All Questions

652 views

How to show that this weak scheme is a cubature scheme?

Weak schemes, such as Ninomiya-Victoir or Ninomiya-Ninomiya, are typically used for discretization of stochastic volatility models such as the Heston Model. Can anyone familiar with Cubature on ...
685 views

172 views

Graduating Quantitative Finance (please don't move it to meta immidiately)

Seeing how very few actually read the Quant Finance meta I intentionally post it here on the main site. To the more powerful admins: could you leave it here for a day or two and move it to meta ...
623 views

Formula for the efficient portfolios (mean-variance optimisation)?

Consider the setting of mean-variance portfolio optimisation: $n$ assets with expected returns $\overline{r}_1,...,\overline{r}_n$ and standard deviations $\sigma_1,...\sigma_n$. For a certain fixed ...
126 views

Applications of distance correlation

This question mentions distance correlation. Where has this concept been applied to financial data and provided new insight? Do you know any examples or references?
126 views

Basket option density in BS model

Let X and Y be two GBM’s, they have each a univariate log-normal distribution for some time t, that is $X_t\sim{LnN(µ_x, σ^2_x)}$, $Y_t\sim{LnN(µ_y, σ^2_y})$ and $Z_t=[X_t,Y_t]\sim{ MvLnN(μ, Σ)}$ ...
220 views

Stress testing covariance

Going one level beyond stressed scenarios, to parameters e.g. for a VaR measure: what are the most common approaches for stressing a covariance/correlation matrix, especially taking portfolio exposure ...
2k views

VaR model Unconditional Coverage Tests: Is this extension of Kupiec POF test correct?

Background: Kupiec P. in 1995, published paper "Techniques for Verifying the Accuracy of Risk Management Models" on Journal of Derivatives, v3, P73-84, it's a Unconditional Coverage Tests designe for ...
574 views

option chain data visualization, sunburst

I think option chains are not represented in the best way. With more and more options products coming out and trading on the various exchanges, I see vendors struggling to keep up with a good way to ...
228 views

is there a mapping from Altman Z-score for private companies to bond ratings or probability of default?

On wikipedia, there is a formula to calculate the Altman Z-score for private companies: Z-score estimated for private firms: T1 = (Current Assets − Current Liabilities) / Total Assets T2 = Retained ...
194 views

Basel CVA VaR with R/WWR

In Basel III the CVA VaR “is restricted to changes in the counterparties’ credit spreads and does not model the sensitivity of CVA to changes in other market factors, such as changes in the value of ...
622 views

Alternative to Block Bootstrap for Multivariate Time Series

I currently use the following process for bootstrapping a multivariate time series in R: Determine block sizes - run the function b.star in the np package which produces a block size for each series ...
62 views

portfolio optimization averaging weights, what are benefits?

I'm playing around with different portfolio optimization techniques. Amongst others I was also looking at the resampling method, especially the one described in Meucci. I have two general questions ...
91 views

Why is it useless to model stochastic volatility when pricing Vanilla style derivatives?

With respect to the answer by user AFK in Ideas about Stochastic volatility models. I am specifically interested in interest rate options (IR Caps/Floors and Swaptions).
109 views

Momentum - Statistical Argument

In their seminal paper Jegadeesh and Titman (1993) develop a statistical model to infer where moment comes from. In practice they setup the following: $r_{it}=\mu_i + b_i f_t +e_{it}$ ...
143 views

I am pricing an American call under the CGMY model ($0 < Y < 1$) with strike $K$ at grid point $(x_i,\tau_j)$ where $x_i=x_{min}+i\,\Delta x$ for $i=0,1,...N$ and $\Delta ... 0answers 107 views “Extract” the density of the underlying, given the implied volatility “surface” Suppose given implied volatility quotations$\widehat{\sigma}(T_i,K_j)$of call options on an underlying$S$for various expiries$T_i$'s and strikes$K_j$'s. I am interested in the following problem ... 0answers 102 views DCC GARCH - Specificating of ARCH and GARCH parameter Matrices STATA The command in STATA to calculate the DCC model of two variables is: mgarch dcc ( x1 x2=, noconstant) , arch(1) garch(1) distribution(t) $$\begin{bmatrix} ... 0answers 76 views Stochastic control (HJB) for wealth process involving stopping times Given a wealth process that evolves as$$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. ... 0answers 85 views Is Least Median Squares (LMS) regression commonly used in Finance? Least Median Squares is often argued to give more stable results than does OLS. Whereas in OLS one minimises the mean of squared residuals, in LMS, one instead minimises the median of squared ... 0answers 93 views Why is Weighted Least Squares necessary in fundamental factor model? Why is Weighted Least Squares necessary in fundamental factor model while it is not in a standard Macroeconomic factor model? I understand that$\mathbb{E}[\epsilon^2_{it}]=\sigma_i^2$varies across ... 0answers 174 views Integral-differential equation for forward rates I am struggling in this question: Let$P(t,T)$denote the price of a zero-coupon bond (with marturity at time$T$) at time$t \in [0,T]$. As usual, at time$t$for maturity$T$, the forward rate is ... 0answers 63 views Estimating Number of “Day Trades” from Total Volume of Commodity Futures Contract Looking at futures data I am trying to calculate/estimate the number of "day trades", i.e. positions that were initiated and closed during the same day, as distinct from those positions that were ... 0answers 462 views A model to stochastic hazard rate and CDS spread term structure I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at$s$, maturity$T\$ and recovery function ...

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