# All Questions

17 views

### jump-resetted diffusion process

I'm working on a model in which there are two processes, $H$ and $L$, and the final variable to model starts as $H$ and then whenever a jump occurs, an instance of the $L$ processes starts and ...
51 views

### how to do interpolation in the term structure of volatility surface?

everyone~ I am a newbee in the quantitative finance and I meet a problem in working out an equity option volatility surface. We use the reasonable market data to derive the implied volatility, then ...
67 views

### Interview questions pictures [closed]

I got this questions which is quite interesting, I am in a museum, there are 100 rooms (numbered from 1 to 100) in this museum and each room has a picture in it. I go visit each room in the ...
27 views

### Is the European call option delta an increasing function of the spot?

In the Black-Scholes' setting, the delta hedge ratio of a European call option is given by $N(d_1)$, which is an increasing function of the underlying equity spot $S_0$. Does this property hold ...
39 views

### Portfolio Optimization with equal weight for assets selected

I have a data frame of bets, with 1 being a win and 0 being a loss. These bets are correlated so I cannot just pick the highest winning percentage. Goal is to get 2 optimizations, 1 for max sharpe ...
44 views

### copulas and time series

Can anbody explain how Copulas are used to describe the dependency between, for example, the return on two different stocks? I understand how Copulas are the "glue" that binds the two marginals ...
83 views

### Normalizing SPY ETF time series data with its sector ETFs?

I am looking to compare the returns of a sector rotation strategy between the various SPDR sector ETFs XLY, XLP, XLE, XLF, XLV, XLI, XLB, XLK, XLU vs. ...
41 views

### simple game - fair value

Suppose a person A has the following game: there are 2 red balls, 2 green balls and 1 white ball in a bag you take 1 ball (don't put it again in the bag) and then a second ball if you take the white ...
27 views

### Delta hedging Question [closed]

What is the delta of a short position in 1,000 European call options on silver futures? The options mature in eight months, and the futures contract underlying the option matures in nine months. The ...
48 views

### Fourier transform covariance estimator

I am estimating realized variance and covariance by the estimator described in this paper, and relying on Fourier Transform. Now, as my data is one day of data in ultra high frequency, so that the ...
69 views

I'm currently working on the requirements phase of a software project, and need get an overview of the industry regarding the tools available for Algo Trading. My first idea was to look for Gartner's ...
67 views

### Match different option high frequency databases

I downloaded the “E-mini S&P 500 (Dollar) Options for 1/10/11” Top-of-Book (BBO) data. If you are interested you may download the data from the following link (approx. 80MB zipped and 1GB ...
36 views

### Fair Price CDS Spread for a Bank

I have been using CreditGrades to calculate fair one year CDS spreads for firms. However, the authors of the model explicitly say that the model does not hold for banks or financial firms. If I need ...
27 views

### Significance testing of average returns from Sharpe ratio

I'm aware that one way to do significance testing on a strategy is based on the sampling distribution of its Sharpe (see, e.g., Lo, 2002 and Opdyke, 2008). However, it appears to me that there's ...
21 views

### Testing out ADX calculator [closed]

I'm trying to program an ADX calculator in python, however I don't know if it is correct since I'm still a bit shaky on the financial side of things. I haven't found an ADX calculator online ...
86 views

### Option greeks vs Position greeks

I know that when it comes to delta, you would calculate your position delta (of a stock position) as follows: option delta * position size * 100 For example if I ...
60 views

### Comparing Implied Vol. to Historical Vol. using intraday data

I'm interested in estimating what my profit/loss would be for continuously gamma scalping a delta hedged option over the course of one day, using historical intra-day price data. I found an equation ...
62 views

### Adding Asset Weights To Cholesky Output - Monte Carlo in VBA

I am looking to create a Monte Carlo generator in Excel to plot correlated asset paths for a portfolio containing 1 to 10 assets. I have the correlation matrix for all 10 assets and have performed the ...
66 views

### Back to Basics — Cumulative Returns

I recently came across a chart of Fama-French's (FF) HML factor cumulative performance. I first saw this in an article by AQR's Cliff Asness: ...
105 views

### Formula behind pandas.Options() implied volatility

I noted that implied volatility (IV field) from pandas.Options class is very different (especially, for out of money options) than what I compute with Black-Scholes model. (risk free rate is pulled ...
56 views

### Triangular Arbitrage with CFD

I cannot understand how the triangular arbitrage fits with CFD. Assuming there is an arbitrage opportunity: EUR/USD < USD/GBP * GBP/EUR If I do this strategy: 1 Long on EUR/USD at Ask price 1 ...
38 views

### Motivation for hedging volatility using VIX ETNs

i wondered what the motivation for professional investors could be to engage in VIX ETNs. Would they even think about trading this kind of product? (they normally should have access to VIX options, ...
14 views

### Scalar and vectorial sensitivities

In a recent discussion about the implementation of the calculation of derivative sensitivities, the notion 'scalar' and 'vectorial sensitivities' were used. I am not familiar with this notion and ...
60 views

### Delta of an option derived from the binomial model

I have the following function $V=V(S,t)$, $V^- = V(vS,t+\delta t)$, $V^+ = V(uS, t +\delta t)$. The book proceeds to explain that if we use Taylor series expansion on the above we will confirm that ...
48 views

### “Spot rate is not observable” meaning

In Bruno Remillard's text, "Statistical Methods for Financial Engineering," he states the following on p 148 after giving the general form of a bond price $P(t,T)$ under Vasicek's model: Note that ...
84 views

### Determining the investment strategy

I have the following problem: Consider the 5 year investment strategy and given the yearly portfolio returns $S_{t+1}/S_t$ and dividends $D_{t+1}$ paid at $t+1$ which are modeled as: ...
23 views

### Construction of bond portfolio represented by a CDS-Index

Markit publishes investable basket CDS indices. These are indices intended to track the credit risk of a basket of issuers (e.g. in the case of iTraxx Europe Series 24 these are 125 names) in an ...
55 views

### Turnbull & Wakeman Asian - not Edgeworth?

My understanding is that Turnbull & Wakeman derived an approximation formula for continous arithmetic Asian option using Edgeworth series by matching the first two moments. However, in the book ...
26 views

### Order ID or Broker information from TAQ or Limit Order book?

Is it possible to see if a big order was executed in smaller chunks, and at what prices and times?
87 views

### Application of time series analysis to Bitcoin prices

Various exchanges allow for the trading of Bitcoins. The price of Bitcoin was very volatile since the inception of the system, today it is 391.76 USD: I wonder whether time series analysis tools ...
38 views

### White’s Reality Check p-value calculation?

I'm testing whether technical trading rules can deliver superior returns in contrast to a benchmark, the risk free rate. As performance measurement, denoted by $\varphi$, I use the annualized Sharpe ...
50 views

### state space for affine yield curve

i would like to reproduce in R the working paper " Affine free arbitrage class of Nelson Siegel term structure". The authors considering the equation of nelson siegel plus an adjustment term(C(t,T)) ...
15 views

### Methods Available for Derivative Pricing in Mathematica? [closed]

I am using Mathematica to price options (built in functions, no need to reinvent the wheel, right?). In the documentation, the Binomial method is used as an example of specifying a non-standard ...
28 views

### How to derive what effect funding shocks have on conditional market betas? [closed]

I am unable to derive the correct result eq2 all my answers seem circular, any help would be much appreciated. It should basically end up saying that shocks that affect all securities compress betas ...
86 views

### BEKK - GARCH model in Stata

Is it possible to run BEKK-GARCH in Stata? mgarch is of a different model type and google provide me with no good hints.
30 views

### What is the expected rate of return from paying 1 today for a 50/50 bet receiving either 2 in year 1 or 0.5 in year 2? [closed]

What do you think is the correct way to calculate expected return for this example? I think Method4 below is correct. Method1 35.4% = AVERAGE(1.0, 0.5^(1/2)-1) Incorrect, but some will argue that ...
24 views

### Volatility Skew for Put and Call options [closed]

Given that the implied volatility follows volatility skew, which one has higher implied volatility? At-the-money put 40 (spot = strike = 40) or at-the-money call 160 (spot = strike = 160)? I am not ...
47 views

### affine arbitrage free class of nelson siegel yield curve

I'm studying statistics for finance at university. Last week i read the working paper on "The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models". I would like to reproduce in R ...
23 views

### Soft: Interpretation Fractional BM in finance

Suppose we are in the BS framework. If we replace the Brownian Motion with a more general fractional Brownian motion therein, how can it be interpreted? That is what is a financial interpretation of ...
101 views

### How to add buy/sell market on a long/short Bollinger Bands graph in python?

I am using python, pandas, matplotlib to do the following: I have plotted some stock data ...
37 views

### Are commodities a real assets or a physical assets? [closed]

In CFA Level Reading 45 Commodities include precious metals, energy products, industrial metals, and agricultural products. Real assets are tangible properties such as real estate, airplanes, ...
69 views

### SABR Implied Volatility and Option Prices

I am trying to understand SABR model. I am having difficulty to understand how to calibrate ABR a) the initial variance b) the volatility of variance c) the exponent for the forward rate d)the ...
27 views

### Commercial Vendors for Risk Management and Portfolio Optimization and Performance Attribution

So this question is directly about companies such as Axioma, Barra, Northfield, and etc. that provide risk management, portfolio optimization, and performance attribution related services. I want to ...
37 views

### Returning historical yield rates for Mortgage Backed Securities in a Bloomberg Terminal?

Forgive me if this isn't the right place, and direct me to the correct place to post. I've been trying to figure out how to get the yield rates for Mortgage Backed Securities (MBS's) in the United ...
47 views

### How to build a bond model portfolio (Invested in Emerging markets) [closed]

I have to build a model portfolio from the data of a portfolio composed of bonds from Emerging Markets accounted in \$ (So exclusively corporate bonds from emerging markets). Do you have any ...
30 views

### Generalized method of moments concept in CAPM testing

In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ...
45 views

### How to calculate break-even point of merged plant/company?

The question goes like this : ...
20 views

### Market portfolio [closed]

If I create portfolio consisting of three stocks and build efficient frontier for this portfolio and if there is a risk free rate for treasury bills and then I draw tangent line from risk free rate on ...