# All Questions

166 views

### Estimate weekly, yearly quantities from finite samples

I'd like to estimate from a daily prices serie $P_t$ with $N$ observations a quantity such as the variance of the weekly returns. I will use $\ln\left(\frac{P_{T+5}}{P_T}\right)$ assuming 5 days in a ...
126 views

### Calculating company-level market capitalisations from share quantities and values

I want to calculate company-level market cap values for stock exchanges listed by Bloomberg. I gather this can be calculated as the product of share price and the total of shares in circulation. But ...
96 views

### Intangible assets as underlying for Futures contracts

How is it possible for a Futures contract to have an intangible underlying? For example, to my knowledge, there exist Futures that have interest rates as their underlying, come delivery date, how is ...
213 views

### Price difference between bond cash and futures

I used to trade German and US govt. bond futures and I am now having trouble understanding the price difference of these markets against the cash market. For example, the 10 year german government ...
191 views

### Cloning Return Streams

How would one go about cloning/replicating returns of a hedge fund or a strategy. That is given a return series of the object to be clone, is it possible to decompose return and reconstruct another ...
627 views

### Why is delta-hedging of ATM options near expiry difficult to do? [closed]

Can someone explain to me why the delta-hedging of ATM options near expiry is difficult?
382 views

65 views

### Log daily returns of multiple securities for multiple time period in R

I have dataset containing daily closing prices of 5413 companies from 2000 to 2014. I want to calculate daily log returns for the stocks as according to dates as log(Price today/Price yesterday). I ...
97 views

### How to estimate today's closing price?

I'm working on interday trading algorithm and I have a basic question: How can I estimate today's closing price? I need it to predict tomorrow closing price. Should I use the price few moments before ...
58 views

### What is the current state of microstructure/order book analysis?

I know it's a broad question, but I'm curious as to the current state of microstructure analysis, specifically whether there's anything 'actionable' that people have discovered. Would also be ...
35 views

### Why is the forward rate used for the underlying in Black's model?

Why is the forward rate suitable for being used as the underlying in Black's model? Thanks
25 views

### Why debit and credit impact differently on different type of accounts?

Here is a table that I found in one of the accounting book: ...
65 views

A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM. A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
112 views

### How to estimate variance-covariance matrix of assets with different length of historical data? [duplicate]

Consider you have 4 assets A, B, C and D, where Asset ...
71 views

### Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
35 views

### Why does the credit exposure of a forward increase with time

According to Gregory, the most obvious driving force behind credit exposure is future uncertainty. He characterizes the credit exposure of a forward contract as increasing with time; where exposure is ...
59 views

### Can a large OpenInt of calls cause a stock to go down?

I read forum post from another site. Which stated... ...
69 views

### Multiplying by the Square Root of Twelve to calculate annual standard deviation

I failed to see the mathematics truism. Can someone care to elaborate.
76 views

### How difficult/easy it is to migrate from CME FAST to CME MDP3.0?

Has anyone gone through this migration? Just wanted to have an idea of the amount of effort required.
101 views

### Legitimate input parameters for Nelson Siegel Svensson model

I had previously asked this question and have come to better understand the answer with regards to setting the input parameters for the Non-Linear Optimization problem that provides the NSS ...
177 views

### Setting input parameters for Nelson Siegel Svensson model

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non-Linear Optimization problem to do this. I am trying to solve:  \min_\theta{\sum{(p_i - \hat ...
35 views

### European option and American option are equivalent in this case?

This is Question No.11 from 2007 May MFE Exam. For a two-period binomial model for stock prices, you are given: (1) Each period is 6 months. (2) The current price for a nondividend ...
78 views

### Binomial pricing model: When the Cox-Ross-Rubinstein assumption is not arbitrage-free

I understand that in an arbitrage-free Binomial model, we assume that $S_{t+1} = S_t \cdot u$ in the event of an up-jump and $S_{t+1} = S_t \cdot d$ in the event of a down-jump. We call $u$ and $d$ ...
90 views

### A Difference between Local Vol and Stochastic Vol Models

For the purpose of this question a local vol model is a 1d SDE which specifies the price process and we have a contingent claim that depends on those prices (in general, at multiple times). e.g. ...
217 views

### Fama French 3 Factor Data

I have a trading strategy that uses the Fama and French 3 Factor data. It's provided on French's website up until the previous month or so. And indeed, this is a great source of data. The only ...
594 views

### Principal Component Analysis and Yield Curves

I've been tasked with researching trading strategies relating PCA to trading fixed income futures instruments. Apparently PCA is frequently used in this area. I'm just looking for some references for ...
2k views

### Implied probability from CDS spread

I have two tasks: 1) Given country's CDS spread draw implied probability of default. 2) Given probability of default calculate CDS spread. If possible, refer to any papers. Thank you in advance.
286 views

### VIX options historical data

I'm looking at these data: call and put options on VIX. I'm interested in daily quotes (all strikes and maturities) for - at least - 2009/10. Could you list link of possible sources? and possibily ...
2k views

### Par Yield Curves vs Zero Curves

Does it make sense to look at par yield curve for German bonds in the current environment? Because low rates mean that a lot of bonds are trading above much above par (even around 150!). I would ...
136 views

### Do people actually use VaR in professional settings?

VaR seems like such an obviously flawed metric, I am surprised that it seems to be used so much in the private sector. First, the way it is named and the way it is presented often imply it is the ...
224 views

### Level II market data (equities)

I have been playing around with some equities historical market data and I understand that different exchanges have different definitions of what Level II (Limit Order Book) data means. What I'm ...
217 views

### Why most of apple stock price since 10years have been gained overnight?

I've been playing with stock data and I've discovered a terrible truth : in 10 years apple stock price passed from roughly 3\$to 100$. However this gain isn't due to intraday price variation ...
225 views

### What data should be used for regression-based model backtesting?

I ran regressions using historical valuation data and now want to backtest the models I came up with. Are there any issues with using the same historical data set for the backtest that I need to be ...
241 views

### Can selling put equity options be a good business?

In one of his last books Jack D. Schwager suggested that selling equity puts can be a good business. The puts are like insurance policies against market downturns and there is a natural demand. ...
417 views

### How to create a model or formula for evaluating trade opportunities

I want to build a formula to produce a score for a potential trade based on 4 variables, time, return, liquidity of security, and probability of failure. For a set of potential trades I first ...
199 views

### Book recommendation for time series analysis

I have been trying to wrap my head around Engel-Granger test and jcitest etc. I have failed thus far. If possible can someone guide me about which books to start with and possibly reach to ...
65 views

### Is there any relationship between investment return of a stock, for individual year (Yearly return) and multiple years (Overall annualized return)

currently, I'm calculating the return of a stock, for individual year and multiple years. I tend to answer the following question. Return of a stock for end of year 2010 (Individual year) Return of ...
174 views

### Divergence between binomial pricing and monte carlo simulation for vanilla european call?

I notice a divergence in my own code, but it's evident even in public code: http://www.thalesians.com/finance/index.php/Knowledge_Base/Finance/Option_Pricing_in_Python_and_Simple_English Pricing a ...
283 views

### Trading days or Calendar days for Compound Annual Growth Rate?

When calculating CAGR for intervals shorter than a year (or intervals that are longer than, but not integer years in length), should you use the 252 trading days or the 365.25 calendar days? The ...
159 views

### Why long power and short gas for Merchant power plant

Merchant power plant is one that can be turned on whenever you want. Suppose it is generating electricity from natural gas and we have a spark-spread option. Why is that the person who owns plant is ...
56 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.
194 views

### Use of geometric mean for average return of several indices

Can anyone give any reference for using the geometric mean to average the returns from several indices? Note, this question is not about the usual use of geometric mean to obtain the average return ...
83 views

### Wiener process proof

Can someone prove to me how $dW_t=W_t-W_s$, where $t=s+1$, the difference of the Wiener process eventually equates to $dW_t=z*(dt)^{(1/2)}$ where $z$ is standard normal, $N(0,1)$ in the following ...
I am sorry if the following question is not quantitative finance. I am reading this thing badly written lecture notes, which says $W^r_1 \equiv W_1/P_1^g = (W_0^rP_0^g)(1+R)=/P_1^g$ \$(1+R^r)\equiv ...