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2answers
116 views

Standard Deviation as listed in Rebonato's Volatility and Correlation: Binomial Replication 2.3.4 Worked-Out Example

I am reading Rebonato's Volatility and Correlation (2nd Edition) and I think it's a great book. I'm having difficulty trying to derive a formula he used that he described as the expression for ...
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1answer
450 views

What is the Rho of an option on a futures contract priced using the Black 76 model?

I wanted to quickly confirm some simple calculations for the Black 76 greeks and was making use of the formulas on this website: http://riskencyclopedia.com/articles/black_1976/ I have an issue with ...
1
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1answer
348 views

Interpolation of volatility curve for Swaption

I have found volatility in the black model for swaption for different maturity (1-2-3-6-9M, 1Y, 18M, 2-10Y, 15-20-25-30Y) and Tenor (1-10Y, 15-20-25-30Y). Now I need another values (Maturity: 2, ...
1
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2answers
100 views

Implied Correlation using market quotes

Is there a way to retrieve the implied correlation between stock price and zero coupon bonds?
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1answer
1k views

What is Prompt Date Structure?

In LME website Prompt Date Structure is explained as this. Why there are prompt dates? LME trading calendar isn't universal to all other calanedars found in the market. So how do "Non-tradable dates ...
1
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1answer
103 views

Where can I buy historic raw recording of an exchange

Say I want to buy historically recorded raw feed from an European exchange (say LSE). Is there a vendor that would sell me this data ? EDIT: By raw feed I mean the order by order feed (or equivalent) ...
1
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1answer
59 views

In a mis-matched trade who profits?

I am building a service similar to the BullionVault where users can buy and sell bullion. They will be placing their Buy and Sell orders on the service. Matched orders will get executed. My question ...
1
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1answer
436 views

Where can I find implementations of the time-varying copula (BBX) in Matlab or R?

I want to construct some time-varying BBX copulas, however, I found that patron's package does not contain time-varying BBX copula. Anybody know where I can download them?
1
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3answers
197 views

What does “true”volatility mean in volatility comparison?

In Sinclair's book, wee need to compare standard deviation with "true volatility" to check the power of the model suggested, close -to-cloce, or Parkinson formula, etc. What do we mean here by "true" ...
1
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1answer
206 views

novice question on fixed coupon schedule in QuantLib

For some bonds I work with the last coupon date is not equal to bond's maturity date. E.g. the last coupon date is April 25th, 2020 and maturity date is April 25th, 2021. I looked at Schedule class ...
1
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2answers
370 views

How to price this option using the Black Scholes model?

I have a question regarding regular option pricing. In the standard Black-Scholes model, with interest r and volatility $\sigma$, I have to eetermine the arbitrage free price at time $t$ of an ...
1
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1answer
195 views

FX Rate dynamics

Let's suppose USD/EUR price in USD follows a GBM with $$ dS_t = rS_tdt + \sigma S_tdW_t $$ What process does EUR/USD follow in EUR?
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2answers
126 views

Harnessing small correlations for reliable profit

It is said that Edward O. Thorp was able to harness small correlations for reliable financial gain. I've seen some strategies based on strong correlations which did not seem particularly reliable. ...
1
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2answers
152 views

Simple question about expected value of brownian motion

I would appreciate some help with the math in this paper : High Frequency Trading in a Limit Order Book Specifically, I would like to understand how the authors calculated the expected value of price ...
1
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1answer
234 views

Different range price data on one chart

I'd like to evaluate 3-4 instruments on one price chart. For example: Stock A: 90,05 90,15 90,25 90,09 Stock B: 0,0045 0,0049 0,0039 0,0040 Stock C: 1998,1 1998,7 1998,8 1997 I try to use: ...
1
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1answer
96 views

Simple pricing example confusion

This it taken from "Heard on the Street", Section B. Consider a market with $0$ risk-free rate, no transactions costs etc. The IBM stock costs \$75 and does not pay dividends. Design a security ...
1
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1answer
91 views

what is the vol in the BS formula?

I need to compute the delta of an option for which I know a) the time to maturity, b) the price of the option, c) the price of the underlying asset. what is the formula to get this delta It seems ...
1
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1answer
169 views

Direct exchange data via a Vendor

I am considering the option between using direct exchange connections vs using a vendor like Bloomberg for market data. I am interested in daily data and potentially tick by tickdata. Initially I am ...
1
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2answers
4k views

where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
1
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2answers
276 views

Practical equity options pricing

To price a vanilla option, the following information are required : Strike price; Underlying price; Volatility; Maturity; Dividends rate; Repo rate; Interest rate; The strike, underlying price, ...
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2answers
288 views

Risk management of options

Your client would like to buy a digital call option. the digital call option pays the buyer in one years time (i.e at maturity ) N=1m SGD, if the SGD USD spot rate at maturity is above a prescribed ...
1
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2answers
271 views

Brokers offering low-cost / free accounts [closed]

I'm attempting a "hello world" of live algorithmic trading. A script that pulls in tick data, presents it visually, and allows me to buy / sell at the press of a button. Also a toggle between { fake ...
1
vote
1answer
625 views

Price of a down-and-out call in terms of European call

If $EC(S_0, K, \sigma, r, T)$ represents the price of a European call option with strike $K$, expiry $T$, initial price $S_0$, volatility $\sigma$ and where the constant interest rate is $r$, then I ...
1
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1answer
367 views

Derivation of the Nelson-Siegel model and proof of arbitrage

1. I am looking for a derivation of the Nelson-Siegel model $y(m)=a+b\left( \frac{1-e^{-\lambda m}}{\lambda m}\right)+c\left( \frac{1-e^{-\lambda m}}{\lambda m} -e^{-\lambda m} \right)$ It is ...
1
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4answers
382 views

Error message in calculation Implied Volatility

I am unsuccessfully trying to find the Implied Volatilities for the SPX on a given date using information of the CBOE, as well as Open Interest, but as I run the code I am getting and error message ...
1
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1answer
63 views

Scaling Intervals in Diffusion Process

I know this is a very elementary question but... when modeling asset prices through a stochastic process as in $$dS_t=S_t μ dt+S_t σdW_t,$$ where the following is a wiener process ...
1
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2answers
1k views

VIX intraday data

Where I can high-frequency intraday data on VIX? Is it available on Bloomberg Terminals? I see many questions posted on Quant.stackexechange about VIX options therefore I am sure someone knows where I ...
1
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1answer
209 views

Examples of non-increasing variance of a time homogeneous Markovian process

This is an edit to the previous question, on stationary process, which was answered by Richard below. Let $x_t$ be a zero mean, time homogeneous Markovian process over time $t$ starting from ...
1
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2answers
192 views

Quotes and Transactions Streams from Exchange

I have possibility of taking 2 types of real time streams from some exchange: bid-ask quotes (fresh quotes from order book) transaction log (transactions matched by exchange) I'm curious what ...
1
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1answer
193 views

Basics about the scaling property of volatility

It is a usual practice to calculate realized volatility $\sigma$ using the square root of the usual variance estimator $\hat{{\sigma}²}$. This is done using the stock log returns (practitioners ...
1
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1answer
1k views

Probability of a return from historical average and standard deviation

I have a question from a sample exam paper that I'm having some trouble figuring out. The question is: Bavarian Sausage stock has an average historical return of 16.3% and a standard deviation of ...
1
vote
1answer
1k views

Question about weighted midpoint formula

The answers from these two replies seem to contradict each other. The first numerator is bidSize*bidPrice + askSize*askPrice but the second is bidSize*askPrice + askSize*bidPrice. Price functions ...
1
vote
2answers
182 views

How to value VIX Option?

Could someone tell me a common method for pricing VIX Options please? Do I need to use a Stochastic Vol Model? Or Local Vol Model is suitable as well? Should the model be modelling S&P 500 and ...
1
vote
2answers
5k views

How to normalize stock data

Please advise how can i normalize stock prices. Recently, I've been using such formulas: Log prices = Ln(Close(t)) Close(t)-Mean (Close(t)-Mean)/(StdDev) Ln(Close(t))-Mean Is there any other ...
1
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1answer
2k views

How to apply Ljung Box Test?

I am checking the closing prices(about 9000+ prices) of the stocks data to test for randomness. The test I am using is Ljung Box test, in MFE toolbox for MATLAB, I used 300 data of closing prices, ...
1
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1answer
2k views

VaR for FX forwards

I am trying to figure out some of the commonly used approaches to deal with FX forwards (in a currency portfolio containing spots, forwards and swaps) that would allow me to calculate the one day VaR ...
1
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1answer
244 views

Why use leverage when it does not improve the risk/reward ratio? [closed]

Leverage will increase gains when things go right but will also increase losses when things go wrong. Mathematically speaking, it does not change the risk/reward ratio (or does it?). Since ...
1
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1answer
136 views

Is it better to hedge or reduce the position size? [closed]

Traders hedge to reduce their risk. However, wouldn't reducing the position achieve the same results while keeping the risk management process simpler? At least, one need not worry about making the ...
1
vote
1answer
141 views

Calculating spot level using tick data

What is a proper (or commonly used/accepted) way of calculating some spot value with tick data? At the moment I can think of two options: Take the latest available best bid, latest available best ...
1
vote
1answer
254 views

“Friendly” papers about maximum smoothness yield curve modelling

I'm currently looking to implement some version of the yield curve modeling techniques in the maximum smoothness framework. The papers I have found so far explains the theory pretty well, but I find ...
1
vote
2answers
868 views

Brownian motion - first passage time

Can anyone point me to the expression for the first passage time for a geometric Brownian motion process X(t) as a function of the starting point, threshold, drift and diffusion parameters. I am ...
1
vote
1answer
97 views

How do I take an unbiased, sector neutral sample from a stock index?

I am looking to take a cross sector subset of a larger stock index universe. What steps to I take to assure that sector representation is as equal as possible to help smooth out my variance(while ...
1
vote
1answer
105 views

Trading Elasticity Research

Is there any good research on the price elasticity of trading in financial markets? Things like optimal fee structures and the like?
1
vote
2answers
1k views

Covariance of a GMV portfolio with any asset

Why is that the covariance of a global minimum variance (GMV) portfolio in the efficient frontier with any asset is always the same?
1
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2answers
76 views

different amount of information on return correlations from shorter and longer periods?

I want to calculate annual excess returns on portfolios using monthly (total) returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on ...
1
vote
1answer
118 views

What is the smart way to reallocate money?

We are running a portfolio of fund managers in our fund. When one of the managers hits the max DD constraint we pull money from this manager. This may happen in the middle of the allocation period and ...
1
vote
1answer
300 views

Help with understanding a normal distribution/probability question

Could someone please help me translate what this is saying on page P15, section 4.2: http://www.ntuzov.com/Nik_Site/Niks_files/Research/papers/stat_arb/Ahmed_2009.pdf Specifically: When the ...
1
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1answer
375 views

Need to match my bond price calculation to that of Bloomberg, currently failing hard

I have a fixed-coupon bond with the following characteristics: ...
1
vote
1answer
165 views

Regression of Unequally Weighted Portfolio against a Single Index

When I regress a single stock against a market index, I get a high value of R2 and beta closer to 1. APPL.fit <- lm(APPL ~ JKSE) When I regress an unequally ...
1
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1answer
383 views

Blackbox Optimization + Bootstrapping = Parameter Selection?

Most automated trading systems have a number of embedded parameters such as the lookback periods, entry and exit thresholds, etc. This is like the moving average crossover system or any of the systems ...

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