# All Questions

229 views

### Estimate of fx trading volume

I understand that there are no official figures of fx trading volume per currency, but are there any good estimates? Is there any fx exchange that is particularly forthcoming with its volume data, ...
1k views

### HFT enhancements for FIX (Simple Binary Encoding) vs proprietary protocols performance and cost

I would like to know from those that have used FIX (with Simple Binary Encoding) for HFT compares with the current (proprietary) protocols in use that often vary per counterparty. Interested in ...
60 views

### Why is the discount function non increasing if pure cash holdings are feasible?

I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ...
189 views

### moody's credit ratings for senior unsecured bonds

Can 2 senior unsecured bonds from the same obligor have different moody's credit ratings? Or do they both have to have the same rating because they are in the same capital structure? Thanks
156 views

### What's wrong with this asset growth simulation?

Sorry if this is too basic, but I have this spreadsheet that simulates asset growth of a portfolio under a given return and risk using MPT. Here is a plot of probability distribution of asset ...
76 views

### Is “Issuer and Holder with same strike” meaningless?

I've seen a callable putable bond whose first exercise date is an exercise date both for the holder and the issuer. Moreover both strikes have the same value: 100. I wonder what does it mean. I ...
219 views

### Control variate for Heston model

Does anyone have suggestions for potential control variates for vanillas in a Heston model? I've tried black scholes with implied volatility, average volatility and long term volatility all without ...
559 views

### Automatic fixing of missing floating rate in QuantLib's addFixing()

Due to the periodic fixing of floating rate bonds's coupon rates, in order to calculate the bond clean price one must tell the pricing engine to account for previous LIBOR rate fixing. If I am right (...
285 views

### Definition of “tenor” argument in QuantLib's Schedule class object

In QuantLib an object of class Schedule takes const Period &tenor as argument. I would ...
146 views

### how to extend lognormal model so that $\sigma$ is correlated to $\mu$?

Consider a log-normal model, $dx / x = \mu dt + \sigma dW$, where $W(t)$ is a Wiener process. Let's say $\mu$ and $\sigma$ change with time, slowly, so we note them by $\mu(t)$ and $\sigma(t)$. ...
1k views

### Partial Least Squares Discriminant Analysis

Could anyone point me to detailed literature about "Partial Least Squares Discriminant Analysis"? Intuition, methodology and examples.. Thanks,
598 views

### garchOxFit in R

Could someone please help me with trying to get the Ox interface to work in R. I followed the steps outlined in this paper (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1752095), but I get the ...
2k views

### Normal vs Lognormal Short Rate models

Are there any general arguments to decide whether it is better to use a model with a normal or a lognormal distribution of the short rate? E.g. Hull-White with a normal and Black-Karasinski with a ...
121 views

### Bracket-Notation in SDEs

I often come across the following notation in my script, and I have not found it anywhere else. While our lecturer insists it is of utmost importance to write this way in his exams, he yet failed to ...
466 views

### why banks shall keep short term gap position low?

I'm reading "Insights for Bank Directors" (http://www.stlouisfed.org/col/director/reference_view.htm), a good introduction to commercial banks, based on a virtual bank "Insight". It talks about Gap ...
352 views

### What are the differences between CFD and SSF?

What are the intricate differences between SSF and CFD? The similarities are that both take into account interest and settled daily thus looks more or less the same pima facie.
156 views

### Statistics of difference between two GBMs

if I have two asset prices modeled separately as geometric brownian motions. How do i go about calculating the expected statistics of their difference? Like given the sigmas and mus of both processes, ...
178 views

### How to deal with different amount of td's in computing Sharpe Ratio

In calculating the Sharpe Ratio, should I take into account the days were I have 0 return due to non-trading day? Another user posted a similar question but this was related to trading days with no ...
245 views

### Testing Black Scholes Analytical Options Pricer

I've written some code to calculate European option prices using the Black-Scholes analytical method. Can somebody recommend a good way to test that code? I have looked at option pricers online like ...
133 views

### Find a paper about portfolio management

Where to find the following paper of the noble prize Paul Samuelson (2003) “When and Why Mean-Variance Analysis Generically Fails,”. I was looking for it desperately on Google and Google Scholar but ...
370 views

### Good Model Calibration Books/Papers for Common Option Pricing Models

I am trying to find a good book which focuses on the model calibration. I just want to know generally, what are the most common methods of model calibration(such as Black-Scholes Model, Stochastic ...
1k views

### How to interpret/use VaR and Standard Deviation?

The parametric VaR is defined as follows: $$VaR=Z_a*Vol$$ Is this the best way to interpret how much risk is being taken on for a particular asset? How does one interpret volatility on its own if ...
72 views

### How to attribute income that incurs a double liability in a P&L?

I'm a developer writing a system for a startup. Without giving away too much of the business model, here are the basics of how it works: The web site has two forms of "currency": tickets and ...
599 views

### Performance Stats of Pairs Trades

This is something I've been thinking about for a while but I can't reach a clear conclusion. When we calculate, for example, the profit factor for a pairs trading strategy, do we treat each pairs ...
474 views

### Why does $\hat{\epsilon}'\hat{\epsilon}$ of a factor model measure risk?

$\hat{\epsilon}'\hat{\epsilon}$ from the market model: $R_{it} - \hat{\alpha} - \hat{\beta}R_{mt} = \hat{\epsilon}$, or from a factor model such as the Fama-French 3 factor model, is often used in the ...
546 views

### CARA Utility function expected utility

I have been trying to undestand how the expected utility for a CARA negative exponential Utility function is calculated. In my particular case the variable has normally distributed returns. Could ...
751 views

### How to compute portfolio weights from multivariate regression results?

Assuming that I performed a multivariate regression and I found a set of $k$ coefficients $\alpha_1, ..., \alpha_k$ for each of the factors $F_1, ... F_k$. I have then computed the following ...
398 views

### Use of AI in portfolio optimization

A new Danish hedge fund has received quite a large amount of attention in the last month or so. They are launching a new investment fund that uses proprietary AI to select stocks to invest in. They ...
351 views

### Proxy for risk in portfolio theory when return can take only two values

I'm trying to adapt tools from portfolio theory for another use, and I have a question about how I might do so. Suppose that instead of having normally distributed returns, the return $R_i$ is ...
432 views

### Calculating Theta assuming other variables remain the same

Is there any way to calculate theta at X day in future based solely on knowing 1) Total Current Option Price 2) Days Till Expiration How would this be done? Thank you
2k views

### What is the difference between STOXX and STOXXE?

Could anyone explain the difference between STOXX and STOXXE? Which is the right index for benchmarking European stocks? Thanks.
2k views

### How to get started in quant finance? [closed]

I am a programmer and I have no finance background. I am looking for advice as to how to get started in the quant finance industry. My goal would be to have solid understanding about the industry and ...
1k views

### How do I calculate weighted mean with negative weights?

I need to display in my system the amount of stocks that I own and the average price it took me to buy them. I am having a problem doing that when I include the selling. Lets say I bought 4 stocks ...
41 views

### Pricing of a Forward-start option in a Black-Scholes framework

I have read the pricing procedure of a Forward-start option in a Black-Scholes world in Musiela-Rutkowski, but I don't find their proof clear (pp. 195-6). Let me summarize their argument: Consider ...
46 views

### Is Poisson Disk Sampling an alternative to crude Monte Carlo and QMC?

I recently stumbled over Poisson Disk Sampling (here and the meditative version). I wonder if it is an alternative to crude or quasi Monte Carlo for very high dimensional integrals. It is not ...
41 views

### Monte Carlo Accuracy - Antithetic Variate Method

I'm self studying for an actuarial exam and I am curious about a property of the antithetic variate method for increasing the Monte Carlo price accuracy (i.e. For every random draw of $z$, also ...
35 views

### Merton portfolio allocation problem proportions/weights >1 or <0?

In the classical Merton portfolio problem, lets assume: $$dX_t \, = \, \frac{\pi_t X_t}{S_t} S_t(\mu dt +\sigma dW_t) = \pi_t X_t (\mu dt +\sigma dW_t)$$ ie: zero interest rates for simplicity. ...
50 views

### What is curvature risk?

The BCBS has presented a new standard approach for measuring risk for a portfolio, which is based on sensitivities, that is “delta”, “vega” and “curvature” risks. Delta risk measures the change in ...
32 views

### How to understand the following limits when kapa limits to Zero

The equation is quite simple, however it is not very obvious to me to have the following relationship:  \frac{1-exp(-\kappa(T-t))}{\kappa}\rightarrow(T-t) \quad \rm{when\space} \...
54 views

### How FOK or IOC order types are executed

Ok, I know what's the difference are between them but still have some question. Let's say that the exchange's limit order book looks like this: (order depth of LOB) Now, let's say I send a buy FOK ...
52 views

### Initial/Boundary Conditions for a Butterfly Option?

What are the initial and boundary conditions for a Butterfly Option? I want to write up a PDE program for it and I have a rough idea of what the payoff should be (is it just a call and a put at the ...