All Questions

682 views

Does amortization of bond start accumulating on trade date or settlement date?

I am sorry if this is not appropriate here. We are building a wealth management system and I really would like to know whether amortization of bond start accumulating on trade date or settlement date ...
155 views

How can I estimate the parameters of an option value model of retirement?

I am modelling an option value model of retirement, see for instance Stock and Wise (1990). I am however not sure to which class of problems this model falls into and hence which optimization method I ...
141 views

Brent Crude Data

I am trying to locate historical volatility data (5+ years) for Brent Crude? Does anyone know where I might be able to source such data?
544 views

T-note returns from T-note yields … derivation of Damodaran's formula

Damodaran's historical data on 10-year T-note returns (found here) uses the following formula to calculate the 1-period total return on a T-note ($R_1$) given the 10-year constant maturity ...
143 views

Derivatives with a floating Libor leg

If Libor is found to be fraudulently fixed, are any of the derivative contracts with a floating libor leg still valid?
169 views

help me compare methods to compute one instrument price from another instrument price

Assume we have two instruments A and B. Also time is increasing from 1 to n. Let's say that ...
256 views

Normalized data

I am new to this. I trained and tested my data using SVM in Matlab with the autoscale option true => the data would be normalized with unit SD. Let's say the training data have the price around 200. ...
1k views

How is mean reversion implied by different valuations of Bermudan swaptions?

Someone told me that mean reversion can be implied by the different valuations of bermudan swaptions when using different methods for volatility calibration. Does anyone know what this means?
293 views

Reading recommendation on using statistical analysis in online fraud prevention [closed]

Can you please recommend good reads on statistical analysis related to online fraud detection and prevention of account abuse?
62 views

Calculating IR sensitivity

I'm trying to figure out how to find IR sensitivity of a bond whose time to maturity of a bond is 2 years. Bond pays 10.875 percent coupons yearly. Duration is 1.8 years. How do you find the ...
41 views

Creating index from bloomberg data in matlab

I'v got 6 different equity index time series from which I want to create an index based on a particular percentage. This would be simple although due to different holidays the date don't always match. ...
28 views

Are financial returns considered more volatile in recessionary times as opposed to expansionary times?

I need help in understanding some results that I have obtained. I am doing some out-of-sample performance analysis for different targets of volatility in mean-variance optimization where I solely ...
131 views

Merton model riskless self-financing derivation

Suppose $dA_t = A_t[\mu dt+\sigma dW_t]$ (assets' value) under the physical measure, plus the other assumptions of the Merton model. Suppose further that debt and equity are tradeable assets that ...
33 views

News about CAPM/FF3FM or asset pricing models in general

Is there any interesting news about CAPM/FF3FM or asset pricing models in general lately? Would have been greatly appreciated!
64 views

Is this formula correct to estimate a knock out option price using monte-carlo?

I have a knock-out option with barrier $L>0$ and strike $K$ that pays at maturity $(S-K)_+$. So, positive payoff occurs only in case the price stays below the barrier over life of the option. I am ...
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Tangency portfolio and CML - Why does it have the highest sharpe ratio?

In the book that I am studying, the tangent portfolio was defined as the regular efficient portfolio in the case with $n$ risky assets and 1 riskfree asset with the extra requirement that the ...
50 views

Why are Yahoo Finance API values different from the web interface?

(SOLVED: Solution is below the second graph) The API results on GSPC: Same period in the interactive chart of ^GSPC: SOLVED ...
29 views

ATM volatility and flat volatility

Why do the implied volatility curve and the flat curve cross over the ATM volatility (at 100%) ? Tx
71 views

Quanto/Compo adjustments - Product of two geometric brownian motion

Let's say I have two processes $X_t =X_0 \exp((a-\frac{1}{2}\sigma_X^2)t +\sigma_X dW_t^1)$ and $Y_t=Y_0 \exp((b-\frac{1}{2}\sigma_Y^2)t +\sigma_Y dW_t^2)$ and I then multiply them together (like ...
42 views

Implied Volatility as proxy for instantaneous volatility

In many papers and book I have found a reasoning that it is well summarized in this paper as "The first proxy we use is an unadjusted Black-Scholes proxy in which the implied volatility of a ...
53 views

Integration in the Hull-White SDE

I'm stuck in solving the SDE in Hull-White interest rate model. I do not have a thorough background in math (only Real Analysis during my blissful undergrad years), so I am having trouble ...
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Greeks across different underlying

To monitor risk of a client portfolio, does it make sense to accumulate Greeks across different underlying? If yes, how can Greeks be normalized across different underlying?
103 views

Pricing of Black-Scholes with dividend

Consider the payoff $g(S_T)$ shown in the figure below. Consider Black-Scholes model for the price of a risky asset with $T = 1$, $r = .04$, and $\sigma = .02$ and dividends are paid quarterly with ...
104 views

Relations between Call and Put

I am trying to solve a question in finance but I am pretty much stuck and would need your help :) Suppose you know the following information about a market: Future is at 66 70 strike straddle is ...
33 views

EUR issuance using forwards to hedge FX risk

Trying to think about the right way to hedge a EUR denominated issuance from FX risk only. Say I have an annual pay 20-year EUR bond and I want to hedge the FX risk but take the interest rate risk. I ...
75 views

Discount factor

Suppose we have : $r$ - zero coupon rate, constant over time, $n$ - a number of years (an integer), $\theta$ - a fraction of a year $(\theta < 1)$ , calculated with the relevant day count ...
87 views

Monte Carlo Option Pricing: Averaging Price Per Path

In Glasserman's book, he computes the price of an option by first computing the average price over each simulated price path. Once all the paths have been simulated, the average of all the payoffs is ...
37 views

Swap curve and short maturities

Consider USD Libor 3M swap curve. There are different maturities: 2d, 1m, 3m, 6m, 9m, 1y, 18m etc. The values for 3m, 6m, 9m etc. time buckets are just swap rates for swaps with floating leg equal ...
55 views

Put-on-call option confusion

So the question asks: Given a 3-steps Binomial Tree model with $S(0) = 50$, $U = 20%,D = 􀀀20%$, and $R = 5%$. A European call option has the strike price $X = 40$ and maturity time $T = 3$. Also, a ...
23 views

First and foremost thank you for reading my question, I hope all if you have a Happy Holiday this weekend. On to my question: I am completing an assignment on global sovereign bonds, I've been ...
130 views

Why is the term structure of the implied volatility surface non-monotonic?

Does this reflect expectations & uncertainty about interest rates (exposure to rho?), event driven concerns about the underlying, or something else?
Online I found the asymptotic behavior property of geometric Brownian Motion $X_t$as: If $\mu$ (drift parameter) is $\ge$ $\sigma^2/2$ where $\sigma$ is the volatility parameter, then \$X_t ...