1
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0answers
88 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 ...
1
vote
0answers
39 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 ...
1
vote
0answers
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)) ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
1answer
88 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.
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
105 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 ...
1
vote
0answers
38 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, ...
1
vote
1answer
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 ...
1
vote
0answers
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 ...
1
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0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
47 views

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

The question goes like this : ...
1
vote
0answers
21 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 ...
1
vote
1answer
63 views

Obtaining the drift of a Wiener process formed from a random walk

I'm trying to understand how the equation for Geometric Brownian Motion is formed from a random walk. I'm following the book 'Statistics of Financial Markets' but I'm struggling to follow how the ...
1
vote
0answers
18 views

Why is the forward price set to make the value of the forward contract to 0 when it is signed? [closed]

When I study the forward contract, I read that the forward price must be the price that makes the the value of the contract zero. I searched for the answer, but there are many versions. Some say it ...
1
vote
0answers
50 views

Monte Carlo simulation of Multifractional Brownian Motion in MATLAB

Code under is taken from http://en.literateprograms.org/Monte_Carlo_simulation_(Matlab) ...
1
vote
0answers
60 views

Risk-Free Rate In CAPM

Let's start out with the CAPM equation itself: $E(R_i) = R_{f1} + \beta_{i}(E(R_m) - R_{f2})$ Are there cases where one should choose a different $R_{f1}$ and $R_{f2}$ (Risk Free Rates Of Interest) ...
1
vote
0answers
34 views

Advice for college freshman? [closed]

This is my first time posting on a Quant forum (or StackExchange in general), so bear with me. It might be the wrong place to post. I am a rising senior and I plan on majoring in finance and computer ...
1
vote
0answers
44 views

How to handle missing data in time series in R?

I have 5 years stock closing price of a company with some missing values in between (I having 1443 data points). When I create timeseries object in R with frequency 365 it creates 1834 data points, R ...
1
vote
0answers
26 views

negative transition probability in trinomial trees

I was pricing a option with big dividend in the underlying. However, I got negative transition probability in a trinomial tree. Will it cause arbitrage? Does anyone have reference paper or book ...
1
vote
0answers
32 views

Impact / slippage model for open and closing crossing auctions?

The general impact model for trading a VWAP order throughout the day has the form of: $\alpha \cdot \sigma_n \cdot \text{(participation rate)}^\beta$ I'm looking for an impact / slippage model of ...
1
vote
0answers
64 views

State of Art - Nelson Siegel Modeling

My idea is to work with dynamic Nelson Siegel models(DNS) on my master's thesis. As I am finishing undergraduation this year I started researching on the subject. I wonder what is being discussed in ...
1
vote
1answer
56 views

Monte Carlo VaR assuming logistic distribution

I have a Monte Carlo model which measures the Value at Risk (VaR) for given portfolio. I use the geometric brownian motion to model the prices. But let's say I assumed the returns of prices follow the ...
1
vote
1answer
99 views

Computing loss of Call / Stock Purchase

A seller of an European Call, can, subjectively have unbounded losses. This loss may be mitigated by buying the stock (covered call). In this case,, the loss will be bounded at A. How would one ...
1
vote
0answers
66 views

Calculating PnL from log prices

I'm backtesting a statistical arbitrage strategy. To calculate the PnL I simply use $Y(t)-Y(t+n)$ for the profit on the first leg and $\beta*X(t) - \beta*X(t+n)$ for the profit on the second leg, ...
1
vote
0answers
40 views

What time do bond traders come into office in morning in New York? [closed]

When I worked on bond desk in we need to be there 8am est. Is this typical ? Seems late to me as some markets open 8am like the Canada bond futures. Treasuries futures open 820am. I work at hedge ...
1
vote
0answers
33 views

Fed Funds Rate - why has it just started decreasing on the final day of each month (vs quarter)

I understand why the Fed Funds rate has historically dropped on the final day of each quarter, but in 2015 it appears that the effective Fed Funds rate now drops on the final day of each month as ...
1
vote
0answers
44 views

How do I use common forecasting models to forecast FUTURE values? [closed]

I would like to forecast likely future demand based on historical demand. The problem is: I have no mathematical background and in relevant tutorials and even in literature formulas are used, that ...
1
vote
0answers
26 views

Can anyone suggest book about fixed-income portfolio management? [closed]

Can anyone suggest books about fixed-income portfolio management? Thx
1
vote
0answers
14 views

Just how transparent are CDOs?

Not sure if this belongs here on on money SE. Just how transparent are CDOs? Would the ultimate investor have insight into the underlying collaterals or just an overall tranche rating? Has ...
1
vote
0answers
39 views

Is there anyone tried to use simultaneous stochastic differential equations?

I am looking for some examples or attempts of using simultaneous stochastic differential equations for financial analysis but there has been none so far. Is it just so nasty to apply such thing in ...
1
vote
0answers
63 views

Assets cointegration: optimal inventory for futures market

I'm interested in HFT cointegration stratagies, and recently found interesting article "Algorithmic Trading of Co-Integrated Assets" The article describes mean-reversion strategy for N-assets. ...
1
vote
0answers
47 views

Transforming Variables in time series regression

I have multiple quarterly time series data and trying to build a linear regression model using this dataset. Should the transformations on the LHS and RHS be the same i.e QoQ percent changes? Could ...
1
vote
0answers
18 views

Sample data of quarterly (annualized) real GDP growth

I am looking for a database that provides me the quarterly (annualized) real GDP growth (quarter t and t-1) of US, Germany and England. For the US data i went here: ...
1
vote
0answers
65 views

How to hedge an ETF position with a basket of its underlying components

In practice, when one takes on a large equity ETF position, I would imagine it's not necessarily "optimal" to hedge using a basket of all the constituents even though that should be a perfect hedge. ...
1
vote
0answers
16 views

Joint tests of market efficiency - Is it possible to test market efficiency with either one?

Tests of market efficiency are the joint tests of (1)the market is efficient and (2) expected return model. Please help me (a) explain this and (b) is it possible to test market efficiency with ...
1
vote
0answers
44 views

Logic between options and risk free rate [closed]

What is the relationship between put option price and risk free rate? And between call options price and risk free rate? Explain the logic? No calculation.
1
vote
0answers
21 views

Financial Derivative, European Option [closed]

Market Prices for European put and call options on ABC stock are as below: Call = $4.5 Put = $6.8 Exercise Price, X =$70 Risk Free Annual Compounded rate r = 5% Time to expiration T = 139 days ...
1
vote
0answers
32 views

Using a hybrid approach to calculate operational risk capital

I've read that a hybrid approach combing scenario analysis and loss distribution analysis can be used to calculate operational risk capital under the advanced models approach. I've read a couple ways ...
1
vote
0answers
18 views

Pricing claims of parties in a fund

I'm working on the following problem and would appreciate some input because I'm stuck. Consider a fund that works as follows. The fund starts with $S_0$ worth of assets following a geometric ...
1
vote
0answers
32 views

Gil-Palaez Inversion Formula in Black Scholes world

I am trying to calculate numerically the price of a plain vanilla call through Fourier Transform, by applying the Gil-Pelaez formula. More precisely, we have that C(K)=S0*Π1-Kexp(-rT)Π2 where ...
1
vote
1answer
44 views

Cost of revenue vs SG&A [closed]

How do cost of revenue and SG&A compare (across industries)? For cost of revenue, one definition is "the cost of manufacturing and delivering a product or service". Assuming my product is beer, ...
1
vote
0answers
59 views

What are the best online platforms to hire a quant? [closed]

I have already written the base of a trading algorithm, however there are some optimisations that I would like to add that might be best programmed by more experienced quantitative programmers. This ...
1
vote
0answers
20 views

How to understand stock return comovement

In his book "Asset Pricing" chapter 20, Cochrane said For example, suppose that average returns were higher for stocks whose ticker symbols start later in the alphabet. (Maybe investors search ...

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