6
votes
1answer
486 views

Min VaR and Min TE as second order cone program

The quadratic optimization (min variance) $$ w^{T} \Sigma w \rightarrow \text{min}, $$ where $w$ is the vector of portfolio weights and $\Sigma$ is the covariance matrix of asset returns, is a well ...
3
votes
2answers
417 views

Forcing price to rise or fall by high volume buying and shorting

Is there an a name for the approach / strategy to artificially move a price either up or down by high volume buying or shorting. ie. Buying a large (say 5%) of a stock very quickly, thus ...
1
vote
1answer
204 views

What does it mean by “labor taxes cut is self-financed”?

I'm reading "Principle of Economics" by Mankiw. In Part III Market and Welfare, Ch 8 "Application: the costs of taxation", it says: Only 32% of a cut in U.S. labor taxes would be self-financed, the ...
1
vote
3answers
342 views

Given monthly returns of 10-Year Govt Bond, how to get monthly risk free rate of return

I have a list of monthly returns of a 10 year Govt Bond. I am not sure if this is a good proxy for the monthly risk free rate of return. Can somebody suggest how I can derive the monthly risk free ...
5
votes
2answers
852 views

How to use a realized kernel?

I've read that realized kernels are the thing to use for calculating daily volatility from high-frequency data. So I've got minute data, how do I actually use such a kernel? Will it give me minute-ly ...
1
vote
1answer
73 views

Problems to understand a stochastic DGL equality

currently I am reading a paper called "Portfolio optimisation under non-linear drawdown constraints in a semimartingale financial model" for self-study reasons. The paper can be found here: http://...
1
vote
2answers
197 views

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 ...
3
votes
1answer
594 views

How to manage evaluation date changes in QuantLib while using ImpliedTermStructure Class

I will not attach the whole code 'cause it would be just a huge waste of space and it would be not useful for this question's purpose. What I am going to attach here is a snippet code and its output, ...
4
votes
1answer
296 views

Does Matlab support exogenous variables in GARCH models?

Is it possible to introduce dummy variables or explanatory variables in the GARCH variance equation (garchset and garchfit) in ...
4
votes
1answer
3k views

open-source implementation of orderbook from FAST?

I'm looking for c/c++ implementation of OrderBook. I need implementation to reconstruct market data from FAST. I don't need to do "matching" because it already did by exchange, I only need to "...
3
votes
1answer
320 views

Which measure to determine Risk?

Say I hold an equity and I want to calculate the Value-at-Risk over some period. Would one calculate the Value-at-Risk of the equity under a risk-neutral (as in martingale) measure or under the ...
1
vote
0answers
78 views

OF-B1 report - cell A1

Pretty basic question - what is the SIGN that should be used in cell A1 of the EIOPA Solvency II OF-B1 report? So should share capital be displayed with a positive or negative value? CP-13 extract: ...
1
vote
1answer
228 views

Distinguish between market makers and other participants?

Are there any known quantitative techniques to distinguish between market makers and other participants? I manually MFT, have no knowledge of these specialties, and may be observing phenomena that ...
2
votes
1answer
631 views

Maximum Likelihood using a Kalman filter for two factor model

I'm trying to implement a Kalman Filter for the parameter estimation of a linear gaussian two factor model in Matlab. (Schwartz Smith model for commodity prices) In other words: I try to compute the ...
5
votes
2answers
240 views

Itô diffusion processes in finance with unknown distribution at a terminal value

In several papers it is argued that for many Itô diffusion processes, $$dX_t = a(t,X_t)dt+b(t,X_t)dB_t,$$ in mathematical finance the distribution of $X_T$ for fixed $T>0$ is unknown, which makes ...
7
votes
0answers
798 views

Formula for the efficient portfolios (mean-variance optimisation)?

Consider the setting of mean-variance portfolio optimisation: $n$ assets with expected returns $\overline{r}_1,...,\overline{r}_n$ and standard deviations $\sigma_1,...\sigma_n$. For a certain fixed $...
2
votes
2answers
312 views

constructing best bid/ask from NASDAQ TotalView-ITCH data

anybody know how to construct a intraday stock price from NASDAQ TotalView-ITCH data? I would need to know the price in millisecond, so I would need two rows: timestamp (for every millisecond) and ...
2
votes
1answer
471 views

Pricing credit risky bonds

How do we price credit risky bonds? If I discount the cash flows using LIBOR/zero rates, it won't take the credit riskiness into account. So should I use a rate based on the issuer's credit spread? ...
1
vote
1answer
196 views

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 ...
3
votes
1answer
96 views

How accurately can the LIBOR market model price a floating note

I am considering some hedging strategy where portfolios of derivatives are built so that each portfolio is equivalent to a floating note, even if the instruments in the portfolio might be quite ...
1
vote
0answers
123 views

What is the right group of durations?

It seems that the group of durations commonly used in quantitative analyse is $\mathbf{R}$ but it seems to me that $\mathbf{R_+^*}$ could also be an interesting choice. While I am not aware of ...
6
votes
3answers
385 views

How to choose a risk-neutral measure when the market is incomplete?

I am more of a probabilist than a financial mathematician. I am currently working on the features of American put options under a particular stochastic volatility model. Like most stochastic ...
1
vote
1answer
357 views

Black 76 for Options on Interest Rate Futures

This is my first time using Black76 to value options on IR futures and I have a question on $F$ and $K$. I understand the price for an IR future is usually quoted as $100 - r$. Do I use this price ...
3
votes
2answers
331 views

Shortcomings of generalized Brownian motion for asset price modelling

I'm simply interested on hearing some views on which shortcomings arise by using the (multidimensional) SDE $$dS(t)=S(t)\alpha(t,S(t))dt+S(t)\sigma(t,S(t))dW(t)$$ as a model for asset prices. I know ...
3
votes
0answers
118 views

Estimating risk aversion (power or exponential utility) from options prices

I came across this literature and it seems like there are a number of ways people do this. You can do it for an option on any underlying as long as you can create the risk-neutral p.d.f. If you agree ...
0
votes
0answers
42 views

Is this usage of “M” and commas for a cash flow statement correct? [closed]

I recently was confused by a cash flow chart produced by a company I invest in. Each bar represents a monthly cash flow, but the values are confusing. For example, "3,012 M" is used on the most ...
1
vote
2answers
1k views

HFT enhancements for FIX (Simple Binary Encoding) vs proprietary protocols performance and cost

I would like to know from those that have used FIX (with Simple Binary Encoding) for HFT compares with the current (proprietary) protocols in use that often vary per counterparty. Interested in ...
1
vote
1answer
1k views

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....
0
votes
1answer
197 views

download intra day data [duplicate]

I am trying to download intra day stock data for some 7000 symbols using google url : https://www.google.com/finance/getprices?q=RELIANCE&x=NSE&i=60&p=5d&f=d,c,o,h,l&df=cpct&...
4
votes
4answers
570 views

Deep bid ask orders

Why do I often see some very deep limit buys and limit sells in a limit book? For instance the bid-ask may be \$39.00-39.01 but I see some bids at \$20 or even \$10 and some ask at \$60 or even \$500. ...
3
votes
1answer
139 views

A basic question about market jargon

What does it mean by DBR 4s of Jan4, 2037? I know the Jan4, 2037 is the maturity. How about DBR and 4s?
1
vote
1answer
83 views

Get discount factors with limited knowledge?

I am facing the problem of just having this information: 6% coupon bond with 2.5 years to maturity, traded at a 100% clean price 4% coupon bond with 1.5 years to maturity, traded at a 98% clean price ...
2
votes
0answers
190 views

Potential pitfalls in the use of correlation

Background: The red line is an index, which goes from 0 to 100, measuring uncertainty in the markets. The dark blue line is a price index, which has a lower bound at 0, and virtually no upper bound. ...
1
vote
1answer
60 views

Why is the discount function non increasing if pure cash holdings are feasible?

I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ...
3
votes
0answers
94 views

Optimizing stochastic functions numerically

Is there an efficient and commonly used optimization method for "more complex" investment strategies. For instance, say you have a function $f(X_1,...,X_n,c,v)$ where the $X_k$'s are your random ...
4
votes
2answers
290 views

Is price gaping the major risk that market maker has?

Suppose you are a market maker. So you put a limit price out and hope someone will cross bid/ask spread to take your limit. But there is risk that bad news could come out and market will gap. So ...
4
votes
1answer
130 views

Optimal Choice of exceeding time

Suppose you hold a share from company $Z$ whose vaue at time $t$ is $S_0+\sigma B_t$ where $B_t$ is Brownian Motion and $\sigma$ denotes some volatility. Now lets assume that company $Z$ may go ...
2
votes
2answers
176 views

Accrued Interest in CVA DVA

I'm implementing the CVA/DVA for some derivatives, which follows a Hull-White model (one factor). Once I have calibrated the model and I get the results with the simulation, a quite interesting ...
1
vote
1answer
656 views

Components of an index in a specific date

Objective: Get a list of all the companies that were ever part of an index (e.g.: FTSE100) in a given period of time (scale: years/decades). Method I have in mind: 1) Create an empty list k. 2) Get ...
2
votes
0answers
121 views

Can I trade the volume of a security or index?

Is it possible to trade a derivative product priced on the volume traded of some underlying security or index? Does such a derivative exist on any exchange traded markets? Or anywhere?
9
votes
2answers
297 views

Extrapolating implied volatilities to small time

Could anyone please direct me to literature or methods for extrapolating the implied volatility surface towards small expiry? I'm looking to price very short time to expiry binary options (e.g. 5 ...
9
votes
0answers
207 views

Proving the asymptotic distribution of Manipulation-Proof Performance Measure (MPPM) (Paper by Goetzmann et al.)

In Goetzmann et al.'s (2007) paper, the authors derive a "Manipulation-Proof Performance Measure" (MPPM), which is a performance measure that is impervious to performance manipulation by fund managers....
2
votes
2answers
4k views

Why do stocks with a negative beta return less than the risk free rate?

Let's say we have two stocks, Stock A and Stock B. Both of them have the same standard deviation $\sigma$, and therefore have the same risk. The only difference is that Stock A has a perfect ...
2
votes
1answer
299 views

Closed form european option prices for a variance gamma process with a randomly distributed drift, volatility, and variance rate

Does an option pricing model with a closed form European option price exist that takes into account randomly distributed drift, volatility, and variance rate? I prefer a modification to the variance ...
2
votes
2answers
1k views

Finding Probabilities Using The Binomial Model

I was not able to find a similar question when searching, but if I've missed one please feel free to point me to it. Unfortunately the closest example in the textbook was not terribly helpful either. ...
0
votes
1answer
151 views

Why does the SMA and EMA appear to be relative to the timeframe?

Why does the value of the SMA and EMA for the current time appear to change when I change my timescale. I'm using ActiveTrader by Fidelity, but I'm hoping there's an general phenomenon so that someone ...
1
vote
1answer
1k views

Question about weighted midpoint formula

The answers from these two replies seem to contradict each other. The first numerator is bidSize*bidPrice + askSize*askPrice but the second is bidSize*askPrice + askSize*bidPrice. Price functions ...
5
votes
2answers
2k views

How do I calculate Sharpe ratio from P&L?

Say I have a market-making strategy that trades intraday. I start with a flat position and finish flat too. I end up with a daily P&L $p_{today}$. Over a year of trading I get $\vec{p} = (p_1,\...
7
votes
2answers
2k views

What are common methods for modeling intraday trading volume?

What are the most common ways to model intraday trading volume, particularly for futures contracts? There are obviously a number of seasonal-type factors, like roll, economic news releases, time of ...
5
votes
5answers
2k views

Library for interactive financial charts

For my recent project I am looking to build a software capable of visualizing financial charts in a dynamically and interactive matter. The workflow is as follows: I gather data from my data ...

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