# All Questions

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### Cointegration and variance of time series

Given that $X_t , Y_t$ are two cointegrated random processes, what can we say about the relationship between variance of the two increments $var(X_{t+h}-X_t)$ , $var(Y_{t+h}-Y_t)$ for a given ...
52 views

### Term Structure and short rates

If I have a term structure/yield curve given by: $$f(t, T) = f(0, T) + σ^2t(T − \frac{t}{2}) + σB_t$$ and want to find the short/spot rate $r_t$, is this simply: f(t,t) = f(0,t) + ...
17 views

### Value of sequential mutually-exclusive options (A variant on the Secretary Problem)

How much should you offer a potential hire in a signing bonus? Imagine you are interviewing a list of candidates for a particular job. Each candidate has a "lifetime value", and probability of ...
32 views

### FX rollover swaps rates based on LIBOR rates

I am trying to calculate FX swaps overnight rates based on LIBOR rates Example: Libor rate for TRY crosses is 12.00 Libor rate for USD crosses is .19 How do we get to these number? USDTRY swaps ...
66 views

I am using the variance ratio test to check whether my sequence is mean reverting in that test there is a parameter n, How in general I choose this n? or what is the meaning of this parameter? ...
19 views

### Stochastic Optimal Control for ratios

Do you know any good papers on methods of Stochastic Optimal Control and Hamilton-Jacobi-Bellman(HJB) for optimization of different ratios(Sharpe, M2, Sortino, Sterling, etc.)? Meaning that using ...
28 views

### “For any random variable $X$, someone will be willing to buy and someone to sell a financial instrument, whose final payoff is $X$.”

we will assume that for any random variable $X:\Omega\rightarrow\mathbb{R}$, some investor will be willing to buy and some investor will be willing to sell a 'financial instrument' whose final ...
47 views

### Where do I find a good data model for CDS

Tasked with implementing software that deals with CDS's what is the best place to get the data fields required to properly represent one. Found the definition in FBML but seems somewhat excessive: ...
52 views

### Binomial function use in Bezier smoothing

I am using the Bezier method to smooth option volatility curves, which utilised the binomial distribution. Is someone able to clearly explain the interpretation of the binomial distribution in the ...
25 views

### Hypothetical actuary working with a life company

If you are an actuary with a life company, how would you show that your capital assessment complies with the rules of Solvency II (or related regulations) that stipulate the minimum of capital that ...
221 views

### Binomial tree vs trinomial tree in pricing options

Very new to pricing models. Is there a general guideline when to use binomial tree and when trinomial tree is preferred? As far as I know, unlike binomial tree, trinomial tree only gives a range ...
24 views

### use of recurrence quantification analysis for deterministic signal identification and classification

The recurrence quantification analysis (RQA) is a method of nonlinear data analysis which quantifies the number and duration of recurrences of a dynamical system presented by its state space ...
71 views

### KeyError in Python code used to determine a trade signal for Pair Trading

I'm basically running some code as follows. Basically I'm just retrieving pairs of stocks (laid out as Row 1-Stock 1,2, Row 2-Stock 1,2 and so on, where Stock 1 and 2 are different in each row) from a ...
45 views

### Value-at-Risk - Currency Swap

Can someone explain to me how to calculate the VaR (delta-normal-method) for a Currency Swap? Thanks in advance. Regards Alexander
35 views

### Distribution of running maximums of a log normal process

I've been searching for quite some time and would appreciate any guidance! What I'm looking for is the distribution of running maximums for a log-normal process. If anyone is familiar with any ...
22 views

### Complete Multiperiod Binomial model

I have the following deifnition of a Complete multiperiod binomial model: A multi period binomial model can be called complete if every derivative security can be replicated by trading in the ...
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### Is it possible to offer promoters of a public company to acquire only their stake?

I am preparing a project report and I am interested in suggesting to buy the promoter stake (34%) in a public company. Will I get into trouble with the Securities Board (like SEC) if I do that instead ...
20 views

### Why does SOR post the order to the primary market if it cannot find best price to execute?

If a Smart Order Router cannot find the best price for an order to execute, it would post this order to the primary market. I think this is because the primary market has more liquid and more active ...
33 views

### Compute the (Net) Present Value

Let's have a project where we invest 1000 at the beginning of year 1 and 1000 at the beginning of year 2. At the end of year 2 the income is 2200 and the project is closed. Person A discounted with ...
28 views

### How to understand the upward trend of currency hedged euro/japan equity ETF

The quantitative easing implemented in Euro zone & in Japan has resulted in two outcomes Massive inflow of money into market that raised the stock index, and The weakening of euro/yen compared ...
144 views

### bond price formula in excel

I inherited a excel spreadsheet that has the following code to price a bond given coupon and current yield ...
36 views

### Daily PnL Calculation with currency conversion and multiple trades at the same day

In my project I increase and decrease my position many times during the day and leave a part of the position open. Through these many trades the position can flip from long to short. At the end of the ...
51 views

### How to compute the Coskewness Matrix in excel?

I'm triyng to compare two portfolio based on same sample of equities returns. And i want to know how to compute the coskewness matrix without using VBA, only in excel. Even a simple example with three ...
28 views

### scale alpha forecasts to align with covariance matrix

I have a set of monthly alpha forecasts and my covariance matrix has been annualized. I would like to do a mean variance optimization with a linear tcost penalty term. How do I rescale my alpha ...
52 views

### Which bond corresponds to which curve?

Bond X has a coupon Bond Y is a zero-coupon bond (Maturity 2 years) Bond Z is a zero-coupon bond (Maturity 10 years) The following graph is given: X-axis: yield curve, Y-axis: price Question: ...
37 views

### Invoice Discount pricing model

I was wondering whether there exist pricing models in particular for Invoice Discounting contracts and short-term financing solution where credit risk plays a major role. Specifically, assuming that ...
50 views

### Raising money in IPOs

When a company goes into an IPO wouldn't they try to make as much money as they can? Then how come the Greenshoe option says that some would try to not issue additional shares just so their share ...
62 views

### How to compute short interest real-time?

Is there a way to compute real-time short interest (at least daily) using Bloomberg for a given stock?
30 views

### Source for Normalized File of ETF Holdings [duplicate]

Does anyone know of a source for a data feed containing ETF Holdings for most ETF firms such as Ishares, Proshares, State Street? I know Bloomberg has this info, but I'm looking for a vendor that can ...
6 views

### Finding the price of an option that will be exercised [duplicate]

I am reposting this question because it was originally unclear, and I didn't get the answers I was hoping for. In my finance book I have the following question T-bills currently yield 5.5 percent. ...
51 views

### Interpreting Johansen co integration test

I am a little new to econometrics. Please pardon me for this silly question. I was running a Johansen cointegration test on two time series using the econometrics toolbox provided by James LeSage for ...
52 views

### Seeking Advice for Exam FM regarding Derivatives Markets

I am taking Exam FM in a week and I was wondering if I could get any advice from people who have recently passed this exam. How much of the derivatives markets question did show up? I am using the ...
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### How to use the asset covariance matrix for risk analysis in excess returns equation

New here and I have a question that may be very basic but despite my research I cannot connect the dots. I would like to know how to connect the nxn asset covariance matrix for an efficient tangency ...
20 views

### How Commercial Mortgage Backed Securities works?

I recently read some concept about CMBS, and have some questions about it. To make my question clear, here is an example. So say I have a pool of 5 loans that each generate 1000 for 23 months, and ...
21 views

### How discount TVaR of a put option?

Let say I want to calculate the TVaR of a put option. After I simulated possible outcomes in real-world, how do I discount the outcomes? Is there a difference if I am hedged or not? I tried to use ...
31 views

### Price a put option on a CPPI

I want to price a put option on a CPPI using Monte Carlo. I have found so far this article which prices a call on a CPPI. I was wondering if I could use the put/call parity here, and and if so, how ...
24 views

### Literature on “Risky Risky” Method

Trying to get some information/examples on a method called "risky risky" in the context of equity option/convertible bond valuation.
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### Ornstein-Uhlenbeck / Vasicek and no-arbitrage

I'm working my way through a common question which asks to derive the solution, the mean and the variance to the following Ornstein-Uhlenbeck process: \begin{align} dS_t = (\theta(t) - \beta\,S_t)\,dt ...
15 views

### Use orthogonal decomposition to compute the optimal return for a CARA investor

Question from Back, 5.8. If all returns are joint normally distributed, then $R_p$, $e_p$, and ε are joint normally distributed in the orthogonal decomposition R= $R_p$ + $be_p$ + ε of any return R ...
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### How to optimally hedge construction loans with interest rate swaps?

We are a borrower with a construction loan that is pay floating. At the inception of the loan, we entered into a pay-fixed/receive-floating interest rate swap with a growing notional profile that ...
I want to correctly simulate a $\mathcal{Q}$ - martingale $S$, which is a geometric Brownian motion and an exponential of a process $X$, X_t = X_0 + \mu t + \sigma B_t = X_{t-\Delta ...