# All Questions

260 views

### Question on Barrier Option and Skew

If you bought an Equity Call Option with a Down-and-In Barrier, are you Long Skew or Short Skew? Please provide explanation as well. Thanks.
2 views

### Unexplained delimiters in Nasdaq ITCH file

I'm working on writing an order book constructor for Nasdaq ITCH v5 files, and I'm noticing some occasional message identifies/ delimiters that are not included in the ITCH5 specification, ...
5 views

### Calculating unweighted performance of stocks within a period

The well known calculation of unweighted index of stocks is just calculating an arithmetic average. And then, to calculate the performance of the index, I calculate the %change of the unweighted ...
389 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 ...
23 views

### Futures Parameters for Value at Risk

I am new to risk management. I am calculating the VaR for a portfolio of futures contracts, long and shorts. I calculated it using the historical, parametric, and MC method. But there is something ...
16 views

### Interpretation of vega out of BS formula

I am comparing Monte Carlo estimates of VaR (using importance sampling) under both the normal and student distributions. I am also considering risk factors other than log-prices; in particular, ...
59 views

### Up and Down days in GBPUSD and a Filter

I want to study if the odds of an up or down day in a forex pairs is 50-50. I just count the total number of up and down days in X years and compare it with the total days. The results are very ...
29 views

### Feynman Kac Formula for path-dependent options

Consier geometric Brownian motion: $dS_t/S_t=\mu dt+\sigma dW_t$ Feynman Kac theorem tells us that the conditional expectation $v(t,x)=E[ e^{-rT}\Psi(S_T) | S_t=x]$ can be computed by solving the ...
37 views

### How are Quandl monthly S&P500 earnings estimates derived?

Can someone explain how the monthly earnings estimates are derived for S&P500? Quandl sources multpl.com, who state: ...
86 views

101 views

### Why can't you arb skew by buying options with low implied vol and selling high implied vol in the same month and dynamically hedging?

there's something I've been trying to understand for a while now and I just can't quite understand with regards to skew. In the same month, why can't you buy a option that have low implied vol on the ...
74 views

### Pricing employee stock options

ESOs are typically priced using the black-scholes model, but with an additional parameter for for the employee turnover rates . An example ...
13 views

### Expectation Hypothesis: forward variance

I am trying to understand the Expectation Hypothesis from Campa and Chang (1995). In the paper of Byoun et al. they use this formula to estimate the forecast biasness of options.  V_{1,k} - V_{0,k} ...
318 views

### VaR mapping - Forward Foreign Currency Contract

I have a question about VaR mapping for FX forwards. Please bear with me while I outline the problem. Philippe Jorion's book discusses VaR mapping; a means to break down complex instruments into ...
188 views

### HFT to blame for Flash Crashes?

Some people 1, 2, 3 claim that High Frequency Trading is partly to blame for the extreme volatilities in the markets yesterday (24. August 2015). Is that true? Is the amount HFTs move even enough ...
8 views

### What equal installment of annual payment will discharge a debt which is due as Rs. 848 at the end of 4 years at 4% per annum simple interest? [on hold]

The above question can be calculated by using the formula x=100P/(100n+n(n−1)r/2), which gives the result = 200. My doubt is that 200*4 gives 800. So when the balance (848-800) 48 will be paid?
34 views

### What to expect when switching from backtesting to live trading?

I am back-testing my model using the closing price of 5 minute candle-bars. I am trading S&P 100 stocks. I simulate executions with the assumption I can get them 2 ticks away from the closing ...
214 views

### Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)

I noticed that Bloomberg and SuperDerivatives both use "Deposit Rates" for the calculation of forward points for currencies. I couldn't find anything online that describes precisely where these rates ...
58 views

### Realtime Exchange Rate Data API

There are various sources for real-time exchange rate data, e.g. Ariva EUR/USD. Is there also an API or other source which enables to automatically retrieve real-time exchange rates as a data stream ...
51 views

### What exotic options are exchange-traded?

There are a number of exchanges that trade vanilla Call/Put American/European options on various underlyings (equities, indices, futures). There have been some trading in digital options on certain ...
2k views

### What distribution to assume for interest rates?

I am writing a paper with a case study in financial maths. I need to model an interest rate $(I_n)_{n\geq 0}$ as a sequence of non-negative i.i.d. random variables. Which distribution would you advise ...
1k views

### What are the most common/popular exotics in the interest rate markets these days?

By "exotic" I mean anything that is not a plain vanilla swap, swaption, cap or floor. Also any IR hybrids if appropriate. Possible examples would be: CMS and CMS spread options Multi-callable swaps ...
128 views

### Understanding $N(d_1)$ and how to use the stock itself as the numeraire?

Assume the stock price follows a geometric Brownian motion Then in Black-Scholes pricing model, $N(d_2)$ is the risk-neutral probability that the option expires in-the-money. However, it is said that ...
58 views

We got the stochastic process for stock price of n stocks at continues time. We can find if there is a arbitrage trading strategy or dominant trading strategy. I wonder if we cannot find such ...
1k views

### HFT - How to define and measure latency?

I have read and heard a lot about latency. But I can't find any solid information that explains how latency is defined and measured. When people say they have achieved millisecond or nanosecond ...
12 views

### Historical UK Gilt 2-year and 5-year data

Data on the Medium (approx. 5-years) and Short (approx. 2-years) futures contract listed on ICE only goes back to 2009. Is anyone able to point me towards where I can get a longer time series, perhaps ...
10k views

### Usage of NoSQL storage in Finance

I am wondering if anyone has used NoSQL (mongodb, cassandra, etc.) to store and analyze data. I tried searching the web but was not able to see if the financial firms had gotten in to using nosql ...
85 views

### How to check that an interest rate curve is arbitrage free

I have 2 interest rate curves (LIBOR 3M and OIS). I want to create stress scenarios for those two curves. Is it possible that some scenarios will make my term structure arbitrageable? How can I test ...
19 views

### Stock valuation: Solving non constant growth problem statement: stock evaluation [on hold]

Note: I have the answer I think but it doesn't make any sense to me as to what the question actually is asking or what the method is to solve. •Suppose a firm is expected to increase dividends by 20% ...
86 views

### OIS & LIBOR swap

Why do people use OIS and LIBOR swap spread to compare/value bonds/derivatives? Why not just use US treasury?
53 views

### Derive OIS rate from IRS rate and Fed Funds/Libor basis spread

For example I have 7Y interest rate swap rate and 7Y Fed funds/Libor basis spread. What is the step-by-step procedure to derive OIS rate from these two?
30 views

### Rebucketing Risk using PCA/other methods

was working on a project and could use some help. New to the community and looking fwd to being an active part of it. My question is, let's say we have a vector of securities V, and it trades with ...
36 views

### Software project in QF? [on hold]

I am relatively new in QF and I still need to learn lots of things about the subject. But I can't wait to start to use my analytic+math+software skills in some QF project. So basically, I would like ...
186 views

81 views

### European call down and out option (geometric Brownian motion, Monte Carlo, Euler)

I need to estimate the expected value and the Greeks of an European call down and out option, assuming geometrical Brownian motion of the asset, with Monte Carlo simulation employing Euler ...
19 views

### How are netting sets determined for CVA calculation?

In his book, Gregory describes a netting set as a set of trades that can be legally netted together in the event of a default Obviously, the netting agreements (as per ISDA master agreement) ...