# All Questions

212 views

### Overview of robust/regularized portfolio selection

I am looking for either a review paper or individual papers on portfolio selection using robust statistics or regularization (e.g. LASSO, Ridge, etc.) I.e. a review on methods along the lines of: M ...
420 views

### Value at Risk from Delta of a single asset portfolio

I am trying to figure out the following, for me unfamiliar type of question: Given is a single asset portfolio: the Delta of the portfolio is 15, the value of the asset is 10 and the daily volatility ...
62 views

### Incorporating a stochastic correlation structure into a multi-factor model

I am considering extending a multi-factor fixed income stochastic model (e.g. LIBOR-Market) to use stochastic correlation matrices instead of determinstic ones. For pricing instruments with short ...
972 views

### What are the merits of pseudo random numbers over quasi random numbers in monte-carlo simulation?

I understand that quasi-random numbers have much better convergence, but are there any reasons for me to use pseudo-random numbers instead?
114 views

### FTAP a-la Harrison, Kreps and Pliska

I was reading the papers co-authored by Harrison, Kreps and Pliska, that initiated the formal research on the connection between pricing, martingale measures, arbitrage and completeness. I have some ...
319 views

306 views

### Definition of orthogonality and independence for a stochastic processes

Somehow I can't find the explicit definition of when two processes are supposed to be orthogonal or independent anywhere. I think orthogonality and independence should mean the same thing in this ...
2k views

### Does one use the covariance or correlation matrix in cholesky decomposition to generate correlated samples

Can we interchangeably use Cholesky decomposition of covariance and correlation matrix to generate simulations? If not, in which situations do we use one or the other and why? Thanks in advance.
2k views

### Value Weighted Return

I recently have started to look at some data from CRSP, and they have a metric called Value Weighted Return (two versions with and without distributions). When I looked it up, it seemed that this ...
657 views

### Difference between VaR and credit VaR?

Quick question: is there a difference between credit VaR and VaR or are they the same thing?
496 views

### Backtesting Period

Views on timeframes for backtesting vary considerably. Curious on what timeframe/trade size leads to a statistically significant result. For example, what backtest period is reasonable for a system ...
241 views

### Mock/practice trading for options (delta/gamma hedging etc.)

I know there are some sites for practicing equity investing. But could you provide me with suggestions concerning options trading etc. I read Natenbergs book on Options and want to test things like ...
248 views

### List of financial derivatives Ito's Lemma does not apply

According to Ito's Lemma there is no restriction on the continuity of the stochastic process. The restrictions are on the continuity of the pay-off so that second derivatives with respect to ...
62 views

### CAPM as pricing formula

P - price that the asset was purchased. Q - price that it was sold P = Q/(1+r+B(R_m - r)) What is the financial meaning of denominator. Thanks for help.
43 views

### evaluating portfolio performance without knowing the amount held on cash accounts

I would like to evaluate the performance of a portfolio mananger. I know his trades, and the initial portfolio holdings. I do not know, however the amount held on his cash account. That is, I ...
452 views

### How is the MA (moving average model) useful?

How is the MA model useful in modeling financial data, for example the stock indices? For example, from what i understand in the AR (auto-regressive) model portion, we can use the ADF test to check ...
550 views

### Scaling of a transition matrix

I am working on a ratings transition matrix and I wondered how people scale it down to shorter time periods (although one should more or less stick to the estimation period i know). It is clear that ...
1k views

### How to incorporate fundamental analysis in quantitative trading algorithm? [closed]

I want to write a quantitative stock trading program based on fundamental analysis. It would crunch through prices, financial reports to look for value stocks. It can support backtesting of strategy ...
198 views

### QuantLibXL - Optionlet bootstrapping failure

I am trying to bootstrap the Optionlet volatility surface from a Cap/Floor volatility surface using QuantLibXL. To be specific, the data is from ICAP: ...
2k views

### How do I calculate probability distribution of stock prices given option prices?

I'd like to calculate a probability distribution for prices given the option prices for that stock? Any ideas how to do this? My desire is to do this daily and then see how the price PD changes over ...
2k views

### Calculate volatility from call option price

Given call option price, what is the simplest formula to get the volatility value ? Test Data: ...
248 views

### Price of Bond given credit state matrix

"Consider a credit rating system consisting of four states, A,B,and D(default) with the following annual credit transition probability: A= [ 0.7, 0.2, 0.1; 0.2, 0.5,0.3; 0,0,1] For a company rated B,...