# All Questions

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### How to show that the exponential Vasicek model is not an affine term-structure model?

From the pricing formula, we know that the value at time $t\in [0,T]$ of a zero coupon bond maturing at time $T$ is $$B(t,T)=E\left(\exp{\left(-\int_{t}^{T}r_sds\right)}|\mathcal{F}_t\right).$$ ...
30 views

### What does it mean for an option strategy to be leveraged

Probably a newbie question, but what do traders mean when they say that an option strategy is leveraged ? And when can we say that it is the case ?
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### Girsanov Theorem for Quanto/Compo adjustment

Assume that I have a foreign asset $Y_t = Y_0 \exp((r_f-\frac{1}{2}\sigma^2_Y)t+\sigma_Y W_t^1$ and an exchange rate $X_t = X_0 \exp((r_d-r_f-\frac{1}{2}\sigma^2_X)t+\sigma_X W_t^2$. I would like to ...
149 views
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### Options Data Sources

I am using Option Metrics to study a couple of things related to options. However, Option Metrics is quite limited in terms of scope (mainly it's US equities). I was wondering two things: 1) Are ...
18 views

### trading equities on options data

Obviously, not asking for a trading strategy, but do people successfully use options data to trade equities intraday? What's the general framework for such strategies?
7 views

### How to trade the Ornstein-Uhlenbeck process?

My question comes from this paper, which is a short version of Avellaneda's paper The picture bellow provides a summary of the equations. Do I understand correctly that in order to trade OU process ...
34 views

### Vasicek model problem

I am analyzing a problem where the below is given Vasicek model with risk-neutral dynamics $$dr_t = \kappa (\theta - r_t)dt + \sqrt{r_t} dW_t \quad \quad (1)$$ bond prices ...
62 views

### Why Is Bond Time Value Risk Not Considered in Bond Immunization?

I know bond portfolio immunization includes duration and (if the hedging period is longer) convexity matching. These are equivalent to taking the first and second partial derivatives of the bond ...
1k views

### How to exploit calendar arbitrage?

Say we are looking at European Call options in a toy environment with zero deterministic intereset rates, a stock paying no dividends, no repo rates etc. Let C(T,K) be the price of a call with expiry ...
15 views

### How can I set buy and sell price for testing my automatic stock trading system? [on hold]

I'm testing my automatic trading system in stock market (data mining system). I'm modeling day by day for 30-days and calculate profit in every step. Suppose that my system predicts tomorrow close ...
16 views

### Modelling log-returns and calculating the portfolio return

I know this might be a trivial question, however, I would be grateful for some clarification. I am working on weekly log-return data, doing volatility-foracasting using GARCH models and then using ...
44 views

### Option delta - Conditional probability definition?

Can someone help me interpret this definition of delta? Delta is a conditional probability of terminal value (St) being greater than the Strike (X) given that St > X for a call option. Is the ...
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I'm trying to implement Andersen and Broadie's dual method for an upper bound (here) of a regular American Put. I understand the process to compute it, but I have a conceptual issue : everything ...
349 views

### Do efficient market hypothesis and random walk theory convey the same concept?

According to investopedia efficent market hypothesis is The efficient market hypothesis (EMH) is an investment theory that states it is impossible to "beat the market" because stock market ...
23 views

### Quanto/Compo adjustments - Product of two geometric brownian motion

Let's say I have two processes $X_t =X_0 \exp((a-\frac{1}{2}\sigma_X^2)t +\sigma_X dW_t^1)$ and $Y_t=Y_0 \exp((b-\frac{1}{2}\sigma_Y^2)t +\sigma_Y dW_t^2)$ and I then multiply them together (like ...
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### What is the best / most used / recommended C++ non-blocking networking library for low-latency / real-time development?

I'm coming from Java and there we use the EPoll selector implementation that comes with the JDK for non-blocking / asynchronous networking TCP and UDP development. Therefore you don't have to make ...
134 views

### Transforming 3M volatilities into 6M volatilities in EUR forecast curves

I have implemented a stripping algorithm to extract forward volatilities from cap/floor flat volatilities for different currencies. I am however struggling a bit when implementing a method to convert ...
106 views

### Where to find good notations to teach investment portfolio maths?

I don't know whether this question is in order here. I do a bit of teaching and I am preparing my own notes but I thought that his should not be necessary. In which book/pdf on the web can we find a ...
9 views

### model to predict variable evolution [migrated]

Suppose that I have a set of variables X1 X2 and X3 that explain the evolution of a ...
36 views

### Fitting Copula and Simulation

I would greatly appreciate any insights into the problem described below, regarding using the data obtained from applying the functions of the 'rugarch' package into those from the 'copula' package. ...
17 views

### Control over finance [on hold]

I don't know if this the right site to ask, so I hope you guys can direct me to the appropriate site if I'm wrong. My question is, Is it possible for a man or a company to control at least 50% of ...
181 views

### Who Uses American Options?

...in other words, why would a person want to have the right to exercise an option early? What advantage does that really give you? Are Euro-style options not good enough for some people? Who are ...
47 views

### Interpolation of forward zeros-coupons bonds simulations for missing maturities (ESG data)

I have a set of economic scenarios simulated with Barrie and Hibbert ESG. The stochastic model for interest rates used is Libor Market Model Shifted. I am facing a problem with zeros-coupons prices. ...
135 views

### Execution quality for illiquid securities

The SEC's execution quality statistics measurements (Rule 605) arguably does a poor job at measuring the execution quality of ...
11 views

### Quantlib xll - Converting deposit/swap curve to zero curve

I am trying to create a spreadsheet using the Quantlib xll to convert deposit/swap rates to zero rates. I tried to implement such by referencing to the C++ code listed here: How to sum interest rate ...
27 views

### SABR Calibration: Normal vs Log-Normal Market Data

This question is about getting some clarification as to how to understand market quotes for normal & log-normal vols together with certain model assumptions. So let us define ...
34 views

We are working under complex enough distributed trading system where several components will run on different physical machines. Unfortunately, I'm stuck on part backtesting part. Originally we was ...
171 views

### Issue with OLS Regression for Nelson Siegel Svensson parameters

I have been working on getting input parameters to the Non-Linear Optimization which gives the Nelson Siegel Svensson model parameters and am carrying out the OLS regression as described in this ...
17 views

### Why NYSE is not included in TAQ data for NASDAQ listed companies?

I am using TAQ data to see from which exchanges bids (or asks) are coming. I have got this for AAPL (Apple company, listed in NASDAQ) for a sample day: ...
41 views

### if I had a 1M spread option. Would you say that was 1m notional (for IM purposes) or 1m pay + 1m rec i.e. 2m notional?

if I had a 1M spread option. Would you say that was 1m notional (for IM purposes) or 1m pay + 1m rec i.e. 2m notional?
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### Daycount Actual/Actual AFB example

This question is about the following example in Wikipedia about time factor using the Actual/Actual AFB daycount. Assume that the $t_1=\text{28 Feb 2004}$ and $t_2=\text{29 Feb 2008}$. There are ...
24 views

### approximating fBm sotchastic integral

Suppose I have the following stochastic integral: $$\int_a^b f(t)dB_H(t)$$ with the term $dB_H(t)$ a fractional brownian motion with associated $H$ parameter. Is it true that for $H \in (1/2,1)$, ...
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### Is the money market account (MMA) numeraire and the forward measure equivalent?

Suppose we have a risk-neutral measure $\tilde{\mathbb{P}}$. The money market account is given as $M(t) = e^{\int^t_0 R(s) ds}$, while the price of the zero-coupon bond at time $t$ that matures at $T$ ...
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### how to choose a price adjustment, a roll date and a data center for my trading strategy?

I have many doubts about Which roll date and price adjustment should I use. I need to backtest like 50 diferents futures. 6 index(mini sp500, Nikkei 225…), 10 Agriculture (soybean, Oat, Corn….),3 ...
25 views

### Interest rate modelling [on hold]

Assume that the price of a stock is given as where rt is the interest rate process in the Ho & Lee model and Bt is a second Brownian motion, which is correlated with the Brownian motion ...
22 views

### Local and Stochastic volatility [on hold]

a.What is a volatility surface and how does it point in general to the limitations of the Black-Scholes model? Discuss. b. Describe the algorithm based on the Newton method to compute implied ...
36 views

### Design models using adjusted or unadjusted stock prices (time series prediction)?

I'm creating a predictive model for closing price of stocks (using neural network and support vector machines.). Is it appropriate to use adjusted prices or unadjusted prices for this prediction ...
23 views

### Initiating new orders with active “order-session” only?

Is it a must to establish "quote-session" & subscribing to quotes/market data before initiating a "New Order-single(Market-GTC)"? I actually can't see any use of quote-session for trading ...
10 views

### Global Min Var Portfolio Weights for each period (restricted model) [on hold]

I have daily returns for 5 assets from 1990 to 2015. I am trying to see the evolution of the weights for the Global Min Var Portfolio with 2 restrictions: 1) all portfolio weights are strictly ...
29 views

### How to choose a GARCH model which delivers iid standardized residuals?

For my thesis I first need to examine nine financial time series and fit a conditional volatility model such that the obtained standardized residuals ($z_t = \epsilon_t / \sigma_t$) are approximately ...
159 views

### Augmented Dickey-Fuller Questions

I've been searching in bibliography about this test applied to an AR(p) model. $$Q(L)(Y_{t})=c+\epsilon_{t}$$ Where L represent the Lag Operator and $Q=1-\phi_{1}x-.....-\phi_{p}x^{p}$ is the ...
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### Is there any wordpress widget that i can add on my website for customized stocks? [on hold]

Is there any wordpress widget that i can add on my website for customized stocks? Because so far from what i have searched, all the stock tickers widgets are using data provided from Google Finance, ...
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### Mathematically: How does increasing the number of assets reduce idiosyncratic risk?

As part of an Asset Pricing Module I'm currently taking, whilst looking at APT Ross (1974), we looked at how according to this model, risk originates from both systematic and idiosyncratic asset ...
Let ${(I_t)}_{t\geq 0}$ be a stochastic integral defined by $$I_t=\int_{0}^{t}\theta_sdW_t,$$ where $W$ is a standard Brownian motion defined on \$(\Omega,\mathcal{F},{(\mathcal{F}_t)}_{t\geq ...