1
vote
0answers
48 views

Questions related to the banking crisis during the European sovereign debt crisis

I am studying the European Sovereign Debt crisis and I have the following questions which I am struggling to find examples for: 1) I have heard that during the sovereign debt crisis, European ...
7
votes
4answers
849 views

Does Modern Portfolio Theory align with EMH?

I came to the conclusion that in literature Markowitz' Portfolio Theory is believed to be compliant with the Efficient Market Hypothesis. The weakest form states that the current price fully ...
1
vote
2answers
315 views

Historic Value at Risk - Ratios vs. Differences

Quick Summary on Historic VaR Let $S_0,...,S_n$ be the daily values of some stock (where $S_0$ is the current value). Then for $i=1,\ldots,n$ we let $$\hat r_i:=S_{i-1}/S_i \quad \text{and}\quad \hat ...
0
votes
1answer
1k views

Calculate bond yield in python

I want to run the newton method on a large dataset to calculate bond yield. Below is the code I created using a loop. I need to run it on ~50 million lines and the loop is quite unwieldy. Is there a ...
0
votes
2answers
157 views

How is the price of a bond actually determined?

How the price of a bond is actually determined? Is it the supply-demand that determines the price first and then the YTM is calculated on the back of this for that bond. Or is it that the changes to ...
2
votes
3answers
10k views

How is PnL calculated

In Fixed Income, I know that bonds PnL are evaluated depending on where the price lies on price/yield curve at the end of the day, compared to where it started from at beginning of the day. The ...
2
votes
3answers
1k views

Handling Missing values in stocks returns when estimating the co variance matrix

What is the best way to handle missing values when stocks did not exist for the entire historical period?.
1
vote
3answers
547 views

Arbitrage free implies complete market?

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this proposition It seems that to show that the model is complete, we must show that the claims are reachable. That is, we ...
1
vote
2answers
148 views

Pricing Principle 1

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this Pricing Principle. Is the one in red supposed to be the proof of the Pricing Principle 1? Or merely an intuitive ...
1
vote
0answers
101 views

forecasting crash time of KLSE index (1991-1994)

Price deviation = financial bubbles. i try to fit the following stock price index to predict recession. I couldn't fit the model with the data(Data are not available in yahoo finance for the ...
2
votes
1answer
325 views

ETFs have lower tracking error than Futures?

I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ...
2
votes
2answers
327 views

Logic behind Gordon Growth Model in a DCF analysis?

Sorry, I wanted to ask this on the finance/money forum, but they don't support LaTeX there. Let's say we are valuing a company using the DCF methodology with a 5-year projection period. We project ...
3
votes
2answers
582 views

SVCJ (SVJJ) Duffie et. al Model implementation in Matlab

I'm attempting to implement aforementioned SVCJ model by Duffie et al in MATLAB. so far without success. It's supposed to price vanilla (european) calls . parameters provided, the expected price is: ~...
0
votes
1answer
125 views

How to construct a deterministic trading model based on a loess (local regression) model?

Given data that has been fit to a loess model, can you make reliable decisions on future trades given a good past fit? Has anyone here done so and can give an example of their use case? I am yet to ...
0
votes
1answer
49 views

(Purchased) terminology on Net Preferred Equity Issued

I understand what we mean when we say: Net Preferred Equity Issued it is the total amount of Preffered Stocks plus their price. But does the chart mean when it says (Purchased)? What other can it be? ...
-1
votes
1answer
732 views

Difference between Total Long Term Debt and Net Total Long Term Debt

What is the difference between Total Long Term Debt and Net Total Long Term Debt? Below you can see a picture revealing that they are not equal.
1
vote
3answers
81 views

Interpretation of equation derived from the delta of a call European call option

I have started reading an introductory book called: A Course in Derivative Securities by Kerry Back. On page 12 they mention the following: The delta of the call option is $\delta = (C_{u} - C_{d}) / ...
2
votes
2answers
2k views

Sharpe Ratio - my own calculation differs from Yahoo finance, Morningstar

I am trying to compute the Sharpe ratio for my portfolio. To check that I am doing this correctly, I am first trying to compute it for SPY (the S&P 500 index). ...
0
votes
1answer
125 views

why people want to get a continuous time series from futures data?

So for the backtesting , is it necessary to make an adjustment for the last day of the current contract and the first day of the next far contract? Even if there's is a gap, that's the actual price, u ...
1
vote
0answers
83 views

Max Likelihood via Marquardt Optimisation

I asked a related question here: How to apply Levenberg Marquardt to Max Likelihood Estimation I tried the approach suggested it works for some of the parameters but not the variances. I spoke to ...
0
votes
1answer
226 views

How to get permanently growing chart within PCA

I looked onto different questions and answers about application of PCA on this site and found this interesting article : http://systematicedge.wordpress.com/2013/06/02/principal-component-analysis-in-...
0
votes
2answers
2k views

Technical analysis in Python - source of knowledge

I did my best, but I could not find answer for this one - is there any good and in-depth source of knowledge about using Python for technical analysis ? Obviously, there are plenty of tutorials, blogs ...
10
votes
2answers
1k views

Why Ito calculus?

Coming from physics, I am used to the fact that the Ito interpretation of most natural stochastic equations is wrong, and one should be using Stratonovich calculus instead (of course they are ...
0
votes
2answers
64 views

Break down XIRR to different segments

Currently, I have the following transactions. ...
2
votes
1answer
169 views

Where can I buy historic raw order by order data for Euronext market?

I cannot find any vendor that sell the full depth order by order data historically. I called Euronext and for some sick reason they "have the data" but "do not sell it". Do you guys know where I can ...
3
votes
2answers
225 views

Martingale Stock Prices

In http://www.principlesofforecasting.com/files/pdf/Granger-stockmarket.pdf Granger makes survey of some arguments. In section I there are two hypothesis H01, and H02. H01: Stock prices are a ...
1
vote
1answer
169 views

Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim

In Tomas Bjork's Arbitrage Theory in Continuous Time (or here), $\exists$ these propositions How does the first formula follow from from the algorithm? I get that $\Pi(0;X) = V_0(0)$, but I don't ...
2
votes
1answer
297 views

How to see the impact of one variable on a set of other variables?

Editing my question: I have decided to use multiple factor model to model my stress test. I am using factor shock method to implement the propagation of shocks. I am doing this according to a book "...
3
votes
1answer
2k views

How popular is the Linear Gauss Markov (LGM) model?

Some friends recommend to me Linear Gauss Markov model, saying it's interesting to have a look at it. Basically it's a framework different from HJM, with potential to extend, and the merit is that it'...
0
votes
1answer
564 views

Excel to Java for Interactive brokers

I have a working excel workbook connected to Interactive brokers DDE API. I am struggling to upgrade to a more robust environment like Java. I tried to change it to ActiveX for Excel but the ...
4
votes
1answer
596 views

Option based portfolio insurance in practice

My question is about option based portfolio insurance in practice. Some insurance companies offer products where there is a mutual fund (equity and bonds) and a guarantee attached. This guarantee is ...
2
votes
1answer
136 views

Correlation of asset to portfolio, given certain variables

Ultimately I'm trying to calculate stdev contribution, but I've hit a hurdle. What I have: 20x20 correlation matrix for various assets Standard deviations for each asset Returns for each asset ...
1
vote
1answer
77 views

How to benchmark bonds?

I am trying to find for each european bond in my database a proper Benchmark to compare them with the Bloomberg benchmarks for bonds. What i have done so far is to extract a list of all government ...
0
votes
0answers
83 views

Correlating random numbers seems to skew the data

First off, apologies for the cross-post from mathematics, but I found this site later and think it would be a better fit for the question (besides, there has been no comments/answers on mathematics ...
1
vote
1answer
188 views

How to projectP&L or drawdowns on pair trading , trading and portfolios? [closed]

This is for planning and risk management. I am stuck on the following thoughts - Back-test the trading strategy for a period similar to the one you expect and then project. Do the above using ...
0
votes
1answer
66 views

Is there any relationship between investment return of a stock, for individual year (Yearly return) and multiple years (Overall annualized return)

currently, I'm calculating the return of a stock, for individual year and multiple years. I tend to answer the following question. Return of a stock for end of year 2010 (Individual year) Return of ...
4
votes
3answers
4k views

What are the implication of a negative risk-free rate on SML?

What happens to the Security market line (within the CAPM model) when the risk-free rate turns negative?
1
vote
0answers
69 views

robust regions in grid search

I have a strategy f that takes parameters x,y (for x,y taking values in integer ranges). I get two grids (of returns and volatility values) from computing f(xi,yi) for integer ranges x1 <= xi <= ...
1
vote
0answers
122 views

How to convert HJM model risk-neutral measure $\mathbb{Q}$ to real measure $\mathbb{P}$?

HJM model, $df(t,T) = \mu(t,T) dt + \xi (t, T)dW(t)$, is defined in risk-neutral measure $\mathbb{Q}$, according to Brigo's "Interest Rate Models" book. I wonder, how could I transform it to real ...
2
votes
0answers
53 views

Isn't a perfect economic system always in debt? [closed]

Let's say in a simple world, we have 3 persons, a banker, a businessman and a worker. Then we apply the current monetary system in this economy. So for the system to get started, we need a banker to ...
6
votes
1answer
112 views

Valuing a warrant on a warrant

How would you go about valuing a European warrant that entitles you to a) 1 share of a company and 2) 1 warrant on that same company?
2
votes
2answers
187 views

2 stocks, no shorting vs shorting. (concrete questions, mean-variance)

I'd appreciate help with the following questions. Suppose there are two stocks $A$ and $B$ with expected returns $E_A, E_B >0$ and volatilities $v_A, v_B >0$, respectively . Also, suppose ...
9
votes
2answers
696 views

The Definition(s) of Momentum

I am currently studying the Momentum strategy and its differences in results (returns) when we change the formula describing momentum. There are indeed no accurate formulas for implementing the ...
0
votes
0answers
24 views

Commodity prices on Yahoo finance [duplicate]

I tried looking for some decent way to get stock data for general commodities. I went looking on Yahoo Finance and found https://nz.finance.yahoo.com/q?p=finance.yahoo.com&s=GCN14.CMX. But this ...
2
votes
1answer
128 views

Shorting 'pump and dumps' legal?

Ive seen my junk inbox overflowing recently with a few stocks being pushed extremely heavily via unsolicited emails from a variety of 'firms', my guess is that these are done by the same individual / ...
1
vote
1answer
410 views

Non-linear Dynamical Systems and Quantitave Finance

The vast majority of what I have read about quantitave finance is to do with option pricing and time series analysis for forecasting. However the economy as a whole behaves as a dynamic system with ...
0
votes
1answer
78 views

Calculate rate of return of a stock, if there is a buy transaction occurs during the middle of financial year

Currently, I'm implementing a feature of an open source project (https://github.com/yccheok/jstock/issues/7), which requires me to calculate the rate of return of a stock. Let's take the following ...
0
votes
3answers
200 views

Divergence between binomial pricing and monte carlo simulation for vanilla european call?

I notice a divergence in my own code, but it's evident even in public code: http://www.thalesians.com/finance/index.php/Knowledge_Base/Finance/Option_Pricing_in_Python_and_Simple_English Pricing a ...
-1
votes
1answer
98 views

Math basics of Equally-weighted Risk contributions

i'm writing my BA Thesis about "Equally-weighted Risk contributions". Can anyone recommend math books for further understanding of Risk contributions?
7
votes
3answers
331 views

Transaction Costs for Currency Pairs

I have been aggregating some tick data from Oanda's streaming API to try and get an idea of the relative cost and best time to trade different currency pairs. The idea was to plot the spread of the ...

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