# All Questions

3 views

### Standardized and Advanced IRB together

Is it possible to use Standardized approach and AIRB together for the same asset class? For example sovereigns see a risk weight of 0% if AAA, but in AIRB they might not be seeing 0 weight. Is it ok ...
7 views

### Extracting IB market data: bid and ask for greeks and IV

I wrote a piece of code to get option chains with volatility and greeks from IB market data. After testing yesteday, it seems to work, but I am surprised of seeing bid and ask for impliedVolatility ...
4 views

### CDS spread scenarios from historical market data

I'm searching for information on the best way to generate scenarios to be used in VaR or ES calculations, for CDS spreads. Given that we need significant historical data in order to achieve a decent ...
6 views

### Clarification of The Market Portfolio

I am currently reading John C. Hulls' "Risk Management and Financial Institutions" and came across the following passage related to the efficient frontier and combinations of risky and risk-free ...
3 views

### Is Market OPG an efficient means of entering positions at historic daily open prices?

This question pertains to backtesting a strategy against historic daily data. If a strategy is devised using such data, is Market OPG a reasonable way to enter positions? Expanding, the question is ...
3 views

### Modelling prepaid commodity swaps

I'm somewhat new to derivatives, so please forgive a potentially silly q: Suppose there is a VPP agreement (volumetric production payment) which is basically a prepaid commodity swap. The financier ...
11 views

### Is there an error in this problem on pricing an asset using the true probability of an up move?

I'm self-studying for an actuarial exam and I encountered the following problem: The true probability of an up move, $p$, must satisfy: $$p = \frac{e^{{(\alpha - \delta})h} - d}{u - d},$$ where ...
25 views

### Risk-Neutral Probabilities, Trinomial Model

My professor has many grammatical mistakes and errors in his questions, so apologies ahead of time. I am just trying to understand what he wants for this question, In trinomial model, let $S_0 = 1$, ...
21 views

### Stock valuation/stock pitch and CAPM

If you were valuing a stock (say to pitch a stock for the buy side), you are looking for stocks that the market has mispriced. Your aim is to have a profitable long or short strategy. Can you use the ...
12 views

### Faster way to backtest/Walkforward

I am currently using Ninja Trader to program and test my strategies and the forward testing in very time intensive. I am thinking of writing my own code in either c++ or c#. The question I have is ...
30 views

### Delta of an option in two cases

Let C be the prime of a call in fi=unction of the price in term F, Strike K, volatilité $\sigma$ and maturity t: $C(F,K,\sigma,t,r)$ We assume that we know $\delta$ ...
40 views

### How to determine volatility for private company for Black-Scholes

I am trying to determine the volatility to use Black-Scholes to value some warrants for a private company. Very few comps are public or they are large diversified businesses. Any thoughts on how to ...
16 views

### Correlate the G2++ with a GBM model

In Matlab one can use the LinearGaussian2F function together with the simTermStructs function to create a simulated zero curve based on the G2++ model. Next to simulating the interest rates I need to ...
47 views

### Dollar-Neutral Strategy

Here is an excerpt from E. Chan's book Quantitative Trading, However, if the strategy is a long-short dollar-neutral strategy (i.e., the portfolio holds long and short positions with equal ...
21 views

### White's reality check p-value

I am running a hypothesis test based on White's reality check p-value. I am getting a weird result for my univariate time series of returns. In essence, I am following a code on MATlab to run the test ...
21 views

### How do you replicate a geometric index?

For example Value line composite index
28 views

### Metastock end of day data to Python

I'm thinking of getting End of Day stock prices from Metastock, but was wondering if it would be possible to have Python to automatically extract the stock prices and store it in a SQL. Would that be ...
28 views

### demonstrate that a Square-root process is Non-central Chi-squared distributed

how can i prove that the value at some future time $t'$, $x_{t'}$, of the Square-root process at current time $t$, $x_t$, is Chi-squared distributed? $dx_t = k(\theta - x_t)dt + \beta \sqrt{x_t}dz_t$ ...
16 views

### Horizon effects on Correlation Estimation

I'm wondering what the effects of downsampling time series' can have on estimating their correlation and how this horizon should be chosen in relation to rebalancing frequency. An example would be if ...
16 views

### Properties of optimization under shortfall constraints in R

Properties of optimization under shortfall constraints in R. Hi, I'm having trouble optimizing a portfolio for a school project, which has been bothering me for a week. What I want to do is to ...
26 views

### Is the value of fixed swap leg independent of X, where the Floating Rate is say, LIBOR minus X%?

In my texts of swap valuation, the fixed leg is decided by calculating the following equation, say for a swap agreement where: Fixed Leg : $s(1)=s(t)$ Floating Leg : 1 year LIBOR - 25bps Term = 2 ...
11 views

### Reference Request: Portfolio Optimization Conditional on downside threshold

Under a standard portfolio optimization framework we have some idea of a predictive return distribution $r_{t+1}$ and a Utility function $U(r)$, in the best case in a 'nice' form (differentiable ...
30 views

### How were the probabilities of recession over the next four quarters calculated in this table?

http://www.bloomberg.com/news/articles/2016-02-08/goldman-sachs-says-defy-mr-market-as-recession-risk-still-low The probability of a slump in the U.S. is just 18 percent and 23 percent over ...
34 views

### Market with exponentially distributed random variable

Consider a market consisting of a stock with $S_0^1=1$ and $\log(S_1^1)=Z$, where $Z$ is an exponentially distributed random variable. $S_0^1$ denoted the prices of the stock $1$ at time $t=0$ and ...
34 views

### What is the formula for variance in estimating exchange rate?

I was watching this Youtube Video. He used a exchange rates of Euro to Dollar for a few days and apply GARCH(1,1) to get the predicted price. However, I didnt understand variance that he calculates ...
118 views

### Ito Formula for Stochastic Integral

Suppose I have $$dS_t = \mu(S_t,t) dt + \sigma(S_t,t)dW_t$$ What would be the process satisfying the following process of $y_t$? $$y_t = \int_0^t S_u du + \int_0^t S_u dW_u$$ I'm not quite sure ...
15 views

### Are there good off-the-shelf coding implementation of trade classification algorithms?

Including Lee Ready and bulk classification methods, as well as any other method. To be clear, I'm asking for code, not just a description of the algorithm.
27 views

### method/technique for finding arbitrage

I was able to solve this problem and find the arbitrage but only after spending a long time on it and trying out different possibilites, is there a method or technique that can help me find the ...
83 views

### What is the theoretical expected growth in an option's value over a given period of time?

Say an option with five years left before maturity has a value of $x$ today. Theoretically, under the B/S framework, what is its expected value in five years (upon maturity)? Do we assume it will ...
47 views

### dynamic Markowitz portfolio

Let's take 4 assets, whose values are known during a period of time of 2 years. Then I calculate the expected returns for each of these 4 assets thanks to these 2 years - historical data. I deduce the ...
19 views

### Range accruals - distribution of $n/m$

Say we are pricing a range accrual that pays $4\% * n/m$, where $n =$ # days in the period where libor $>3\%$, and $m =$ total # days in the period. Assume that we have a flat forward curve at ...
32 views

### Delta hedge compound option

Delta hedge portfolio should be adjusted from one period to the other, as the ratio changes. How does it work with compound options though? Suppose, I have a put on a call option on a stock, in 2 time ...
20 views

### Equivalency of FX forwards and FX fixed for fixed swaps? Are they still the same under multiple curves environment?

I am encountering two approaches for valuation of FX swaps (fixed for fixed, e.g. fixed USD payments for fixed EUR payments) which seem to result into different values although in theory they should ...
58 views

### Appropriate measure of risk if return are not normally distributed

Normally standard deviation of an assets is used as an proxy for the risk in the financial market. In reality distribution of return is more peaked at the center and higher mass in the tail as ...
10 views

### Is order flow imbalance more or less correlated with price movements at slower frequency?

Suppose I define order flow imbalance as volume(aggress buy)/volume(aggress sell), or some variant of that. Is this variable more, or less, correlated with price movements when I sample less ...
15 views

### Analytical Bond Price under Rendlemen-Bartter?

Assuming the short rate $r_t$ follows the risk-neutral (so $W_t$ is a $Q$-Brownian motion) process $$dr_t = ar_t dt + \sigma r_t dW_t,$$ does anyone know of an analytical bond price formula? We ...
41 views

### Why QuantLib assumes zero rates to discount factor is continuous?

https://github.com/lballabio/QuantLib/blob/0ec43027834220baf0a554d68de79a159a2c5489/ql/termstructures/yield/zeroyieldstructure.hpp ...
24 views

### Is an FX forward with delayed settlement still a derivative?

As an example: Trade date: 1/1/16 Maturity date: 2/29/16 Settlement (exchange of currencies) 3/31/16 Is the instrument between 2/29 and 3/31 still deemed a forward? The forward rate is determined so ...
21 views

### Bank discount yield and money market yield

I have a question regarding Bank Discount Yield and Money Market Yield for US TBill. Some books mentioned that ...
18 views

### US Bond vs Russian Bond [on hold]

From a neutral point of view : Do you prefer investion in a US Bond or Russian Bond ? I would say US Bond !! But is there any strong argument that permits us to answer ?!
26 views

### Binomial Model, Number of nodes from $t = 0$ to $t = n$

How many paths are there in a binomial model from time $t = 0$ to time $t = n$? How many nodes (states) are there? Intutively it seems that there are $2^n$ paths and $2n - 1$ nodes. But I am not sure ...
51 views

### Difference in implied volatility calculation

I've been using vollib to calculate IV, but my answers have been different by tenths from other sources like NASDAQ and Yahoo. The answers range +- 0.5, sometimes even more. The inputs are: $S$ ...
47 views

### Which studies should be replicated?

The ReplicationWiki provides information on replications and the availability of replication material for published empirical studies. It can be used for research, to build on previous studies, and ...
15 views

### Are there alternatives to the Box-Tiao decomposition in identifying mean reverting portfolios?

As documented in this paper, Box-Tiao decomposition (a way to decompose multiple time series into components with different speeds of mean reversion) can be used to identify mean reverting portfolios. ...
19 views

### Which obligation choose [on hold]

I have 6 different obligations: A: coupon 4% Maturity 10 years. B:coupon 4% Maturity 15 years. C:coupon 2% Maturity 10 years. D:coupon 2% Maturity 15 years. E:coupon 0% Maturity 10 years. ...
29 views

### Historical volatility on bloomberg API

Is there a way to obtain the historical volatility of a stock from the bloomberg API? I would be looking for the data in the HVT table. Actually 3-months historical volatility from now would be ...
36 views

While calculating insider abnormal returns, closing prices of securities are generally used. We take the actual ex post return of the security i on time t, minus the expected normal return for the ...
41 views

### How necessary is real analysis and complex analysis for trading at hedge fund levels?

As the title states, I am basically wanting to know the applications of real/complex analysis in finance. How important are such high levels of math ? I can obviously see how things such as ...