1
vote
2answers
40 views

How to calculate the expected value of a function of a standard brownian motion (Wiener process)

Have a problem regarding the expected value of the Wiener process inside a function, namely: Compute $E[cos(W_t)]$. To extend my question, what is the general method of computing these E´s when it ...
1
vote
1answer
26 views

Effects of Fund manager reputation, track record, and skill on funds returns and capital flows

I am compiling a list of all studies that examine the effects of fund manager reputation, track record and skill on fund returns and capital flows across both mutual funds and hedge funds. The purpose ...
0
votes
0answers
5 views

Attribution of unusual persistence in noncompetitive TAQ quotes levels?

I am looking at one day of AAPL quotes (3 Dec 2012) from TAQ to examine quote-based high frequency vol estimators. However, I found that a number of exchanges, when quoting noncompetitively, seem to ...
4
votes
4answers
5k views

What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?

What does a CVA (Credit Valuation Adjustment) desk do, and how are its activities different from other trading desks? Can you work as a quant for a CVA desk and consider your role "front office"?
2
votes
1answer
74 views

Black Scholes vs Binomial Model

I'm trying to confirm my understanding of the 2 models. It is my understanding that the black-scholes is a special case of a binomial model with infinite steps. Does this mean that if I were to start ...
0
votes
0answers
62 views

Is there a Newey West like correction for overlapping data correlation estimates?

I already posted a related question a while ago but was unsure if I should post within the same question. I want to estimate mulitperiod asset return correlations and test if there are significant ...
2
votes
1answer
221 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 ...
9
votes
5answers
4k views

Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?

What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
11
votes
5answers
2k views

Should Sharpe ratio be computed using log returns or relative returns?

I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same: Based on daily returns? Monthly? Weekly? ...
0
votes
0answers
8 views

Real returns vs. inflation as an independent variable

Assume a model like this, basically explaining stock market returns with a bunch of stuff: ...
-1
votes
1answer
46 views

Were can I find Historical Interest Rate Data?

Where can I find American historical Savings Account interest (Bank) rates? If you can, please attach corresponding links.
1
vote
0answers
26 views

GARCH(1,1) good fit found, how to predict one day volatility ahead?

I used SPY data to fit GARCH(1,1) in my model. My data starts from Jan, 2000 until Dec, 2013. I compared the volatility using runSD on the 21 rolling window and GARCH(1,1). It looks a pretty good fit ...
3
votes
1answer
416 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 ...
2
votes
0answers
16 views

Calculating instantaneous forward rate from zero-coupon yield curve

I have a big dataset containing zero-coupon bond yields with different relative maturities. I fix a time horizon on my dataset and I want to calculate instantaneous forward rate. I'm going to write ...
0
votes
1answer
26 views

What are the good book to understand economics? [on hold]

I am currently studying managerial economics by W. Bruce Allen. The book is good. Are there any good book with quizzes , that makes economics sweeter? Books that relate to real world facts and figure ...
-1
votes
0answers
14 views

“Equivalent” data sets despite different numbers

Are the historical data sets of short term treasury bill rates considered the same as the historical data sets of savings account interest rates because by definition they are both risk free rates of ...
2
votes
2answers
141 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 ...
0
votes
0answers
20 views

PCA related Query

I am currently working on a project in grad school where I am using PCA Approach. I have 4 stocks. I used R to generate Eigen Values, Eigen vectors Eigen Values Number Value Diff ...
0
votes
0answers
13 views

FX Rate dynamics

Let's suppose USD/EUR price in USD follows a GBM with $$ dS_t = rS_tdt + \sigma S_tdW_t $$ What process does EUR/USD follow in EUR?
2
votes
0answers
17 views

Risk neutral measure for jump processes

How can I construct risk neutral measure for option price if active price form is: $$S(t)=S(0)\left[\exp{σW(t)+(α-βλ-1/2σ^2)t+Q(t)}\right] ?$$ Here $W(t)$ is a Brownian motion and $Q(t)$ is a ...
2
votes
3answers
108 views

Why are short expiries associated with more pronounced volatility skews?

I've noticed that for a given strike price, the shorter expiration dates of options have more pronounced volatilities why is that?
5
votes
1answer
120 views

How to perform Empirical Mode Decomposition?

I am trying to use the EMD applied to EURUSD open price to train a machine learning algo (RVM). I have run only once the EMD on my training set and once on the training+test set. The results on the ...
-3
votes
1answer
44 views

if technical analysis rules for predict stock prices is unique for all cases, why should we learn neural networks? [on hold]

Is there any neural network out of the box tool that was already learned all technical rules by feeding many stock trading data?
3
votes
0answers
53 views

Portfolio optimization with Portfolio CVaR Constraint

I wanted to optimize a portfolio based on a portfolio-wide CVaR constraint (i.e. $CVaR_p \geq 0.08$). Unfortunately, I only find solution that minimizes the entire CVaR of the Portfolio. Do you mind ...
-4
votes
0answers
31 views

Financial Engineer as a career [on hold]

I'm now studying in Bachelors in economics.Can I become a financial engineer with this degree?? Why or why not?? And Also what is the minimum GPA do I need to get to that program
0
votes
1answer
18 views

PWIQF excercise solution

I am software developer with no previous experience or knowledge in finance and have recently been starting to build my knowledge in this area. I am working through the book: Paul Wilmott Introduces ...
0
votes
0answers
28 views

How would you correct a GARCH model to deal with non mean reverting volatility?

I am currently attempting to model and forecast volatility of bitcoin but have not been able to find a GARCH model that fits the data appropriately. I've used tick data sampled at 1 hour intervals ...
0
votes
0answers
30 views

full tick and retail tick data feed difference

Full tick institutional data feed like elektron from reuters, how is it different from retail tick data feed & which charting softwares work with elektron data feed
1
vote
1answer
53 views

source for yahoo finance equities volume traded

I am looking at some academic studies regarding volume of stock traded. Yahoo Finance is used as the data source for volume. Does anyone know where the volume figure comes from? Is it a compilation ...
4
votes
1answer
52 views

Usage of Brownian Bridge?

I was recommended to read something about Brownian Bridge. Could someone familiar with BB give some recommendation? It was mentioned that BB benefits in 2 places BB could reduce the simulation ...
4
votes
3answers
223 views

Sampling problem in portfolio optimization

In a summary I am trying to do the following Bond Subset 1 : Get list of USD Bonds --> Filter out Bonds which have YTM > y% DUR > 10 Y etc. .. This gives us Bonds which we are interested in. So ...
1
vote
1answer
57 views

Bond Spread Drivers

I have some work to do on the drivers of government bond spreads - ie. across terms (not across governments) of the yield curve, say 5yr and 20yr bond spreads from the same government issuer - and am ...
1
vote
0answers
29 views

Markov switching model estimation

We are testing Markov switching models to forecast risk regimes, similar to the paper by Kritzman, Page and Turkington. We find that in some cases the Baum-Welch algorithm converges very slowly or not ...
0
votes
0answers
23 views

How does logging effect Quickfix performance?

I am using .net/c++ version of quickfix. How does logging effect Quickfix performance? If I disable logging to file, can it help to increase performance of quickfix? Thanks,
2
votes
1answer
71 views

American Swaption Pricing with Monte-Carlo method

I want to price an American swaption but I am not sure about what I am doing. Tree methods and PDE discretization seem difficult to adapt to a swaption. I am trying a Monte-Carlo approach. (in ...
5
votes
1answer
233 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 ...
0
votes
0answers
12 views

Bank Reconciliation HW Question [on hold]

I'm not sure if this is the right Stack Exchange for this question. If it isn't I apologize. I have an Accounting project I've been working on. It's a bank reconciliation using data provided. ...
2
votes
0answers
30 views

At-the-money Call Spread approximation

In a trading manual I got during a course, the value of the ATM Call-Spread is approximated by $CS_{ATM}=\frac{1}{2}StrD+(F-m)\times\Delta CS$ The lecturer skipped the part where he derived this ...
5
votes
1answer
405 views

Applicability of PCA to get historical volatilities to calibrate interest rates trees

My question in short is as follows: can I take main principal component of historical covariance matrix and use it as historical volatilities when fitting a binomial tree? Here's more detailed ...
1
vote
0answers
14 views

American Swaption Pricing with PDE discretization

So I am still trying to price an american swaption. (MC approach here: American Swaption Pricing with Monte-Carlo method) I've found in Paul Wilmott, The mathematics of financial derivatives, a PDE ...
0
votes
0answers
12 views

Engle Granger test returns a 0 in matlab, while correlation factor is .80+. Am I doing something wrong?

Engle Granger test is giving me a ans = 0. The correlation factor is: 0.8+ Does this imply the No cointegration hypothesis is true? i.e. as per my understanding that there is cointegration? I am ...
0
votes
0answers
15 views

Significance of Data

The following is a result I get from a pair trading model. I am trying to figure out the significance of the below but failing. Can someone help me out i.e. a resource or possibly an explanation on ...
3
votes
3answers
53 views

Budget Constraint in Sharpe Ratio Optimization

I am a math student and I am trying to understand the budget constraint in Sharpe Ratio optimization for portfolio design. Recall the budget constraint requires that the sum of the portfolio weights ...
7
votes
1answer
376 views

Are there any other standard rates term structure decomposition than PCA?

PCA is sometimes used to estimate components in the rates term structure. Are there any other standard method discussed in the literature or used in practice, what are their advantages and ...
6
votes
3answers
754 views

Lib for Arbitrage-Free Smoothing of Implied Volatility Surface?

I'm looking for an implementation of Arbitrage-Free Smoothing of the Implied Volatility Surface - Matthias R. Fengler. Does anyone know of any existing libraries that have implemented this paper? Any ...
0
votes
0answers
30 views

Java Implied Volatility Solving

After using RQuantLib and RCaller from Java I am desiring a bit more speed on my implied volatility calculations (for anyone who has used this knows it is quite slow). I need to price a large number ...
1
vote
0answers
132 views

Black Scholes well coded Python

I have some trouble with the following code. Some jump and a decentered path are present but it's not the case, normally for Black Scholes diffusion ! Is anyone see a problem in my code ? ...
0
votes
2answers
49 views

Dv01 of Eurodollar futures contract

Can anybody please explain in layman terms why the DV01 of a eurodollar futures contract is 25? I can mathematically calculate in different ways, but not able to convince myself, especially how is it ...
1
vote
1answer
66 views

HJM simulation problem

I'm trying to simulate a 3-factor HJM model. I got the algorithms from Glasserman book. In my case, I have $3$ maturity:$ 0.25y, 0.5y, 0.75y$. So my time grid is: $t_0=0,t_1=0.25,t_2=0.5,t_3=0.75$. ...
-3
votes
0answers
29 views

How to calculate the rho of an index future [closed]

can someone explain how to calculate the rho of a SPX index future?

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