# All Questions

4 views

### reference question about portfolio optimization

I know the "classical" modern portfolio theory. However I have quite a lot of different sources. It seems that there is not a book which cover this topic in a rigorous way: theory application ...
68 views

### How to deal with extreme cases in normal random numbers generation?

In order to generate normal random numbers, one usually generates random numbers following a uniform distribution $Z \sim \mathcal{U}(0,1)$ and then applies the reverse CDF function on them ...
21 views

### Opposite of Tail-Risk Hedge (Established Vocabulary)

I'm working on a client memo explaining several approaches to equity hedging, and I'm looking for a not-too-technical term for a hedging strategy where I try to keep options near the money, as to have ...
52 views

### What are the implication of a negative risk-free rate on SML?

What happens to the Security market line (within the CAPM model) when the risk-free rate turns negative?
86 views

### What is the intuition behind the fact that Modified duration = Macaulay Duration / (1+r)?

I understand the derivation of both:take dP/dR and divide by P which will give you both 1) modified duration OR 2) macaulay duration / (1+r) (notice the weighted average time built into the ...
324 views

### Testing the validity of a factor model for stock returns

Consider the following m regression equation system: $$r^i = X^i \beta^i + \epsilon^i \;\;\; \text{for} \;i=1,2,3,..,n$$ where $r^i$ is a $(T\times 1)$ vector of the T observations of the dependent ...
222 views

### Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
133 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 ...
44 views

### Infinite autocorrelation - Unit root?

I have a time series of gold prices, on which I want to build an ARIMA model. The series is autocorrelated and if I can difference as often as I want, it always is. First: data: d1gold Dickey-Fuller ...
132 views

### SVCJ (SVJJ) Duffie et. al Model implementation in Matlab

I'm attempting to implement aforementioned SVCJ model by Duffie et al in MATLAB. so far without success. It's supposed to price vanilla (european) calls . parameters provided, the expected price is: ...
49 views

### How is the price of a bond actually determined?

How the price of a bond is actually determined? Is it the supply-demand that determines the price first and then the YTM is calculated on the back of this for that bond. Or is it that the changes to ...
79 views

24 views

### How does the Bitcoin forex work? [migrated]

Does it work differently in relation to a regular forex because of its underlying technology? How can the market calculate its value?
25 views

### Questions related to the banking crisis during the European sovereign debt crisis

I am studying the European Sovereign Debt crisis and I have the following questions which I am struggling to find examples for: 1) I have heard that during the sovereign debt crisis, European ...
114 views

### How to work out weights for a portfolio based on an inverse ratio with positive and negative values?

I am trying to work out how to determine weights for the assets in order to form a portfolio. The ratio I am using is EV/EBIT, hence the smaller the better. The problem is I don't know how to handle ...
68 views

### How can I calculate Fama-French betas for a particular stock?

For a particular stock, what's the simplest way to calculate betas for the Fama-French factors SMB and HML?
17 views

### Finding Trailing Twelve Months on a month between two quarterly reporting periods [on hold]

I can clearly understand the concept of Trailing Twelve Months or TTM. However i always had a missing piece on fully understanding TTM. e.g If we have a corporation that reports on March(Q1), ...
38 views

### Calculate bond yield in python

I want to run the newton method on a large dataset to calculate bond yield. Below is the code I created using a loop. I need to run it on ~50 million lines and the loop is quite unwieldy. Is there a ...
281 views

### Robust Returns-Based Style Analysis

Sharpe's Return-Based Style Analysis is an interesting theory but flawed in practice when working with long-short funds or funds that are changing strategies over shorter periods of time due to the ...
466 views

### VaR for corporate bonds

I am trying to create a simple risk calculation for the portfolio (ignoring correlations for the moment). I have some corporate bonds with limited daily price changes. Any one have ideas how I can get ...
684 views

### How is the default probability implied from market implied CDS spreads for CVA/DVA calculation?

From point 38 on P.17 the default probability can be implied from market implied CDS spreads. "Macro Surface" method is mentioned, but I cannot get any clue of what it is? Where do I get the acedemic ...
13 views

### code assistance - how to bootstrap and plot paths with a mixed model [migrated]

I created an Arima (3,1,1) model using the steps below. I was able to create a nonparametric model, but now I would like bootstrap for the created model (model 3). Also I'd like to plot the paths of ...
197 views

### selecting test data for neural networks

I have been working on a neural network based on certain technical indicators. As people familiar with neural networks would know after developing a hypothesis, the developer is also supposed to ...
36 views

### list of ADR's by volume or market cap

I'm looking for a list of ADR's (for a simulation) that I can screen by either market cap or volume? If anyone knows of a free way to get such a list it would be much appreciated.
131 views

### Handling Missing values in stocks returns when estimating the co variance matrix

What is the best way to handle missing values when stocks did not exist for the entire historical period?.
171 views

### What Is A Good Success Rate Using Machine Learning For A Beginner?

I know this question will be quickly destroyed and my account summarily banned, but I just have to ask: For a trader using machine-learning algorithms (SVMs, ANNs, GAs, Decision Trees) for ...
1k views

### How to estimate real-world probabilities

In the world of finance, Risk-neutral pricing allow us to estimate the fair value of derivatives using the risk free rate as the expected return of the underlyings. However, the behavior of ...
42 views

### forecasting crash time of KLSE index (1991-1994)

Price deviation = financial bubbles. i try to fit the following stock price index to predict recession. I couldn't fit the model with the data(Data are not available in yahoo finance for the ...
17k views

### What's the difference between volatility and variance?

How do they differ in what they imply about an underlying's (or any variable's) movement?
100 views

### Is stock price priced in the uncertainty?

Consider a one step binomial tree model for stock price. The classical setup is as below: At time $t=0$, the stock price is $S_0$. At time $t=1$, the stock has probability $p$ to jump up to price ...
102 views

### ETFs have lower tracking error than Futures?

I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ...
32 views

### Correlation of Dividend Yield Index/Stock

I need your experience and intuition about dividend yields. Indeed, I would to know if the dividend yield of and Index is correlated with the dividend yields of it's componenets separately? The ...
44 views

### Math basics of Equally-weighted Risk contributions

i'm writing my BA Thesis about "Equally-weighted Risk contributions". Can anyone recommend math books for further understanding of Risk contributions?
646 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 ...
269 views

### How to compute the Radon-Nikodym derivative?

Suppose $B(t)$ is a standard Brownian motion, and $B_{1}(t)$ is given by $dB_{1}(t)=\mu dt+dB(t)$. Suppose $P$ is the Wiener measure induced by $B(t)$ on the $C[0,\infty)$, and $P_{1}$ is the Law ...
38 views

### Where Can I Find Risk Modelling Functions? [on hold]

I'm looking for functions that take the historical value of an asset as the input and return how much risk/uncertainty is associated with the investment. I've been searching for a while but haven't ...
164 views

### interpreting huge jumps

i have been working on this trading system that uses digital filters to generate signals. the system works fine during normal market hours. but it goes haywire when there is news release. i have ...
51 views

### Logic behind Gordon Growth Model in a DCF analysis?

Sorry, I wanted to ask this on the finance/money forum, but they don't support LaTeX there. Let's say we are valuing a company using the DCF methodology with a 5-year projection period. We project ...
960 views

### Modelling with negative interest rates

For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...

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