1
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1answer
35 views

Calculate total risk [closed]

I have a question regarding how the risk is calculated, if I have only the returns. I think the risk premium (rp) is just the average of the returns and the sharpe ratio is the risk premium divided ...
1
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1answer
60 views

How to convert bond options strikes to future prices

CME, 10 year Note Call Strike 1300 How to convert this strike to future price? (today's open at 131'100) For example we can take current prices EOD data for example chart on CMEgroup: ...
1
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1answer
66 views

the difference between forward price and future price

In Hull's book 'Options, Futures and Other derivatives', author said that when price of underlying asset S is strongly positively correlated with the interest rate, future price is slightly larger ...
1
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1answer
85 views

how to calculate RMSE, MAE, given ugarchforecast results?

Given S&P500 returns for the past 20 years I fitted an ARMA(1,1)-GARCH(1,1) model using the rugarch package, so using ugarchspec() and the ugarchfit(), with different innovations distributions, ...
1
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1answer
30 views

What is the difference between group and inequality constraints in Matlab?

Sorry if this seems stupid. I was wondering what the difference between a group and inequality constraint is in Matlab. As far as I can tell they are the same: From Matlab ...
1
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1answer
40 views

Effect of different maturity options in delta-gamma-hedging

I read about hedging with options and think i got it. However there is a case am not sure how to handle. Is there any exception in the delta-gamma-hedging-(calculaton-)technique? - say: solve an set ...
1
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1answer
62 views

Strategies to merge bid, offer and trade price time series into a single price time series?

I'm doing intraday analysis on low volume stocks. There are just a few trades every day, but a whole host of bids and offers. In order to reduce the sparsity of the time series data I'd like to ...
1
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1answer
24 views

instantaneous forward rates vs forward LIBOR rates

HJM describes the behavior of instantaneous forward rates while BGM describes the behavior of forward Libor rates. From concept perspective, I understand forward libor rate are like forward Libor rate ...
1
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2answers
73 views

Does a Poisson process converge to an Ito process in long term?

I have heard that a Poisson process "converges" to an Ito (diffusion) process in long term. However I do not see how the characteristic function of the form morphs into that of the latter. In what ...
1
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1answer
54 views

By swap valuation, is accrued interest calculated?

If I treat the 2 legs as bonds, and I want to calculate the present value somewhere between 2 payment date, should I calculate accrued interest?
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2answers
63 views

How to price jumps in payoffs

I specifically want to know how to model a jump condition while valuing a derivative.Example :- the jumps which are observed in digital product payoffs, or barriers and knockouts. Although a ...
1
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2answers
123 views

Which database to choose for storing and aggregating finance data?

I'm planing to store stock market data in realtime and aggregate ticks for draw volume based cluster graph. Something like this: Every tick (or second) data will be grouped by period (1,5,10 ...
1
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1answer
60 views

Faster way to backtest/Walkforward

I am currently using Ninja Trader to program and test my strategies and the forward testing in very time intensive. I am thinking of writing my own code in either c++ or c#. The question I have is ...
1
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1answer
49 views

method/technique for finding arbitrage

I was able to solve this problem and find the arbitrage but only after spending a long time on it and trying out different possibilites, is there a method or technique that can help me find the ...
1
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1answer
35 views

Is an FX forward with delayed settlement still a derivative?

As an example: Trade date: 1/1/16 Maturity date: 2/29/16 Settlement (exchange of currencies) 3/31/16 Is the instrument between 2/29 and 3/31 still deemed a forward? The forward rate is determined so ...
1
vote
1answer
128 views

Which studies should be replicated?

In psychology voting on which studies should be replicated is established on a website. For economics, including financial economics, the ReplicationWiki (that I founded) offers a voting option but it ...
1
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1answer
29 views

Are Variances generally stable for any given instrument?

My hesitation, as I look at getting into forecasting based on observed variances, is the nagging question - if variances are not constant per-instrument, is it any good to use the last month or year's ...
1
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1answer
55 views

Historical volatility from non-uniform samples

The way I compute historical volatility is that I take two parameters $dt$ and $T$, get a list of stock prices with the step of $dt$ over the window $T$ (so $T/dt+1$ samples in total), compute $T/dt$ ...
1
vote
2answers
32 views

Is using Fama and French factors data screening dependent?

Fama and French (1993) three factors are available in Kenneth French's data library. Some papers use them as they are provided there and others calculate them again. If Fama and French (1993) used ...
1
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1answer
84 views

Memory-efficient clustering algorithm for large time-series datasets

I have a simulation task at hand with ~1e6 time series to be clustered on the basis of statistical measures every few days in the simulation. Most clustering methods I'm aware of require an affinity ...
1
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1answer
26 views

binomial - parameters at which american option hits early exercise possibility

I am looking for a set of parameters (d,u,r,So,K, N=?) for pricing an american call using binomial where the call hits the early exercise possibility. Do you have any exemplary set?
1
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1answer
85 views

option time value in the pricing models

option price = intrinsic value + time value where intrinsic value (in other words payoff at N) is defined generally as difference between the underlying asset price and strike price (order depending ...
1
vote
1answer
57 views

Is there any package in R for conditional autoregressive range model (CARR)?

I am working on a project which requires volatility estimation using range based volatility. Is there any package in R which helps me in estimating the CARR model proposed by Chou (2005).
1
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1answer
71 views

Options and bond related to convexity

Relevant definition: Assumption 2.1 (No dominance). If the payoff $P$ of a financial instrument is nonnegative, then the price $p$ of the financial instrument is nonnegative. Notation: $T$ - the ...
1
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1answer
29 views

Calculate control variate for monte carlo simulation

For an exercise I need to calculate $\mathbb{E}[X]$ with a Monte Carlo simulation. I need to use control variate $Y$ with $\text{Var}(Y)=2$ and $\text{Cov}(X,Y)=1$. I am asked to give the optimale ...
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2answers
54 views

Martingale correction for Andersen scheme with Interest Rate

I have implemented martingale correction to my Andersen scheme for Heston model, as it is in the paper (page 19-22): ...
1
vote
1answer
100 views

Is Value-at-Risk translation invariant?

Let: $X=V_1-V_0R_0$ where $R_0$ is the interest rate. Then, is it so that this risk measure is Translation Invariant as: ...
1
vote
2answers
62 views

How can I find stocks that have had a X% price swing within Y days, sorted by recency of said swing? [closed]

Let's say that I want to find stocks that have moved +-20% within a 10 day period. ABC would match if at t, ...
1
vote
2answers
257 views

Barrier option : Monte carlo simulation

I am trying to price a Down-and-Out Call using Monte Carlo simulation. The problem is that I get the right price for the vanilla option (same price as the analytic formula of Black and Scholes) but I ...
1
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1answer
115 views

Geometric Brownian Motion: d(S) vs. d(ln(S))

I am quoting from "Tools for Computational Finance, 5th Edition" [Seydel]. I wonder whether the histogram of simulations of the first (yellow) SDE makes sense... especially given that Seydel ...
1
vote
1answer
245 views

How to answer this interview programming question about drawdowns?

I saw this question as an interview, and to be honest, I have no idea what it's even asking for: Write a function (in R or Python) that finds the stock drawdown which will trigger a rebalance, ...
1
vote
1answer
114 views

One-step ahead forecast of a AR(1) process (GARCH context)

I am using a Matlab toolbox for obtaining one-step ahead forecasts of the conditional mean from the ARMA(1,0)-GARCH(1,1) process and I have encountered a piece of code that contains, in my opinion, a ...
1
vote
1answer
39 views

nikkei 225 yen contract on the CME

This may be a silly question on futures trading, but I haven't found a clear answer on the CME website. For the Nikkei 225 Yen contract on the CME, which is denominated in Yen, the margin is also ...
1
vote
1answer
112 views

Estimating profit/loss of a Gold Futures option using Theta and Gamma

HELP! I am trying to find how much the underlying price of a gold futures option must move in order to breakeven on owning an option for a day. I was hoping someone versed in pricing options could ...
1
vote
2answers
91 views

How does stock buy back increase RoA of a company?

In one of the videos in Youtube which explained about stock buy backs, it was told that companies can achieve higher Return on Assets by doing stock buy backs. The explanation went like this :- When a ...
1
vote
1answer
68 views

Path Dependent Options - Which choice of model?

Can someone please help elaborate/clarify the below statements? I've heard about them from people but would like to know some more detail behind these statements.. - 1) SABR is not useful in pricing ...
1
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1answer
61 views

Double no touch option with four barriers

The double no touch (also known as a range binary) is an option with two American barriers. You define one barrier above the underlying asset and one below it. If during the option's lifetime the ...
1
vote
2answers
35 views

Why to 2 methods to calculate bond price with semi annual return give different answers?

I am confused as 2 methods give different answers. The difference lies in the "to the power" numbers for discounting. Example: 2 year semi annual bond (4 periods), $1m annual Coupon Payment, 5% Yield ...
1
vote
1answer
84 views

Drivers of equity returns: dividend yield, change in P/E and dividend (or earnings) growth

In an NBIM paper I read the following: "... one can break down the total equity return into the dividend yield (the starting valuation), the change in the P/E ratio (the change in valuation) ...
1
vote
1answer
67 views

Prove $E_{\mathbb Q}[X_t | \mathscr F_u] = X_u$ given $Y_t$ is a martingale

We are given a filtered probability space $(\Omega, \mathscr{F}, \{\mathscr{F}_t\}_{t \in [0,T]}, \mathbb{P})$, where $\{\mathscr{F}_t\}_{t \in [0,T]}$ is the filtration generated by standard $\mathbb ...
1
vote
1answer
40 views

Pricing of American Deriviatives

Reading the book by Andrea Pascucci "PDE and Martingale Method in Option Pricing" I am struggling with a very simple issue. Suppose we want to find the price of an American derivative $X$ in an ...
1
vote
1answer
96 views

Historical book value data for S&P 500

In Graham's Intelligent Investor, he calculates a metric Earning/book value. I would like to calculate the same ratio in modern times (1960-2015) but am having trouble finding this data. I have found ...
1
vote
1answer
46 views

How to change to risk neutral measure in a mean reversion process?

For example, in the Ornstein-Uhlenbeck process do I just replace the drift term with the risk free rate, like in the GBM case?
1
vote
1answer
153 views

Delta Hedging for 2 Factor Models

If the value of an option at Maturity is what is the off-setting position you take for X and Y, if you are i)Long Call of the option ii)Short Call of the option iii)Long Put of the option iv)Short ...
1
vote
1answer
38 views

Optimal Financing Mix: Cost of Capital Approach

According to Cost of Capital approach to optimal financing mix we can calculate Cost-of-Capital-minimizing $\frac{D}{E}$ ratio as follows: $\frac{D}{E}_{opt} = argmin_{\frac{D}{E}}WACC$, where ...
1
vote
1answer
40 views

Asymmetric Random Walk / Prove that $T:= \inf\{n: X_n = b\}$ is a $\{\mathscr F_n\}_{n \in \mathbb N}$-stopping time

Given random variables $Y_1, Y_2, ... \stackrel{iid}{\sim} P(Y_i = 1) = p = 1 - q = 1 - P(Y_i = -1)$ where $p > q$ in a filtered probability space $(\Omega, \mathscr F, \{\mathscr F_n\}_{n \in ...
1
vote
1answer
81 views

What is the yield when a floating-rate note is issued above/below par?

I am new in this area so all help is much appreciated! Let's say a 3-year floating rate note pays a coupon of LIBOR+100 bps, and is issued at a premium with price = 100.5. I understand that this ...
1
vote
1answer
29 views

no arbitrage condition for paylater option

a paylater option has the folowing payoff: $(S_{T}-K)_{+}-P1_{S_{T}>K}$. To determine the fee P that the option holder must pay, we must write the non arbitrage condition. Why is it this: ...
1
vote
1answer
103 views

Anomaly or feature from Quantmod in R regarding getFX - currency data

I am using R to analyse stock data, using the quantmod package to get all sorts of data, but here specifically FX data using the function ...
1
vote
1answer
60 views

Is anybody using 13F-HR data for making strategies?

I see that a lot of quants work on high frequency strategies. Mostly used data are prices, volumes. I wonder, is anybody using data on funds positions, which they have to disclosure quarnerly under ...

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