# All Questions

77 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 ...
76 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 ...
796 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 ? ...
94 views

### Derivation of a ML estimator

I have the following likelihood function: I'm given this information about the $\Omega$ matrix ($\boldsymbol{1}$ is a $T \times 1$ vector of ones): I would like to be able to show that the ...
35 views

### Having trouble finding PPI for commodity using NAICS code

Is there a way to find the Producer price index for a commodity during two different years by using the NAICS code of the commodity. For example, I know the NAICS code for cast iron steel bearings ...
51 views

### Incorporating a stochastic correlation structure into a multi-factor model

I am considering extending a multi-factor fixed income stochastic model (e.g. LIBOR-Market) to use stochastic correlation matrices instead of determinstic ones. For pricing instruments with short ...
147 views

Consider a credit rating system consisting of three credit states, A, B and D (default) with the following annual credit transition probability: T = [0.7 0.2 0.1;0.2 0.5 0.3; 0 0 1]. For a company ...
190 views

### Mock/practice trading for options (delta/gamma hedging etc.)

I know there are some sites for practicing equity investing. But could you provide me with suggestions concerning options trading etc. I read Natenbergs book on Options and want to test things like ...
37 views

### evaluating portfolio performance without knowing the amount held on cash accounts

I would like to evaluate the performance of a portfolio mananger. I know his trades, and the initial portfolio holdings. I do not know, however the amount held on his cash account. That is, I ...
42 views

### How do I determine what is a separate objective in a multi-objective portfolio optimization?

Is there a general rule to determining when to separate objectives when developing a multi-objective portfolio optimization? For example, one might start with a standard portfolio optimization of ...
40 views

### Econometrics - Granger Causality

Suppose we have two time series, if one has autocorrelations and the other is non stationary how do we test whether they Granger cause a returns series?
102 views

### What is the algorithm for the Fama-Bliss instrument selection?

Fama-Bliss discount bonds are defined through a straight forward calculation (Famma, Bliss 1987). For the purposes of a project I need to derive forward rates, yields &c. for periods not included ...
138 views

### The Public Market Equivalent measure in private equity

What are the advantages and disadvantages of the Public Market Equivalent measure in private equity? Why is it that the volatility of the cash flows do not matter? This topic has been discussed in a ...
169 views

### regarding Basel III IRB method for credit risk

Would the exposures between standard method and internal rating based method for credit risk under Basel III remain same?I could not find any documents for IRB approach under Basel III. Is it still ...
66 views

### Fitting a sigmoid function to incomplete, structured, data

I have an incomplete data set that looks like this: and I believe that it will continue to form a sigmoid-like shape. How can fit a sigmoid curve to this data given my assumption about what the ...
72 views

### Sampling and/or asymptotic distribution of a function

Assume we have the following function: $$f(p) = \frac{1}{(1-p)d}\ln\left(\frac{1}{T}\sum_{t=1}^{T}\left[\frac{1+X_t}{1+Y_t} \right]^{1-p} \right)$$ where $d$ is a constant $T$ is a constant $X_t$ ...
150 views

### What's the link between EURIBOR3M futures volatility and rates volatility?

If I am not wrong, EURIBOR3M futures with maturity $T$, whose price is $F_{T}$, are quoted like contracts which express the underlying forward rates, $r_{T}$, as $$r_{T}=\frac{100-F_{T}}{100}$$ Now ...
51 views

### How do bond futures affect effective rate when used to hedge a bond's duration?

I'm trying to wrap my head around what happens to the net interest received when an invester goes short a bond future to fully hedge the duration of his long position in an actual bond. Does it ...
71 views

### What is the best way to describe latency?

What are good ways of describe observed tick data latency with a view to flagging when something is systematically wrong? For example, we would want to discount outlier ticks so that we do not alert ...
129 views

### Calculating index arbitrage

I have a days-worth of level 2 market data. I am calculating S&P500 index arbitrage. I have a few questions about the calculation: 1) Should I be summing all the bids and asks from the stocks ...
86 views

### Recalibrating SABR parameters for Swaption ATM volatility

I understand that the ATM volatility of Swaption moves quite frequently and the SABR will need to be recalibrated. Which parameter should I recalibrate? Is there any financial meanings why we only ...
62 views

### Clarifying the way in counting number of weeks for calculating historical weekly volatility in Bloomberg

I would like to confirm the way to counting number of weeks for calculating historical weekly volatility in Bloomberg. Given an option with issue date from 14/1/2014 to 13/1/2019, is the proper way to ...
76 views

### Approximating the PDE price of an option with a binomial model

I'm trying to replicate, with a binomial model, the price of an option obtained with a PDE. It doesn't really work, so I was wondering, if there are some caveats when doing that. The PDE model use a ...
266 views

### MonteCarlo simulation of stock prices using milstein scheme with dividend yield?

While performing a montecarlo simulation of stock prices using the milstein scheme is it possible to take into account the dividend yield into the simulation itself somehow, if we are given a ...
39 views

### Weak convergence of Lookback payoff with correction term

In this article on the Multilevel Monte Carlo method on page 8, http://people.maths.ox.ac.uk/gilesm/files/mcqmc06.pdf, Giles uses a correction term to improve the weak convergence rate of the lookback ...
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Recently I created a simulation of a GBM. The time between the prices were sampled from an exponential distribution. The log rate of return was sampled from $\sigma \sqrt { { t }_{ i }-{ t }_{ i-1 } } ... 0answers 113 views ### Calculate display and plot relative spread using Sierra Chart I'm trying Sierra Chart for trading Bitcoin. I would like to display relative spread for a given volume. spread_rel = 200.0 * (ask - bid) / (bid + ask) where ... 0answers 95 views ### How To Regress Returns Vs Price as Pct of 52 week high? I would like to do a linear regression of daily stock price returns, vs the price as a percentage of the 52 week high. i.e. [next week return] = A * [Price / 52 Week High ] + B where A and B are ... 0answers 228 views ### Fixed Income Var calculation I'm trying to calculate var for a portfolio of fixed income securities. I initially want to just calculate undiversified VaR for each instrument. I'm doing the following for each instrument Take ... 0answers 203 views ### Yahoo Finance API Have been looking for ways to down load stock price data using Yahoo Finance on Chinese Stocks. Symbol that ends with .SS = stock listed in Shanghai, .zz = stock listed in Shenzhen This link ... 0answers 122 views ### What is the right group of durations? It seems that the group of durations commonly used in quantitative analyse is$\mathbf{R}$but it seems to me that$\mathbf{R_+^*}$could also be an interesting choice. While I am not aware of ... 0answers 53 views ### Binary options and European option is similar? European options and binary (digital) options is similar? How apply the Black & Scholes formula on binary option? 0answers 207 views ### For pricing, what types of Exotic Options are suitable using Local Volatility Model / Stochastic Volatility Model? I understand that Stochastic Vol Models should be used when Exotic Option payoff is Volatility dependent (such as Variance Swaps and Volatility Swaps). Stochastic Vol Models should also be used when ... 0answers 261 views ### pairs trading or long short strategy given volatility of the stocks Suppose I have 2 stocks and the only thing I know about them is their volatility and that they cointegrate. Let's say vol of stock A is 25% and B is 20%. Will I be able to find a hedge ratio only ... 0answers 230 views ### Comparing Backtests of Value-at-Risk and Expected Shortfall My goal is to test if ES (CVaR) empirically is a better risk measure than VaR for a set of given variables (assumed underlying distribution, confidence level, sample size) for different asset classes. ... 0answers 364 views ### European Swaptions: does implied volatility of swap rates decreases both with start and tenor? Does implied volatility of swap rates decreases both with start and tenor? Given a Swaption price and a discount curve I calculate the swap_rate from the curve, then I define implied volatility as ... 0answers 52 views ### Valuation of Mortgage Backed floating notes Does anybody have experience in valuation of mortgage backed floating notes? I have task to value the 4 different MBS floating notes. I know that it should be done through montecarlo, refinancing ... 0answers 227 views ### Quadratic utility function May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function$U$. This simply means that ... 0answers 243 views ### Obtaining the default probability and recovery rate for each credit rating? I have the following questions for obtaining the credit rating: Given that I have cumulative default probability of each credit rating from Global Corporate Average Cumulative Default Rates ... 0answers 510 views ### Question about Merton model to estimate default probability and recovery rate of the company I recently come across Merton's model to estimate the default probability and recovery rate of the company. Here is the inputs ... 0answers 164 views ### Forecasting Equity returns using state-space models I have data for 3 yrs of 5 min prices of various equities. I can construct a linear regression model and try to see the in-sample model performance. But I was wondering whether fitting a state-space ... 0answers 82 views ### Adjusted option prices? I am trying to calculate IV of options for a ticker over the last 10 years. Problem is that some option prices don't make sense (for example, closing price \$31.94, but 30-day call option with 18 days ...
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Consider a non-liquid option market with a wide bid-ask spreads across all strikes. Spot: \$52 A snapshot of the \$50 strike shows: ...
155 views

### Market Standard Pricing Models for Fixed Income Securities (Vanilla)

To clarify my heading, I have been searching for a material that consolidates all standard Fixed Income Security Pricing. E.g. ...
66 views

### How to choose a window for curve fitting and prediction?

I am using Pareto distribution to fit a serie of survival rates (with least square). My ultimate goal is to use this fitting curve for prediction. Thus I would mainly focus on the tail of the ...
88 views

### How to show that the risk contribution function is or is not injective?

Assume a portoflio $w \in \mathbb{R}^n$, you can get the total risk contribution $\psi_i$ of asset $i$ by doing: \psi_i = w_i \frac{\partial \sigma(w)}{\partial w_i}= \frac{1}{\sigma(w)} \left[ ...
424 views

### Long/Short portfolio return

Suppose I have a Po with one long, one short positions and some cash (to balance the short + 50% margin) as shown below: ...
119 views

### Do you use software for finite element valuation or do you roll your own?

Engineers put a lot of time and effort in developping high quality finite element (FE) software (deal.II, Dune, Elmer,...). So I was wondering if some of those tools would be suitable for quantitative ...