1
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1answer
136 views

Simulate from time-dependent copula in MatLab using COPULARND

I would like to simulate from a t-copula with time-dependent correlation matrices. Say I have a series of 2000 correlation matrices (obtained from a copula-DCC model for data consisting of 2000 ...
1
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1answer
414 views

negative discount and zero rate on swap bootstraping

Hi I am writing a program to Bootstrap a EURO zero swap-curve for tenor 3M and 6M with given bid and ask. When I run the program , I get a negative zero rate and discount factor from 5Y till 30Y for ...
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1answer
111 views

ZSpread in multiple curve framework

how do I calculate ZSpread for a govt. bond in a multiple curve framework? I have not come across the exact details anywhere so I want to verify if I'm right. Below is my understanding, please correct ...
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2answers
186 views

How to price an European call on zero-coupon from the yield curve?

It is known that the price of an European call of maturity $T^*$ on zero-coupon of maturity $T$ is given by $$p(0,T)= B(0,T^*)\mathbb E ^{\mathbb Q_{T^*}}\left[ (B(T^*,T)-K)^+\right]$$ where $B(0,T)...
1
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1answer
256 views

Total return index for interest rates (EURIBOR 3M)

I would like to calculate a daily total return index for the EURIBOR 3M. • Should I freeze at the beginning of each qurter die rate? (With this methology the developing of the index depends on the ...
1
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1answer
51 views

finance - using CAPM [closed]

The risk-free rate is 4%, and the expected return on the market portfolio is 12%. Using the Capital Asset Pricing Model: a. What is the risk premium on the market? b. what is the required return on ...
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1answer
60 views

Pricing rule shall be a martingale measure

In the book "Financial Modelling with jump processes" by Cont and Tankov there is a chapter that explains martingale pricing principles. It is not extremely formal, but gives the idea underlying the ...
1
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1answer
484 views

How to calibrate the Hull-White model using cap prices?

I'm given cap prices and swap rates, and i'm trying to calibrate the Hull-White model to them. I then want to use the model in order to price a swaption. I know that the model can be calibrated from ...
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2answers
499 views

FX Delta Conventions

I'm currently reading Iain Clark's book Foreign Exchange Option Pricing and I got stuck at one sentence in the beginning of Section 3.3 that I feel is important to understand. He writes: FX ...
1
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2answers
107 views

TAQ NYSE OpenBook

Where can I get/buy the TAQ NYSE OpenBook for specific stocks on specific days? I don't need a whole year of all stocks. I just want to enter a day and a stock, so I can download the order book data ...
1
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1answer
71 views

Optimal Upper and Lower Bounds

For the following exercise: Give optimal upper and lower bounds on the price today for a product that pays a function of the spot price, $S$, of a non-dividend paying stock one year from now, there ...
1
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2answers
312 views

Long/Short Backtesting Set up

I am going to be backtesting a Long/Short equity strategy and need some guidance on how best to deal with the short book. I was thinking that for each portfolio I would go long 50 equities and go ...
1
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2answers
94 views

How to calculate cash flow for XC swap

Given 3MLibor vs 12MLibor USD basis swap the 3M Libor is exchanged at 12MLibor+1%. How to calculate the cash flow
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1answer
50 views

Cause of long term inflation in the United States [closed]

Does the US government have a policy of printing money? If so what is this number called, who decides what it is, and where can I find it? If not what is the cause of our long term inflation? (I'm ...
1
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3answers
178 views

I want to prove Determine the coupon rate $r$, such that the price of the bond, at $T_0$, equals its face value

Consider a coupon bond, starting at $T_{0}$ , with face value $K$, coupon payments at $T_1, . . . , T_n$ and a fixed coupon rate $r$. Determine the coupon rate $r$, such that the price of the bond, at ...
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1answer
140 views

Best sources for worldwide balance sheet data?

I’m interested in databases with quarterly balance sheet data of the financial sector. I’m aware of the following datasets: -Compustat -Compustat Global -Bankscope Can someone point out other ...
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4answers
155 views

Black scholes text book

I am looking for an easy and well presented introduction to Black-Scholes theory and stochastic calculus aimed at undergraduate mathematics students. Please can you recommend a book? How about Paul ...
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1answer
110 views

Optimization metric that takes into account number of trades vs expectancy

In optimizing my automated trading system I find that certain combinations while increasing the expectancy: ...
1
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1answer
194 views

Information on books about mathematical finance

In the past at my school the subject of "Mathematics of Derivative securities" has been taught out of two books. "Quantitative Finance" by T. Wake Epps and "Options, Futures and Other Derivatives" by ...
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1answer
394 views

Provide a bond pricing differential equation and invoke Feynman-Kac Theorem

Grateful for any assistance. Consider the process: $dZ=r(t)Z\,dt$ , where $r(t)$ is stochastic interest rate and $Z=Z(r,t;T)$ is a zero coupon bond Price. Provide a bond pricing partial ...
1
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1answer
212 views

Interpret alpha's on Dual-Beta Model regression Results

I am trying to calculate the Dual-Beta for Apple (AAPL) by running a regression against the Spyder's ETF (SPY) & using the 10-yr Risk Free rate. The formula for the dual beta is: ($r_{AAPL}-r_f) ...
1
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1answer
82 views

Market Timing Performance for a single stock

It seems there are models that study the market timing ability of funds. Models such as the Treynor-Mazuy and Merton-Henriksson. One can also study the bull beta and compare it to a bear beta. My ...
1
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1answer
110 views

How to model the effect of earnings surprises on long-term returns?

I'm looking into modeling the relationship between EPS announcement surprises with long-term returns (1 quarter to 3 years with intervals). I've based my current methodology off papers looking at the ...
1
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1answer
349 views

Understanding how to calculate tracking error

I have come across two ways of calculating Tracking Error (TE) but i'm not sure if they are essentially the same. The first way is to calculate the standard deviation of the difference between a fund'...
1
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1answer
98 views

Where can I find a list of market-moving news announcements for different asset classes?

Different asset classes have different important news announcements that move the markets intraday. For instance, oil volatility increases after the EIA Petroleum Status Report, but that announcement ...
1
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1answer
59 views

End-of-day holdings vs overnight inventory

I am wondering whether these two terms identify the same thing: overnight inventory end-of-day holdings The way I would explain it intuitively, the inventory that is held overnight should be ...
1
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2answers
682 views

Price of a composite option

how would you calculate the fair value of an option on a fx'ed underlying, e.g. a put on a USD-stock which is changed into EUR? How should I get, in practice, the fx spot vol/correl? Purpose is to ...
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2answers
55 views

Distribution of the value of a portfolio

Suppose there are k different stocks in a stock market. All of their prices are independent from each other. One year from now the price of the i-th stock will be $X_i^2$, where $X_i \sim \mathcal{N}(...
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1answer
685 views

Elicitability of risk measures

I read that CVaR (Conditional Value-at-Risk, also Expected Shortfall), satisfies coherence, but not Elicitability. On the other hand, VaR satisfies Elicitability, but not coherence. What is ...
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3answers
504 views

What is the fastest way to decode the FAST protocol for market data?

What kind of technology are people using these days for decoding FAST? Can FPGA be used in that area?
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1answer
45 views

Interest rate on loan for purchasing Sterling bond

I am struggling trying to find out where they get the $8$% interest rate for the loan you make to purchase the Sterling Bond in the following strategy: Problem: Suppose that $A(0)$ = $100$ and $A(1)$...
1
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1answer
2k views

Historical Value At Risk on option portfolio

I am new to Value at Risk subject in fact everything related to quant. Can any body validate the Value at Risk Model on the option price ? I am using a below explained approach . our portfolio ...
1
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1answer
52 views

Hedging using relative values

Consider I have two stocks $A$ and $B$, $A$ is trading at $\$40$ and $B$ at $\$30$. The standard deviation of its returns are $\sigma_A=25\%$ and $\sigma_B = 30\%$. Correlation between the returns is $...
1
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1answer
142 views

Calculating returns for a mutual fund with dividends

I'd like to calculate returns for a given mutual fund (in this case, PRWCX from troweprice). When I look at their published performance, it says the Calendar Year Total Returns for 2013 is 22.43% but ...
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1answer
60 views

What do “Exposure Bounds” mean in Portfolio Optimization?

I've just started reading up on Portfolio Optimization models and have come across the use of exposure bounds to mitigate the sensitivity of the optimized model solution, owing to parameter estimation ...
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1answer
446 views

Cholesky Decomposition on Correlation Matrix for Correlated Asset Paths

I found a matlab example for modelling correlated asset paths: http://www.goddardconsulting.ca/matlab-monte-carlo-assetpaths-corr.html In this model the author uses the matlab code chol() in order to ...
1
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1answer
88 views

How can theta be so large on this option?

The AAPL Sep 95 put currently has a theta of -.21. The put midpoint is .84. 84/21 = 4 days. However, the put has nearly a month before expiration, at which time it will be zero. Not 4 days from ...
1
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1answer
110 views

ADR vs Foriegn Stock Price Arbitraguers

So I am sure you all know about the whole Argentina default that has been in the papers lately, no need to delve into it. This so called "technical" default has lead some interesting investment ...
1
vote
1answer
140 views

Explain drop in Correlation between two time series in consecutive periods

I have a time series for a security list with 2 parameters calculated for each time period. For example, for a stock XYZ, I have Param1 and Param2 calculated over various time periods stacked against ...
1
vote
2answers
333 views

Impact of NZD mid-day EST Roll forward

Was taking a look at an NZD spot deal that was traded on a Friday for value the following Tuesday (t+2). Somehow this trade became classified as a forward by our back office systems (dealer says they ...
1
vote
1answer
56 views

Proper way to combine wavelet coefficients from multiple rounds of analysis

I am doing signal analysis for a time series and the assumption of signal is S = F + e Where S is the original signal, F is the frequency component and e is white noise (auto-regressive time series ...
1
vote
1answer
122 views

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
1
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2answers
192 views

Non-Negativity of up-factor and down-factor in Binomial No-Arbitrage Pricing Model

Consider a stock which is trading at $S_0$ at time $t=0$ and is expected to be trading at price $uS_0$ or $dS_0$ at time t=1 where $u$ and $d$ are up-factor and down-factor. The theory says that to ...
1
vote
1answer
192 views

Selling an American call option early

I understand it is never optimal to exercise an American call option early. [1] [2] However, here are my two contradictory thoughts about selling an American call option early. Assumptions I can ...
1
vote
1answer
137 views

Company rank within an industry

I'm looking at the list of companies in the S&P 500 Pure Value Index. For each firm, I want to obtain the dividend yield industry percentile rank and the PEG ratio industry percentile rank. I've ...
1
vote
3answers
539 views

Arbitrage free implies complete market?

In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this proposition It seems that to show that the model is complete, we must show that the claims are reachable. That is, we ...
1
vote
1answer
169 views

Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim

In Tomas Bjork's Arbitrage Theory in Continuous Time (or here), $\exists$ these propositions How does the first formula follow from from the algorithm? I get that $\Pi(0;X) = V_0(0)$, but I don't ...
1
vote
1answer
76 views

How to benchmark bonds?

I am trying to find for each european bond in my database a proper Benchmark to compare them with the Bloomberg benchmarks for bonds. What i have done so far is to extract a list of all government ...
1
vote
1answer
180 views

Does a delta hedged short option guarantee profit of extrinsic value at expiration?

If a trader shorts an option and dynamically delta hedges to ensure the delta is equal to 0 if that option expires out of the money does the trader profit that options extrinsic value at the time of ...
1
vote
2answers
271 views

Which is the correct definition of arbitrage?

Spin-off from here. In Tomas Bjork's Arbitrage Theory in Continuous Time (or here), $\exists$ 2 inconsistent definitions of arbitrage, which is correct? The first definition is for the single period ...

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