# All Questions

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### Opposite of Tail-Risk Hedge (Established Vocabulary)

I'm working on a client memo explaining several approaches to equity hedging, and I'm looking for a not-too-technical term for a hedging strategy where I try to keep options near the money, as to have ...
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### Pricing Principle 1

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this Pricing Principle. Is the one in red supposed to be the proof of the Pricing Principle 1? Or merely an intuitive ...
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I have started reading an introductory book called: A Course in Derivative Securities by Kerry Back. On page 12 they mention the following: The delta of the call option is $\delta = (C_{u} - C_{d}) / ... 1answer 409 views ### Non-linear Dynamical Systems and Quantitave Finance The vast majority of what I have read about quantitave finance is to do with option pricing and time series analysis for forecasting. However the economy as a whole behaves as a dynamic system with ... 3answers 715 views ### What Is A Good Success Rate Using Machine Learning For A Beginner? I know this question will be quickly destroyed and my account summarily banned, but I just have to ask: For a trader using machine-learning algorithms (SVMs, ANNs, GAs, Decision Trees) for ... 2answers 123 views ### Standard Deviation as listed in Rebonato's Volatility and Correlation: Binomial Replication 2.3.4 Worked-Out Example I am reading Rebonato's Volatility and Correlation (2nd Edition) and I think it's a great book. I'm having difficulty trying to derive a formula he used that he described as the expression for ... 1answer 505 views ### What is the Rho of an option on a futures contract priced using the Black 76 model? I wanted to quickly confirm some simple calculations for the Black 76 greeks and was making use of the formulas on this website: http://riskencyclopedia.com/articles/black_1976/ I have an issue with ... 1answer 393 views ### Interpolation of volatility curve for Swaption I have found volatility in the black model for swaption for different maturity (1-2-3-6-9M, 1Y, 18M, 2-10Y, 15-20-25-30Y) and Tenor (1-10Y, 15-20-25-30Y). Now I need another values (Maturity: 2, Tenor:... 2answers 103 views ### Implied Correlation using market quotes Is there a way to retrieve the implied correlation between stock price and zero coupon bonds? 1answer 1k views ### What is Prompt Date Structure? In LME website Prompt Date Structure is explained as this. Why there are prompt dates? LME trading calendar isn't universal to all other calanedars found in the market. So how do "Non-tradable dates ... 1answer 105 views ### Where can I buy historic raw recording of an exchange Say I want to buy historically recorded raw feed from an European exchange (say LSE). Is there a vendor that would sell me this data ? EDIT: By raw feed I mean the order by order feed (or equivalent) ... 1answer 60 views ### In a mis-matched trade who profits? I am building a service similar to the BullionVault where users can buy and sell bullion. They will be placing their Buy and Sell orders on the service. Matched orders will get executed. My question ... 1answer 501 views ### Where can I find implementations of the time-varying copula (BBX) in Matlab or R? I want to construct some time-varying BBX copulas, however, I found that patron's package does not contain time-varying BBX copula. Anybody know where I can download them? 3answers 200 views ### What does “true”volatility mean in volatility comparison? In Sinclair's book, wee need to compare standard deviation with "true volatility" to check the power of the model suggested, close -to-cloce, or Parkinson formula, etc. What do we mean here by "true" ... 1answer 226 views ### novice question on fixed coupon schedule in QuantLib For some bonds I work with the last coupon date is not equal to bond's maturity date. E.g. the last coupon date is April 25th, 2020 and maturity date is April 25th, 2021. I looked at Schedule class ... 2answers 383 views ### How to price this option using the Black Scholes model? I have a question regarding regular option pricing. In the standard Black-Scholes model, with interest r and volatility$\sigma$, I have to eetermine the arbitrage free price at time$t$of an ... 1answer 219 views ### FX Rate dynamics Let's suppose USD/EUR price in USD follows a GBM with $$dS_t = rS_tdt + \sigma S_tdW_t$$ What process does EUR/USD follow in EUR? 2answers 126 views ### Harnessing small correlations for reliable profit It is said that Edward O. Thorp was able to harness small correlations for reliable financial gain. I've seen some strategies based on strong correlations which did not seem particularly reliable. ... 2answers 171 views ### Simple question about expected value of brownian motion I would appreciate some help with the math in this paper : High Frequency Trading in a Limit Order Book Specifically, I would like to understand how the authors calculated the expected value of price ... 1answer 249 views ### Different range price data on one chart I'd like to evaluate 3-4 instruments on one price chart. For example: Stock A: 90,05 90,15 90,25 90,09 Stock B: 0,0045 0,0049 0,0039 0,0040 Stock C: 1998,1 1998,7 1998,8 1997 I try to use: Ln(... 1answer 99 views ### Simple pricing example confusion This it taken from "Heard on the Street", Section B. Consider a market with$0$risk-free rate, no transactions costs etc. The IBM stock costs \$75 and does not pay dividends. Design a security ...
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I am reading a paper that very briefly talks about some volatility arbitrage strategies. It's so brief that I do not exactly understand how it works. It says one of the strategy is based on "short ...
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### what is the vol in the BS formula?

I need to compute the delta of an option for which I know a) the time to maturity, b) the price of the option, c) the price of the underlying asset. what is the formula to get this delta It seems ...
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### Direct exchange data via a Vendor

I am considering the option between using direct exchange connections vs using a vendor like Bloomberg for market data. I am interested in daily data and potentially tick by tickdata. Initially I am ...
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### where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
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### Practical equity options pricing

To price a vanilla option, the following information are required : Strike price; Underlying price; Volatility; Maturity; Dividends rate; Repo rate; Interest rate; The strike, underlying price, ...
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### Risk management of options

Your client would like to buy a digital call option. the digital call option pays the buyer in one years time (i.e at maturity ) N=1m SGD, if the SGD USD spot rate at maturity is above a prescribed ...
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### How to rightfully balance the share of the organization between departments after variable changes?

This is an abstracted version of the problem I'm facing and I have to tell you first, my question might not be precise and or even correct, so I hope you understand and in that case can improve the ...
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I'm attempting a "hello world" of live algorithmic trading. A script that pulls in tick data, presents it visually, and allows me to buy / sell at the press of a button. Also a toggle between { fake ...
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### Price of a down-and-out call in terms of European call

If $EC(S_0, K, \sigma, r, T)$ represents the price of a European call option with strike $K$, expiry $T$, initial price $S_0$, volatility $\sigma$ and where the constant interest rate is $r$, then I ...
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### Derivation of the Nelson-Siegel model and proof of arbitrage

1. I am looking for a derivation of the Nelson-Siegel model $y(m)=a+b\left( \frac{1-e^{-\lambda m}}{\lambda m}\right)+c\left( \frac{1-e^{-\lambda m}}{\lambda m} -e^{-\lambda m} \right)$ It is ...
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### Error message in calculation Implied Volatility

I am unsuccessfully trying to find the Implied Volatilities for the SPX on a given date using information of the CBOE, as well as Open Interest, but as I run the code I am getting and error message ...
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### Scaling Intervals in Diffusion Process

I know this is a very elementary question but... when modeling asset prices through a stochastic process as in $$dS_t=S_t μ dt+S_t σdW_t,$$ where the following is a wiener process dW_t=σN(0,1)dt^{...
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Where I can high-frequency intraday data on VIX? Is it available on Bloomberg Terminals? I see many questions posted on Quant.stackexechange about VIX options therefore I am sure someone knows where I ...
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### Examples of non-increasing variance of a time homogeneous Markovian process

This is an edit to the previous question, on stationary process, which was answered by Richard below. Let $x_t$ be a zero mean, time homogeneous Markovian process over time $t$ starting from $x_0=0$....
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### Quotes and Transactions Streams from Exchange

I have possibility of taking 2 types of real time streams from some exchange: bid-ask quotes (fresh quotes from order book) transaction log (transactions matched by exchange) I'm curious what ...
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### Basics about the scaling property of volatility

It is a usual practice to calculate realized volatility $\sigma$ using the square root of the usual variance estimator $\hat{{\sigma}²}$. This is done using the stock log returns (practitioners ...
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### Probability of a return from historical average and standard deviation

I have a question from a sample exam paper that I'm having some trouble figuring out. The question is: Bavarian Sausage stock has an average historical return of 16.3% and a standard deviation of 5....
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### How to value VIX Option?

Could someone tell me a common method for pricing VIX Options please? Do I need to use a Stochastic Vol Model? Or Local Vol Model is suitable as well? Should the model be modelling S&P 500 and ...
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### How to normalize stock data

Please advise how can i normalize stock prices. Recently, I've been using such formulas: Log prices = Ln(Close(t)) Close(t)-Mean (Close(t)-Mean)/(StdDev) Ln(Close(t))-Mean Is there any other ways?...
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### How to apply Ljung Box Test?

I am checking the closing prices(about 9000+ prices) of the stocks data to test for randomness. The test I am using is Ljung Box test, in MFE toolbox for MATLAB, I used 300 data of closing prices, ...
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### VaR for FX forwards

I am trying to figure out some of the commonly used approaches to deal with FX forwards (in a currency portfolio containing spots, forwards and swaps) that would allow me to calculate the one day VaR ...
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### Why use leverage when it does not improve the risk/reward ratio? [closed]

Leverage will increase gains when things go right but will also increase losses when things go wrong. Mathematically speaking, it does not change the risk/reward ratio (or does it?). Since investing/...
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### Is it better to hedge or reduce the position size? [closed]

Traders hedge to reduce their risk. However, wouldn't reducing the position achieve the same results while keeping the risk management process simpler? At least, one need not worry about making the ...
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### Calculating spot level using tick data

What is a proper (or commonly used/accepted) way of calculating some spot value with tick data? At the moment I can think of two options: Take the latest available best bid, latest available best ...
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### “Friendly” papers about maximum smoothness yield curve modelling

I'm currently looking to implement some version of the yield curve modeling techniques in the maximum smoothness framework. The papers I have found so far explains the theory pretty well, but I find ...
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### Brownian motion - first passage time

Can anyone point me to the expression for the first passage time for a geometric Brownian motion process X(t) as a function of the starting point, threshold, drift and diffusion parameters. I am ...