultaneously, at the same date, on same underlying, with same maturity and ...
1
vote
0answers
43 views

Stock prices and probability

Lets say that the current price of a security is £245 , $\mu =5%$ and $\sigma=32%$ Assume that the natural logarithm of $\frac{S_{t +\delta t}}{S_t}$ is approximately normally distributed with mean ...
1
vote
0answers
72 views

Why random walk Metropolis Hasting algorithm works bad on GARCH(1,1) parameters estimation

I am trying to estimate the parameters of the GARCH(1,1) model with MCMC method, firstly, I read the paper: http://mpra.ub.uni-muenchen.de/12985/1/MPRA_paper_12985.pdf Metropolis Hasting method is ...

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