# All Questions

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### Portfolio Strategies Project

My first assignment for my Quantitative Finance Masters is to design a portfolio that theoretically makes money under any market movement. I am also asked to state all necessary assumptions. What I'...
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### does there need to be risk-neutral agents in the market to enforce risk-neutral pricing?

I'm trying to understand a fundamental link between mathematical finance and economics. I understand that risk-neutral pricing is free of arbitrage with replicating portfolio. Does risk-neutral ...
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### predict next day's close price using hmm

I am reading this paper(Stock market forecasting using hidden Markov model: a new approach) and get confused about how they predict the next day's close price. Below is what the authors say about how ...
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### What is the logic behind this backtesting code in R

I am new to R and I have found this simple backtesting code and can you explain me what is happening here. ...
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### How to fit a SARIMA + GARCH in R?

I'd like to fit a non stationary time series using a SARIMA + GARCH model. I have not found any package that allow me to fit this model. I'm using rugarch: model=ugarchspec( variance.model = list(...
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### Euler discretization of Heston SDE in Mathematica

Below is an implementation of the numerical solution of the Heston SDE using Euler discretization. It takes under a second to run on Mathematica. The calibration parameters give a good fit to the ...
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### Variance Swap volatility

In an article, it is mentioned that a parameter is "the variance swap volatility at time t". I know what a variance swap is but I don't know what they could mean by "variance swap volatility". ...
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### What is the difference between these two Expected Shortfall definitions?

I have come across different ways expected shortfall is defined. e.g. $$ES_a(X)=\frac{1}{1-a}\int_a^1VaR_b(X)db$$ and $$ES_a(X)=\frac{1}{a}\int_0^aVaR_b(X)db$$ e.g. on Wikipedia's article. Are these ...
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### Can you explain me these comments on high frequency data?

I was reading some slides on high frequency data and i came across these statements: data discreetness induces high degree of kurtosis and Non synchronous trading and risk premium are ...
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Suppose I have an amount $T$ to invest and $N$ available assets. The stochastic return per invested unit of asset $i$ is $R_i$. The variance and the expectation of $R_i$ are $\sigma^2_i$ and $\... 1answer 55 views ### portfolio optimization with uncertain returns What is the usual method of dealing with many uncertain mean returns in portfolio optimization? For example say you have a 3 asset portfolio with assets A, B and C. All the correlations and variances ... 1answer 51 views ### Does a call calendar lose its entire value if underlying increases well past the strike? If I buy a call calendar spread, and the underlying increases, both options are in the money by the expiry of the short call. So both options increase in value, but the short one increases less ... 1answer 35 views ### What is the strike of a short put that mimics a covered call If I am long a stock$X$which I purchased at$\$100$ and sold a covered call in the front month with strike $\$105$for$\$2$ then is it true that the covered call is equivalent to a naked put at ...
Is the t in the red boxed $R(t,T)$ supposed to be the same as the S in the green boxed $R(S,T)$?