# All Questions

816 views

### Do low volatility stocks outperform high volatility stocks over the long run?

A recent article from Forbes seems to indicate that low volatility stocks outperform high volatility stocks over the long run. Does anyone have any supporting or contradicting evidence to this claim? ...
829 views

### Does the gamma function have any application in quantitative finance?

I was looking into the factorial function in an R package called gregmisc and came across the implementation of the gamma function, instead of a recursive or iterative process as I was expecting. The ...
1k views

### On my way to becoming a Quant [closed]

I'm currently studying for my undergrad in CS, and considering to do a grad in both CS and Math. I would like to see what you guys would recommend to prepare myself for a field as a Quant. I am ...
1k views

### Methods for pricing options

I'm looking at doing some research drawing comparisons between various methods of approaching option pricing. I'm aware of the Monte Carlo simulation for option pricing, Black-Scholes, and that ...
396 views

### Seeking Historical Non-Finance Datapoints for Backtesting

I'm working on some financial analysis code which I'd like to test against a historical dataseries to analyze the correlations to my algorithm to some non-finance related data. Ideally, I'd like to ...
870 views

### How do practitioners use the Malliavin calculus (if at all)?

This question is inspired by the remark due to Vladimir Piterbarg made in a related thread on Wilmott back in 2004: Not to be a party-pooper, but Malliavin calculus is essentially useless in ...
326 views

### How do bond pricing formulae differ between the US, UK and the Euro zone?

Let's restrict the scope of the question a little bit: I'm interested to learn about major differences in pricing formulae for nominal government bonds. The pricing formulae for inflation-linked bonds ...
565 views

### How would one price a “credit event binary option”?

CBOE has introduced credit event binary options, kind of as a retail trader's CDS. These binary options are worth $1 if there is a credit event (ie, bankruptcy) before expiration, and$0 if there is ...
708 views

### Varswap Basis - What is it in practice?

What is the varswap basis? I am not completely sure what this number represents. Is it the basis between the estimated future realized volatility and the vol surface implied volatilty at a specified ...
577 views

### Quant PMs need to know the following… [closed]

To the degree in which it's possible, I'd like to know what the community believes are the objective skills/knowledge required to run a successful Quant book. I'm not interested in strategies, ...
10k views

### Python library for Portfolio Optimization

Does anyone know of a python library/source that is able to calculate the traditional mean-variance portfolio? To press my luck, any resources where the library/source also contains functions such as ...
319 views

### Enhancing Monte-Carlo convergence (crude method)

I am currently doing a project involving Monte-Carlo method. I wonder if there is papers dealing with a "learning" refinement method to enhance the MC-convergence, example : Objective : estimate of ...
1k views

### What is a persistent variable?

What is a persistent variable in the context of regression analysis? For example, dividend to price ratio (D/P) is considered to be persistent variable when used to model future returns (Stambaugh ...
9k views

### Switching from Matlab to Python for Quant Trading and Research

Has anybody else out there made this switch? I'm considering it right now. What were the negatives and positives of the switch?
220 views

### Picking from two correlated distributions

Can anyone provide a simple example of picking from two distributions, such that the two generated time series give a specified value of Pearson's correlation coefficient? I would like to do this in ...
2k views

### Is there any good research on support and resistance?

Could somebody advise me on where to find good literature on the justification or motivation for using support and resistance lines - and also lines of maximums and minimums. In finance, it is ...
3k views

### Main backtesting & trading solutions: QuantFactory, Deltix, etc.

What are the most used/mature/promising commercial solutions today which handle backtesting/ automated trading needs? I'm talking about vertical product suites like QuantFactory or Deltix which ...
1k views

### How to encode trading strategies mathematically

If you have a bunch of different econometric data (e.g. indexes, FX, commodities, interest rates...) you can try to find a formula to see if there is any relationship in the data - e.g. to forecast ...
344 views

### illiquid american options pricing

What are the standard methods to price american call/put options on illiquid underlyings?
1k views

### How to compute momentum from equity time series?

Let's say I have time series of stock prices for many stocks. What's the best way to sort the stocks based on which have been going up/stayed the same relative to others? Can this be done with a ...
650 views

### Supply and Demand of Oil [closed]

This is probably not the best place to ask this question but the one that seems most appropriate on stack exchange(doesn't seem to be an economics one). Anyways, My question, a serious one and not ...
1k views

### Is there a popular curve fitting formula of options skew vs strike price or vs Delta?

I was trying to build a options trading/optimization system. But it often gets more inaccurate as it scans through the far from ATM options because, you know, options skews. That is because I did ...
426 views

### Hedgefund-like behavior for covered call selling account?

I make money selling covered calls on FX spot options, and some of my friends want to buy in to this without having to trade their own accounts. One method is for each of them to get an account, ...
8k views

### What is the best data structure/implementation for representing a time series?

I was wondering what is best practice for representing elements in a time series, especially with large amounts of data. The focus/context is in a back testing engine and comparing multiple series. ...
561 views

### USDCAD options vs CADUSD options arbitrage?

I think I've found an arbitrage opportunity. Right now, I can do this (first via CME, second via SAXO) : BUY CADUSD AMERICAN PUT 10200 STRIKE EXPIRING 16 MAR 2011 FOR 53 pips USD SELL USDCAD ...
12k views

### Why are GARCH models used to forecast volatility if residuals are often correlated?

The answers to this question on forecast assessment suggest that if the sequence of residuals from the forecast are not properly independent, then the model is missing something and further changes ...
687 views

### What is the most effective way of determining & measuring the level of HFT activity in a stock in (close to) real time?

On a security by security basis, I want to be able to quantify the level of HFT activity (and later institutional & retail activity). Is it higher than it normally is? How much so? What would you ...
1k views

### Which risk-free rate to use to price a bond issued in one currency but convertible into equity in another?

A convertible bond denominated in USD is issued by an Indian company (with equity traded in INR). The bond will be repaid in USD and if converted into equity in the company, the conversion price will ...
721 views

### How do I incorporate time-variability in a pair trading framework?

Recently I have been looking at pair trading strategies from a cointegration perspective, as described in chapter 5 of Carol Alexander's Market Risk Analysis volume 2. As most quantitative finance ...
872 views

### How does UBS hedge its exposure to XVIX ETN?

I am wondering how UBS hedges its exposure to its ETN XVIX. Unless I am grossly overestimating the trading costs, executing the strategy they describe in their prospectus with futures would be quite ...
624 views

As of right now, the price of Brent Crude is $\$$111.59/bbl and the price of WTI Crude is \$$98.36/bbl. I'm well aware that futures markets don't set the spot price for oil, but actual ... 2answers 419 views ### Need advice on finding forward spot rates So this is a "work homework" question. As part of my job they are sending us through sort of a training course. I'm looking for advice, or a link to a site that explains how to do this with maybe some ... 1answer 355 views ### How do you calculate the implied liquidity of an option? How does one calculate the implied liquidity of a specific option contract given a set of vanilla puts and calls with various strikes and maturities on a single underlying? 3answers 242 views ### estimating the accuracy of a method for forecasting the distribution Say for a stock I want to do a simulation using 30 days of historical returns, and maybe generate 1000 paths, with 2 days as the forecast horizon. Say I have 100 of these 5 day blocks used for ... 2answers 2k views ### How to update an exponential moving average with missing values? Say you have an Exponential Moving Average being continuously updated over a time series using 1-second-long time periods. What should happen if there is no value for the next second, e.g. there were ... 3answers 690 views ### Discrete-time model: stock dynamics I am working in the area of probability theory and for a case study I would like to make some calculations in finance. Since I am developing theory for the discrete time, I am interested in models for ... 1answer 962 views ### Simple model for option premium (for covered call simulation)? Given a historical distribution of weekly prices and price changes for a stock, how can I estimate the the option premium for a nearly at-the-money (ATM) option, say with an expiration date 3 months ... 1answer 757 views ### What SABR$\beta\$ to use for EURIBOR swaption smiles

I am currently wrapping up my thesis. My final chapter is on applying the SABR model model for pricing purposes. I am valuing a constant maturity swap by replicating its value using plain vanille ...
7k views

### What is a good broker for HFT?

Currently I trade trough IB. I run my HFT strategies (100 roundtrips per hour) but I think that latency is killing me and my profits are shrinking. I need the fastest possible brokers out there which ...
1k views

### Free/cheap source of structured historical quarterly filings?

What is a good place to acquire cheap/free historical quarterly filings data for US Companies? Specifically, I'm interested in the consolidated financial statements. The data should be well-structured ...
4k views

### Quanto CDS modeling

What is the market standard for pricing quanto CDS (i.e. CDS which pays the contingent leg in different currency than the pricing leg)?
2k views

### Technology stack used in Bloomberg

I figure this perhaps the best place to ask this. What technology stack is used in Bloomberg? I'm C++ developer, and I definitely prefer C++ to C, so I don't want to touch C unless it's strictly ...
9k views

### How fast is QuickFix ?

In my firm we are beginning a new OMS (Order Management System) project and there is a debate whether we use Quickfix or we go for a professional fix engine? Because there is a common doubt that ...
459 views

### How would you test the hypothesis “There are no idiosyncratic returns available in the market”?

A commentary attributed to Matt Rothman had recently (in the past six months) been making the rounds of the internet echo chamber claimed "There are no idiosyncratic returns available in the market". ...
2k views

### Drawbacks & Caveats of using (N)Esper for ESP/CEP in trading systems?

Esper and its .NET port NEsper are components that enable Complex Event Processing (CEP) and Event Stream Processing (ESP) engines. They are especially suitable for trading applications. They can, ...
10k views

### Innovative ways of visualizing financial data

Finance is drowning in a deluge of data. Humans are not very good at comprehending large amounts of data. One way out may be visualization. Traditional ways of visualizing patterns, complexities and ...
14k views

### How useful is the genetic algorithm for financial market forecasting?

There is a large body of literature on the "success" of the application of evolutionary algorithms in general, and the genetic algorithm in particular, to the financial markets. However, I feel ...
901 views

### Which CEP platform is most popular for trading systems? [closed]

I heard that trading firms employ CEP platforms such as StreamBase, Marketcetera, JBoss Drools, and etc., to implement trading systems. I wonder which one is most popular and the recent trend of ...