3
votes
1answer
3k views

Calculating instantaneous forward rate from zero-coupon yield curve

I have a big dataset containing zero-coupon bond yields with different relative maturities. I fix a time horizon on my dataset and I want to calculate instantaneous forward rate. I'm going to write ...
0
votes
1answer
186 views

What are the good book to understand economics? [closed]

I am currently studying managerial economics by W. Bruce Allen. The book is good. Are there any good book with quizzes , that makes economics sweeter? Books that relate to real world facts and figure ...
1
vote
1answer
59 views

“Equivalent” data sets despite different numbers

Are the historical data sets of short term treasury bill rates considered the same as the historical data sets of savings account interest rates because by definition they are both risk free rates of ...
1
vote
1answer
212 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?
2
votes
0answers
47 views

Risk neutral measure for jump processes

How can I construct risk neutral measure for option price if active price form is: $$S(t)=S(0)\left[\exp{σW(t)+(α-βλ-1/2σ^2)t+Q(t)}\right] ?$$ Here $W(t)$ is a Brownian motion and $Q(t)$ is a ...
-1
votes
1answer
827 views

Were can I find Historical Interest Rate Data?

Where can I find American historical Savings Account interest (Bank) rates? If you can, please attach corresponding links.
4
votes
2answers
737 views

Black Scholes vs Binomial Model

I'm trying to confirm my understanding of the 2 models. It is my understanding that the black-scholes is a special case of a binomial model with infinite steps. Does this mean that if I were to start ...
-3
votes
1answer
98 views

if technical analysis rules for predict stock prices is unique for all cases, why should we learn neural networks? [closed]

Is there any neural network out of the box tool that was already learned all technical rules by feeding many stock trading data?
3
votes
1answer
249 views

How would you correct a GARCH model to deal with non mean reverting volatility?

I am currently attempting to model and forecast volatility of bitcoin but have not been able to find a GARCH model that fits the data appropriately. I've used tick data sampled at 1 hour intervals ...
0
votes
1answer
110 views

PWIQF excercise solution

I am software developer with no previous experience or knowledge in finance and have recently been starting to build my knowledge in this area. I am working through the book: Paul Wilmott Introduces ...
4
votes
1answer
367 views

Portfolio optimization with Portfolio CVaR Constraint

I wanted to optimize a portfolio based on a portfolio-wide CVaR constraint (i.e. $CVaR_p \leq 0.08$). Unfortunately, I only find solution that minimizes the entire CVaR of the Portfolio. Do you mind ...
1
vote
0answers
107 views

Markov switching model estimation

We are testing Markov switching models to forecast risk regimes, similar to the paper by Kritzman, Page and Turkington. We find that in some cases the Baum-Welch algorithm converges very slowly or not ...
0
votes
0answers
80 views

full tick and retail tick data feed difference

Full tick institutional data feed like elektron from reuters, how is it different from retail tick data feed & which charting softwares work with elektron data feed
1
vote
3answers
432 views

How does logging effect Quickfix performance?

I am using .net/c++ version of quickfix. How does logging effect Quickfix performance? If I disable logging to file, can it help to increase performance of quickfix? Thanks,
4
votes
1answer
145 views

At-the-money Call Spread approximation

In a trading manual I got during a course, the value of the ATM Call-Spread is approximated by $CS_{ATM}=\frac{1}{2}StrD+(F-m)\times\Delta CS$ The lecturer skipped the part where he derived this ...
1
vote
0answers
147 views

American Swaption Pricing with PDE discretization

So I am still trying to price an american swaption. (MC approach here: American Swaption Pricing with Monte-Carlo method) I've found in Paul Wilmott, The mathematics of financial derivatives, a PDE ...
1
vote
1answer
202 views

source for yahoo finance equities volume traded

I am looking at some academic studies regarding volume of stock traded. Yahoo Finance is used as the data source for volume. Does anyone know where the volume figure comes from? Is it a compilation ...
0
votes
0answers
45 views

Engle Granger test returns a 0 in matlab, while correlation factor is .80+. Am I doing something wrong?

Engle Granger test is giving me a ans = 0. The correlation factor is: 0.8+ Does this imply the No cointegration hypothesis is true? i.e. as per my understanding that there is cointegration? I am ...
0
votes
0answers
47 views

Significance of Data

The following is a result I get from a pair trading model. I am trying to figure out the significance of the below but failing. Can someone help me out i.e. a resource or possibly an explanation on ...
5
votes
3answers
1k views

Usage of Brownian Bridge?

I was recommended to read something about Brownian Bridge. Could someone familiar with BB give some recommendation? It was mentioned that BB benefits in 2 places BB could reduce the simulation ...
1
vote
1answer
188 views

Bond Spread Drivers

I have some work to do on the drivers of government bond spreads - ie. across terms (not across governments) of the yield curve, say 5yr and 20yr bond spreads from the same government issuer - and am ...
2
votes
1answer
471 views

American Swaption Pricing with Monte-Carlo method

I want to price an American swaption but I am not sure about what I am doing. Tree methods and PDE discretization seem difficult to adapt to a swaption. I am trying a Monte-Carlo approach. (in ...
1
vote
2answers
3k views

Dv01 of Eurodollar futures contract

Can anybody please explain in layman terms why the DV01 of a eurodollar futures contract is 25? I can mathematically calculate in different ways, but not able to convince myself, especially how is it ...
1
vote
0answers
1k views

Black Scholes well coded Python

I have some trouble with the following code. Some jump and a decentered path are present but it's not the case, normally for Black Scholes diffusion ! Is anyone see a problem in my code ? ...
3
votes
3answers
284 views

Budget Constraint in Sharpe Ratio Optimization

I am a math student and I am trying to understand the budget constraint in Sharpe Ratio optimization for portfolio design. Recall the budget constraint requires that the sum of the portfolio weights ...
4
votes
3answers
610 views

Sampling problem in portfolio optimization

In a summary I am trying to do the following Bond Subset 1 : Get list of USD Bonds --> Filter out Bonds which have YTM > y% DUR > 10 Y etc. .. This gives us Bonds which we are interested in. So ...
0
votes
2answers
165 views

Why long power and short gas for Merchant power plant

Merchant power plant is one that can be turned on whenever you want. Suppose it is generating electricity from natural gas and we have a spark-spread option. Why is that the person who owns plant is ...
1
vote
1answer
122 views

If we modify duration, should we modify bond price? Options Futures and Other Derivatives

In Example 4.5 of Section 4.8 on Duration of Options, Futures and Other Derivatives (p.92), a bond's price and duration are computed assuming continuous compounding where the bond yield is y = 12%. ...
3
votes
1answer
140 views

Pricing of a simple contingent claim

Earlier I had the question (5.11 Tomas Bjork): $$ \frac{\partial F}{\partial t}+\frac{1}{2}x^2\frac{\partial^2 F}{\partial t^2}+x = 0 $$ $$ F(T,x) = ln(x^2) $$ And solve it using Feynman-Kac. The ...
6
votes
2answers
212 views

Why is the LIBOR-market model free of arbitrage?

Recently I have been reading a lot on the market models. One thing that keeps escaping me - why is the Libor-market model (LMM) assumed to e free of aritrage in continuous time ? To me this means ...
1
vote
1answer
103 views

Differenced Brownian Motion covariance

I am having some difficult showing what the following equals, where $x$ and $y$, $x>y$, distinct times: $\mathbb{E}[\Delta W_x \Delta W_y]$ where each $\Delta W_t = W_t - W_{t-1}$. I have ...
0
votes
1answer
176 views

list of ADR's by volume or market cap

I'm looking for a list of ADR's (for a simulation) that I can screen by either market cap or volume? If anyone knows of a free way to get such a list it would be much appreciated.
3
votes
1answer
379 views

Beta and Frequency of Data

Why are the betas of individual securities essentially the same whether we use daily or weekly data when calculating?
3
votes
2answers
378 views

CVaR/VaR Ratio as alpha goes to 1

I am having trouble taking the following limit of CVaR/VaR for a normal distribution as alpha approaches 1: $\lim_{\alpha \to 1} \frac{\mu + \sigma \frac{\phi^{-1}(\alpha)}{1-\alpha}}{\mu + \sigma \...
0
votes
2answers
179 views

Accessible HTF? (Slippage reduction)

I designed an strategy that operates with 30-second bars on e-mini SP500. It works fine in the back-testing and the out-sample, also performs well in every walk-forward test I have tried. But, when ...
3
votes
1answer
167 views

Convolution copula?

Using copula formulation for the following probability: $$\mathbb{P}(X\leq x,y_{1}\leq Y\leq y_{2})=\mathbb{P}(X\leq x,Y\leq y_{2})-\mathbb{P}(X\leq x,Y\leq y_{1})$$ $$=C(F_{X}(x),F_{Y}(y_{2}))-C(F_{...
15
votes
7answers
18k views

What open source trading platform are available

I would like to compile a list of open source trading platforms. Something that would give an overview and comparison of different architectures and approaches.
1
vote
1answer
99 views

Delta of a standardized at-the-money 30-day put option

The plot below depicts the delta of a standardized at-the-money 30-day put option on the S&P500 tracker SPY over a 14-year period. This is data from OptionMetrics and standardized prices are ...
3
votes
1answer
245 views

HJM simulation problem

I'm trying to simulate a 3-factor HJM model. I got the algorithms from Glasserman book. In my case, I have $3$ maturity:$ 0.25y, 0.5y, 0.75y$. So my time grid is: $t_0=0,t_1=0.25,t_2=0.5,t_3=0.75$. ...
5
votes
2answers
313 views

quantiative risk measure how they are implemented in R and their use

So far I have just theoretical knowledge of risk measure and never used them in application. Therefore I have some basic question how risk measures are used in reality and how they are implemented in ...
2
votes
1answer
109 views

Discounting based on instrument type

Suppose we have an asset $A$, and we have modelled the cashflows for this asset to be $\{C_{1},\ldots C_{k}\}$ which occur at time $\{T_{1},\ldots T_{k}\}$. Now the present value of the asset can be ...
0
votes
1answer
147 views

Debt vs. Equity?

What determines whether an investment should be made using debt vs. equity? For example, startups are often financed with equity, while mortgages are always financed using debt. What characteristics ...
1
vote
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. ...
4
votes
1answer
1k views

Are there Python algorithmic trading libraries supporting forex?

I know about zipline and ultrafinance, but as far as I know, they don't support fx trading. Which libraries do?
2
votes
0answers
301 views

Bond (yield curve) dynamics in the Forward-LIBOR-market-model

The standard Libor-Forward-Market-Models provides a way of modelling the evolution of forward rates in time. However the model does not seem to be well suited for the modelling of zero-bonds. But ...
1
vote
2answers
234 views

Avoiding negative spread in pairs trading

I'm constructing money-neutral spread by this formula: Spread = log(P1) - log(P2), where P1 and P2 is prices of two instruments But sometimes spread can get into ...
5
votes
0answers
2k views

Calculate interest rate swap curve from Eurodollar futures price

So I was reading Robert McDonald's "Derivatives Markets" and it says Eurodollar futures price can be used to obtain a strip of forward interest rates. We can then use this to obtain the implied ...
0
votes
0answers
27 views

modelling with Meixner process

I failed to evaluate the integral of v(x)e^x over real numbers (i.e, from -infinite to +infinite) with respect to dx where v(x)=2d exp(2(pi+b)x/a)/abs(x)(1-exp(2pi.x/a)) for x<0 and v(x)=2d exp(2(...
0
votes
3answers
202 views

hedging with known volatility

Suppose we have a stock $X$ at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How ...
1
vote
2answers
198 views

Are power contracts traded on any stock market?

Are power contracts traded on any stock markets ? What about OTC markets ? I ask about the derivatives where payoff is some exponential function of difference between strike and spot price.

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