# All Questions

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### What are some quantitative approaches to value investment?

As a developer and statistician, I consider value investing to be a statistically sound investment strategy. I've read a few books on the area but I am still not clear on valuation measures. So I ...
490 views

### What are some simple algorithms for hedging vanilla bonds?

My team will soon be implementing an auto hedger for our bond trading desk which will be integrated tightly with our risk application and I am interested in researching how this may work. Any advice ...
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### Are there any brokerages which use URL-based web APIs?

We already have a list of brokerages that provide apis. What about brokerages that provide web apis? For example, Collective2 has a url-based web api for entering trades. Are there any brokerages ...
1k views

### Portfolio optimization with monte carlo sampling from predictive distribution

Let's say we have a predictive distribution of expected returns for N assets. The distribution is not normal. We can interpret the dispersion in the distribution as reflection of our uncertainty (or ...
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### How does one analyze diversification if stock prices follow a Cauchy distribution?

How does diversification actually lead to less variance in a portfolio? I'm looking for a formal reason why this is the case. There are a number of explanations I have been able to find, but they make ...
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### Why are exotic options most popular in FX?

I was reading Derman's latest blog post on Vanna Volga pricing, which, according to the linked Wikipedia article, is used mostly for pricing exotic options on foreign exchange (FX). This Willmott ...
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### Historical Hedge Fund Index Data

Can anyone point me to some Hedge Fund index data - daily levels of the HFRX or something similar, that is available for free and has history back to 2007? The data available through my broker seems ...
4k views

### How do I graphically represent the evolution of a covariance matrix over time?

I am working with a set of covariance matrices evaluated at various points in time over some history. Each covariance matrix is $N\times N$ for $N$ financial time-series over $T$ periods. I would ...
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### How do I calculate the skewness of a portfolio of assets?

I need to calculate the skewness of a portfolio consisting of 6 assets. I know that for that I would need the co-skewness matrix between the assets. Does anybody know the formula for co-skewness or ...
361 views

### Will price levels fall even though money supply increases?

Given this equation, according to the article at this location , which provides the following equation as an argument, the author claims that he predicts "deflation" in the last paragraph of the ...
612 views

### Alternative to Block Bootstrap for Multivariate Time Series

I currently use the following process for bootstrapping a multivariate time series in R: Determine block sizes - run the function b.star in the np package which produces a block size for each series ...
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### How to quantify the impact of management cost on return?

Suppose funds X and Y are the same but X has 0.25% higher management cost. Suppose we are analyzing a 2 year interval. The simple models with discrete/continuous interval -assumptions are not really ...
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### How do I backtest a convertible bond arbitrage strategy in R/Matlab?

Since no one was able to answer my previous question, I am going to try to backtest a modern convertible bond arbitrage strategy myself (perhaps I'll report the results back here, if you're lucky :)). ...
519 views

### What methods do I need to learn in order forecast asset price movements?

What are the standard models used to forecast asset price movements? For example, if I were to trade an option, what model would I use in conjunction with option pricing models to forecast the stock ...
734 views

### Use Trades as Input for PerformanceAnalytics

I'd like to use the PerformanceAnalytics R package to view various metrics from a list of trades with profit values. From looking at the documentation from the PerformanceAnalytics package that most ...
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### How can I learn about the quantitative aspects of market making in illiquid single stock options?

I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
579 views

### What research is available on the performance of convertible bond arbitrage models?

The basic principles of convertible bond arbitrage have been clear at least since Thorp and Kassouf (1967). For those who are not familiar, the arbitrage entails purchasing a convertible bond and ...
2k views

### robust portfolio optimization re-balancing with transaction costs

The optimal re-balancing strategy takes account of factors including i) objective function, ii) current portfolio weights, iii) expected return vector containing updated views/alpha forecasts, iv) ...
5k views

### Which approach dominates? Mathematical modeling or data mining?

According to my current understanding, there is a clear difference between data mining and mathematical modeling. Data mining methods treat systems (e.g., financial markets) as a "black box". The ...
9k views

### Why would an investor trade a variance swap over a volatility swap?

Why would an investor trade a variance swap over a volatility swap? Is it simply related to the leverage involved in a Var (i.e. sigma-squared) or is there something else to it?
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### How should I calculate the implied volatility of an American option in a real-time production environment?

There are many models available for calculating the implied volatility of an American option. The most popular method, employed by OptionMetrics and others, is probably the Cox-Ross-Rubinstein model. ...
2k views

### What is the ideal ratio of in-sample length to out-of-sample length?

Suppose you are running a portfolio of quantitative strategies and that you develop a new potential strategy to be added to the mix. Assume for simplicity that the new strategy is independent of the ...
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### What are the advantages of switching platforms/languages between strategy development and implementation?

I am interested in coding a medium frequency (trading over minutes to hours, holding for days to weeks) quantitative trading strategy and trading it with Interactive Brokers. I have seen many people ...
433 views

### How to model the risk of a CFD

I'm struggling to understand why the risk on an equity CFD is not the same as for the corresponding equity. The RiskMetrics FAQ mentions two ways to model a CFD, but it does not explain why this is ...
613 views

### How to calculate equivalent futures position?

Let's say I have the following two positions: Buy ATM SPX call, expires in 1 month Sell ATM SPX put, expires in 1 month This creates a synthetic futures position. How do I calculate how many ...
2k views

### How we can forecast stock prices using chaos theory?

I saw an article in which the writer had mentioned that he used chaos theory to predict stock prices and ended up with a profit over 30%. Chaos theory is basically about finding patterns called ...
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### Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?

Arbitrage pricing theory states that expected returns for a security are linear combination of exposures to risk factors and the returns on these risk factors. Betas, or the exposures of the security ...
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### Reference material about Quantified Asset Allocation?

I am looking for papers that would describe asset allocation with geometry, group theory, markov chains or things like that. Keeping asset allocation in a range is easy but to keep it more precisely ...
1k views

### Please Explain the Debt to China [closed]

Can someone please explain to me how we are in debt with China? Every weblog, article, journal I read have people in the comments going insane about how we "owe China monies" and "China owns the US" ...
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### Annualzing the log of daily returns riddle

Two popular ways to measure returns are Arithmetic returns and Log returns. Let's define arithmetic (simple period) returns as: P(t) - P(t-1) / P(t-1). Let's define log return as Ln( P(t)/P(t-1) ) or ...
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### Easiest and most accessible derivation of Black-Scholes formula

I am preparing a QuantFinance lecture and I am looking for the easiest and most accessible derivation of the Black-Scholes formula (NB: the actual formula, not the differential equation). My favorite ...
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### Market Value of a CDS

I need to model the market value of CDS in a portfolio. My current approach is to calculate the present value of the future spread payments - does anybody have a better idea to solve the problem? ...
716 views

### What are the risk factors in analysing strategies?

What do you think of strategies displayed on timelyportfolio.blogspot.com? I really like the fact that there is some code to reproduce the strategies, but they seem very elementary because he does ...
1k views

### Which data service to buy for redistributable data?

This is a follow-up to my previous question regarding anyone whom wanted to 'donate' data. So far no one has stepped up (learning more about buying and selling data, I realize that I'm going to have ...
156 views

### Where can I find the standard discount curves for the standard CDS model?

Where can I find the standard discount curves for the standard CDS model? In particular I'm keen to see if ZAR is a supported currency yet...
524 views

### QuantLib and exact numerical simulation

I've just downloaded quantlib and started playing around with it, and it looks like it's designed primarily to use Euler discretizations for everything -- so far as I can tell, there's not even a ...
273 views

### Is there a standard / methodology to determine and grade the quality of OHLC data?

Inputs are most important to any decision making. For strategy backtesting, the OHLC data is one of the most inputs. So to ensure the correctness and integrity of OHLC data, we have checks on the ...
15k views

### How to calculate expected return based on historical data for Mean Variance Analysis

I've recently started reading some books on asset allocation and portfolio theory but I don't work in the field and don't have much knowledge yet. So I've been reading up on mean-variance analysis ...
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### How to represent constraints for optimization problems in a data model?

I am at the moment writing a program focusing on asset allocation and I am thinking about how I should represent my constraints in the data model. The first approach that came to mind was to define ...
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### FX option history

I am testing my model and I am interested in options prices on EUR|USD for Jan, 2011. The history can be even daily - but I have never had a deal with fx options, so I don't know where start to look ...
10k views

### Usage of NoSQL storage in Finance

I am wondering if anyone has used NoSQL (mongodb, cassandra, etc.) to store and analyze data. I tried searching the web but was not able to see if the financial firms had gotten in to using nosql ...
4k views

I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
286 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?