# All Questions

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 ...
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 ...
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, ...
2answers
100 views

### Implied Correlation using market quotes

Is there a way to retrieve the implied correlation between stock price and zero coupon bonds?
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 ...
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) ...
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 ...
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?
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" ...
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 ...
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 ...
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?
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. ...
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 ...
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: ...
1answer
96 views

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 ...
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 ...
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 ...
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 ...
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, ...
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 ...
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 ...
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 ...
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 ...
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 ...
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 ...
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 ...
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?
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?
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 ...
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 ...
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 ...
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: ...
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 ...
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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