# All Questions

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### Why theta multipled by days to expiry exceeds the total time premium of the option

Sometimes, I find an option where the total time value of the option may be 5 cents(rest is intrinsic value) and there are about 15 days to expiry and theta is .08 (8 cents). How is this possible. If ...
14 views

### Assessing stock price movement from implied volatility

If: Underlying is at 100 Implied volatility of ATM call/put is 30%. Then expected 1 standard deviation move over the next month is calculated as:(100 * .3)*sqrt(30/252) = 10.35 points. Is this ...
5 views

### How do estimate parameters of geometric brownian motion with time-varying mean?

Does anyone know how to estimate $A$, $\sigma_1$,$\sigma_2$ from the following system? $$dx = \mu_t x dt + \sigma_1 x dB_x$$ $$d\mu = A(\bar\mu - \mu) dt + \sigma_2 dB_\mu$$ Variation in $x$ could ...
41 views

### Risk minimization by investing in all assets with positive expected return

Suppose I have an amount $T$ to invest and $N$ available assets. The stochastic return per invested unit of asset $i$ is $R_i$. The variance and the expectation of $R_i$ are $\sigma^2_i$ and ...
3 views

### What is an appropriate algorithm to use for tax loss harvesting?

I've been reading into how Betterment and Wealthfront have architected their tax loss harvesting algorithms, but they stop short of providing any real examples. Essentially, they both reduce to: ...
676 views

### how to calculate a cross-currency swap in basis pt?

This question has been bugging me for awhile now and I've been trying to find a definite answer, however, no avail... My question, in specific, relates to the USD/CNH CCS rate. From what I understand ...
60 views

### Deriving the definition of stochastic integrals with respect to Ito processes from first principles

When I first encountered the definition of integrals with respect to Ito processes (Shreve's Stochastic Calculus for Finance Vol II), I didn't think twice. However, I wanted to see if the definition ...
75 views

### Impact on bid/offer due to volume/size of trades placed

When observing bid/offer in the market I came across a question. How much trading a bond would impact its spread for subsequent trades ie. what is the impact on bid/offer due to volume/size of ...
30 views

### VIX Futures data: why happen to have settle price > 0 and Volume = O.I. = 0

This question is about something observed hands on data that makes me a little confused. Consider the term structure of futures on VIX of Monday, December 27, 2010. You can find it at the CFE market ...
34 views

### Q regarding amortization of 500,000 loans

I am brand new to this forum. I asked this question on the main StackOverflow site and it was suggested that I ask here. My task is to find a method to quickly calculate the monthly cash flow on ...
44 views

### How to calculate implied volatility smile of basket using correlations?

For a basket, the realized volatility can be calculated using: $$\sqrt{\sigma_1^2 + \sigma_2^2 + 2 \sigma_1 \sigma_2 \rho}$$ If I have the volatility surface of two underlyings S1,S2 (strike space). ...
42 views

### How to get around flat likelihood function when calibrating GBM parameters

(Hope this is the correct place for this question - I posted it first on stackoverflow:) I want to calibrate jointly the drift mu and volatility sigma of a geometric brownian motion, ...
463 views

### Johansen Cointegration Test

I just performed a Johansen Co-integration test on two stocks. The results I get are: ans = r0 r1 t1 true false I am using Matlab. Can ...
718 views

### Derivation of Ito's Lemma

My question is rather intuitive than formal and circles around the derivation of Ito's Lemma. I have seen in a variety of textbooks that by applying Ito's Lemma, one can derive the exact solution of a ...
62 views

543 views

### Bond Portfolio Immunization - Duration Matching

**Question is at the bottom** Suppose you have a portfolio of bonds A, B, and C with the following characteristics: (the "Frequency" column is the # of coupon pmts per year and also the # of ...
78 views

### Where can I find a guide to implement the FAST protocol from scratch having already a FIX implementation ready?

I need to implement a FAST engine from scratch without using any open source or commercial FAST implementations. The FAST spec does not help much so I am not sure from where to start. Have anyone done ...
29 views

### portfolio optimization with uncertain returns

What is the usual method of dealing with many uncertain mean returns in portfolio optimization? For example say you have a 3 asset portfolio with assets A, B and C. All the correlations and variances ...
31 views

### Does a call calendar lose its entire value if underlying increases well past the strike?

If I buy a call calendar spread, and the underlying increases, both options are in the money by the expiry of the short call. So both options increase in value, but the short one increases less ...
41 views

### PEGY Ratio: Does it make sense?

PEGY ratio is calculated as PE ratio/(Earnings Growth Rate + Dividend Yield). Putting aside the discussion of whether forward or trailing P/E ratio should be used, isn't adding dividend yield over ...
86 views

### Combine together different strategies in one portfolio [on hold]

Hi I have generate equity of my strategies which invest in commodities and currencies at daily interval. What the best method to combine together all strategies in one portfolio? I want to make the ...
56 views

### Convert a call spread to a butterfly to mitigate risk

I do not have a source for this (apologies), but sometimes, I hear about option traders initiating a vertical spread(short) and then converting that call spread to a butterfly spread to mitigate risk. ...
483 views

### Documentation of the ISDA CDS standard model

I have to validate the use of the ISDA CDS standard model. Don't understand me wrong - I am sure that the ISDA model is "good" I just need to know what it is in detail. I can download an ...
285 views

### Empirical copula

I am trying to find the empirical copula linking two random variables $X$ and $Y$. I have some data available but it's limited with respect to the variable $Y$ and I am not convinced it's enough data ...
55 views

### Are there industry standards form market data server and real time linux kernel?

I'm wondering if there is some standard in the industry about the version of the linux kernel of a computer to run a market data engine on it. (market data engine = connect to brokers, subscribe to ...
62 views

### Order book Limit Order book

I am trying to make a Limit Order book from an ITCH file using r. what is the basic difference between orderbook and limit orderbook? R has a package for orderbook I think
76 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 ...
7 views

### Is there a difference between annuity and actual interest rate payments? [on hold]

I read in some books about annuity repayments and actual interest rate payments. However, I think both concepts are quite similiar or describe even the same? Is there a difference between the ...
175 views

### Which interest rates to use for options pricing?

I am looking at the historical treasury interest rates and am uncertain which rates would be best to use for options pricing. Should I use 1 month, 6 month, 2 year? See: ...
156 views

### How to apply Elliott wave priciple to any Time Series?

I'm strongly interested to computing Elliott Wave to any given Timeseries. Does anybody tried? Is there any phython library to do that? I'm looking for an algorithm taht if I give to it a time ...
110 views

### How to compute the VaR for European Call, using the delta-normal method?

I have a European call option with current stock price $S_0$, strike $K$, risk-free rate $r$, volatility $\sigma$, and time to maturity $T$ years. I assume that the stock price at time $t$, which is ...
25 views

### Stochastic control (HJB) for wealth process involving stopping times

Given a wealth process that evolves as $$d w_t = r w_t dt + \theta_t ( \sigma dW_t + (\mu-r) dt) - c_t dt.$$ where $\theta_t$ is the worth of holding at time $t$ and $c_t$ is the consumption stream. ...
493 views

### How to estimate market integration parameter in Singer-Terhaar model for E(r)?

Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ...
547 views

### Volatility of a rolling window strategy

What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
37 views

### Applying Girsanov Theorem

I have some parts of the proof, but I am not sure if they are arranged correctly or are sufficient. Is this right? Proposition: Given probability space equipped with natural filtration of standard ...
307 views

### Calculating Bollinger Band Correctly

My bollinger band comes out like the below, which doesn't seem right. Any idea what is wrong with my code for calculating upper and lower bollinber bands? I obtained my data from here ...
38 views

### What is the filtration described?

What is the filtration $(\mathfrak{F}_t)$ encircled below? Is it $(\mathfrak{F}_t) = (\sigma(W_t)) = (\sigma(\tilde{W_t})), t \in [0,T]$? Or is it \$(\mathfrak{F}_t) = (\sigma(\hat{W_t})), t \in ...
45 views

### Has automated trading produced profits at IEX?

Is there evidence that automated trading is profitable on the latency-enforced portion of the exchange? On the one hand, if automated trading was profitable when these limits existed naturally, it ...