0
votes
2answers
347 views

Explanatory variables for regression predicting weekly stock returns

In an empirical analysis I'm trying to predict log() weekly stock returns. I'm trying to model stock returns in a panel data model framework. As explanatory variables I have 1) a measure of investor ...
3
votes
1answer
114 views

Ito integrals and copulas

Let $X_{t}$ and $Y_{t}$ be two brownian motions and let their joint distribution be given by $F$. So in regularly correlated BM's where $dX_{t}dY_{t}=\rho dt$, we have a bivariate normal distribution ...
1
vote
3answers
160 views

Where can I find a correlation matrix between the revenues of different industries?

I don't need something super complicated, I would just like a quick and dirty way of estimating the correlation coefficients between the revenues of different companies. Information on companies in ...
1
vote
1answer
8k views

Conversion factor for bonds

Hull defines the conversion factor for a bond as the "quoted price the bond would have per dollar of principal on the first day of the delivery month on the assumption that the interest rate for all ...
0
votes
2answers
232 views

Calculation of price momentum using weekly price observations

In an empirical analysis I'm trying to predict stock returns using different firm characteristics. I would like to use price momentum as an explanatory variable, but I'm not quite sure how to ...
0
votes
3answers
117 views

What makes investors risk averse?

There are some regularly-occuring events that coincide with a rise in the implied volatility of an asset. For example, in advance of an firm's annual earnings report, it is typically expensive to buy ...
2
votes
0answers
84 views

Practitioner's criterion for MC pricing convergence

Let's say I have some Interest Rates (IR) pricing model which relies on Monte Carlo pricing and I'd like to benchmark its quality and find out optimal settings (time steps & iterations) per asset ...
4
votes
4answers
590 views

What kind of front end/ gui is used with trading applications?

I was wondering what kind of front end is used for trading applications. Coming from a quant background, I was always only concerned with research and back end of the application but am at a total ...
5
votes
1answer
164 views

Intuition behind American Option pricing

The price of an American option is given by $$V_n = \max\left(G_n,\frac{pV_{n +1}H^d + qV_{n + 1}H^u}{1 + r}\right)$$ where p, q are the risk neutral probabilities. I have two questions: How can ...
1
vote
1answer
61 views

What do “Exposure Bounds” mean in Portfolio Optimization?

I've just started reading up on Portfolio Optimization models and have come across the use of exposure bounds to mitigate the sensitivity of the optimized model solution, owing to parameter estimation ...
0
votes
1answer
183 views

Constructing Volatility Smile from Implied Volatility & Delta

I have implied volatility data for call and put options (expiring in 1 month from any given date) for a particular stock. In addition, I have the delta for the options. However, I have no information ...
-3
votes
2answers
1k views

What software should I use for forex arbitrage?

These are my requirements: Speed of lookup & update Speed of crunching large numbers and combinations The exchanges I want to connect to will mostly provide json feeds to their orderbooks & ...
0
votes
1answer
98 views

Yahoo OHLC data reflects nonexistant stock split

Can anyone explain why the OHLC data I'm getting from yahoo appears to reflect stock splits during times when no significant corporate actions have occurred? For example, I'm looking at ABT and yahoo ...
0
votes
0answers
116 views

Fixed volatility portfolio with max returns creates skewed results

I am trying to create a portfolio of only four components using the mean-variance optimization (MVO). I am setting up my problem such that I want to maximize the expected returns with a fixed vol ...
3
votes
0answers
122 views

State Space models with Short Time Series

My problem is that I have a state space model that I estimate using the Berndt–Hall–Hall–Hausman (BHHH) algorithm. The state space model is relatively simple in that the hidden part follows a pure AR(...
4
votes
3answers
747 views

Algorithm to detect the aggressor side of a trade

Most of the exchanges provide aggressor side property of trades (e.g. Tag=5797 AggressorSide on CME) in their raw data. But many data providers do not provide this information via their datafeed API's....
4
votes
1answer
131 views

Explicit solution SDE

I have the following SDE: $$dY_{t}=A\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{1}+B\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{2}$$ where $W_{t}^{...
3
votes
1answer
279 views

Which is the better risk sensitive measure?

Consider the two following optimization problem 1) $$ \min_{\theta} \ln E_{\theta}[ e^{X}]$$ 2) $$ \min_{\theta} E_{\theta}[ X]$$ with the constraint $$ Var_{\theta}[X] <c$$ Is it true that ...
0
votes
1answer
161 views

Contribute to Finance related projects [closed]

I am currently a student and in the future would like to work as a software developer for a financial institution such as Bloomberg, Factset etc. I was looking to contribute to some open source or ...
5
votes
1answer
120 views

Nested volatility

The introduction VIX options makes the concept of "volatility of volatility" a real life concept. The idea of "nested volatility" seems interesting, and I am wondering if there are any academic ...
1
vote
2answers
103 views

Art market specificities

I am looking for some reference on the art market in light of quantitative finance. I am interested in some things: The market in general, how is it compared to financial market ? What about common ...
1
vote
2answers
126 views

CVA/CDVA - Worsened Credit Quality implies profit?

In the book Counterparty Credit Risk, Collateral and Funding by Brigo et al I found the following: credit quality of investor WORSENS $\Rightarrow$ books POSITIVE MARK TO MKT credit quality of ...
4
votes
2answers
173 views

How does this follow from the separating hyperplane theorem?

This is from Pliskas book in mathematical finance. I do not know what was best to write the question so I included the pages from the book. He has not written what form of the separating hyperplane ...
0
votes
3answers
422 views

How to create a model or formula for evaluating trade opportunities

I want to build a formula to produce a score for a potential trade based on 4 variables, time, return, liquidity of security, and probability of failure. For a set of potential trades I first ...
3
votes
2answers
88 views

Risk Neutral Pricing Necessary Condition

Suppose that I have an option on a single stock expiring at time $T$ and I replicate the payoff of this derivative by investing in the stock market and the money market. So this condition reads $$X(T) ...
2
votes
2answers
604 views

List of dates at which the NYSE was closed from 2005 to 2014?

I'm doing research on historical price movements on the New York Stock Exchange. Because the NYSE is closed on weekends, on holidays, and sometimes because of special events, special care needs to be ...
3
votes
1answer
383 views

Portfolio Optimization - n risky assets

I'm currently implementing a CAPM model in Excel: A portfolio of n risky assets when n=6 (in this case) A riskless borrowing rate of 8% and riskless lending rate of 3% I'm given the expected return ...
1
vote
1answer
167 views

How to develop your own interest rate model?

How can you develop your own interest rate model? What must be take cautiously before making one? Also what is the regulation that one mustfollow? Also what is some common properties that models ...
2
votes
2answers
177 views

What is the reasoning to derive this financial model called the Vasicek Model?

The model specifies that the instantaneous interest rate follows the stochastic differential equation $$\mathrm{d}r_t = a(b-r_t)\: \mathrm{d}t + \sigma \: \mathrm{d}W_t$$ where $W_{t}$ is a Wiener ...
2
votes
2answers
289 views

How to classify stocks by their volatility?

I would like to hear other possible ways of classifying Stocks by the Volatility of their returns. Assuming that I want to characterize each stock as Low, Medium or High Volatility Stock and assuming ...
2
votes
1answer
145 views

Methods for “prompt month equivalent” exposure in commodities forwards/futures markets

It is common in commodities markets to hold many positions, both long and short, across a range of contract months beginning in the prompt month (today, September) to five or more years out. In ...
4
votes
3answers
124 views

Modelling currency exchange rates timeseries data across re-denomation dates

I am working with data for an exotic currency, that has been re-denominated a couple of times during the twenty years of data that I have. What is the best way of 'normalising' the data, so that I ...
1
vote
1answer
457 views

Cholesky Decomposition on Correlation Matrix for Correlated Asset Paths

I found a matlab example for modelling correlated asset paths: http://www.goddardconsulting.ca/matlab-monte-carlo-assetpaths-corr.html In this model the author uses the matlab code chol() in order to ...
3
votes
2answers
149 views

Approximation of different volatilities

Suppose I model the forward swap rate lognormal $$dS_t = \sigma_{ln}S_tdW_t$$ On the other hand we could model it simply by a normal assumption: $$dS_t = \sigma_{n}dW_t$$ I would like to know if ...
1
vote
0answers
38 views

Doubt on risk cost criterion

I want to minimize some kind of risk sensitive cost. But, I am confused what cost criterion should I use. I am aware of only expected exponential utility. I want to know what are the other such ...
2
votes
1answer
165 views

hedging with a 3 month fx forward every month

I think this is a bit odd question. Let us say I want to hedge my fx exposure every month but using 3 month forwards . How can I do that ? Is it not easy just to use 1 month forwards ? I recalculate ...
1
vote
1answer
1k views

Probability of stock closing over a certain price

A stock has beta of 2.0 and stock specific daily volatility of 0.02. Suppose that yesterday's closing price was 100 and today the market goes up by 1%. What's the probability of today's closing price ...
3
votes
2answers
295 views

Valuation of barrier options in Jump diffusion model

I am trying to evaluate the value of a Barrier option using Monte carlo method. The stock follows a jump diffusion model. I am using the method described in Metwally and Atiya. The authors describe ...
1
vote
1answer
115 views

ADR vs Foriegn Stock Price Arbitraguers

So I am sure you all know about the whole Argentina default that has been in the papers lately, no need to delve into it. This so called "technical" default has lead some interesting investment ...
1
vote
1answer
88 views

How can theta be so large on this option?

The AAPL Sep 95 put currently has a theta of -.21. The put midpoint is .84. 84/21 = 4 days. However, the put has nearly a month before expiration, at which time it will be zero. Not 4 days from ...
5
votes
3answers
505 views

multiperiod optimization using R

I'm interested in multistage optimization problems. Are there any good R packages around to solve such problems over time? I'm not at all an expert in it, so maybe someone knows a good paper / lecture ...
-2
votes
0answers
88 views

Stock Price Evolution Equation Clarifications [closed]

What is the dimension of Δt? Is it second [s]? What are the expected return and the expected volatility? How can I calculate them for any given stock? Should I use the return and volatility values for ...
2
votes
0answers
38 views

what kind of test for volatility and where find the data

I am working on a model for stochastic volatility. In short, the model try to capture that the volatility goes up suddenly after a shock (war, policy, financial events, etc) and then goes down slowly, ...
1
vote
1answer
140 views

Explain drop in Correlation between two time series in consecutive periods

I have a time series for a security list with 2 parameters calculated for each time period. For example, for a stock XYZ, I have Param1 and Param2 calculated over various time periods stacked against ...
1
vote
0answers
110 views

CVA formula proof

I'm struggling to prove the CVA formula in this paper. Equation (3) is the result of computing the expectation of formula (1). Could you please show me how to prove that?
2
votes
1answer
159 views

Volatility of Futures

Apparently: Under a constant interest rate, the futures price is given by a deterministic time function times the asset price (I think I understand this). This means that the volatility of the ...
1
vote
2answers
214 views

M&A hedging an equity portfolio against an index

Quick Note This question was already posted under the userID user8170. Reason being I could not access my account. Now I am able to login to my account I am reposting the question here and will ...
1
vote
0answers
235 views

one-step-ahead Stochastic Volatility for 5-minute VWAP prices

I'm trying to run an SV model against prices of Euro/USD. For those not familiar with SV, its a volatility model in which each point gets its own volatility parameter $h_t$ with 3 main parameters that ...
2
votes
0answers
59 views

Testing for the presence of a positive or negative gamma effect

I am currently analyzing a statistic that I believe will have the effect of hedgers having a positive or negative gamma position in certain stocks. In the case where I believe hedgers have positive ...
1
vote
2answers
345 views

Impact of NZD mid-day EST Roll forward

Was taking a look at an NZD spot deal that was traded on a Friday for value the following Tuesday (t+2). Somehow this trade became classified as a forward by our back office systems (dealer says they ...

15 30 50 per page