3
votes
1answer
154 views

US options market/microstruture research

Can someone point out where to find up to date market/microstruture research in the options market?
2
votes
0answers
12 views

Speeding up computations: when to use Quasi and standard Monte-Carlo in pricing

I am familiar with the theory of Monte-Carlo techniques in the numerical integration, and recently I have started my experiments with these methods applied to derivatives pricing. I am using ...
1
vote
1answer
17 views

Pie-chart (or alternative) representation with negative values/liabilities

I'd like to represent graphically/visually a fund/portfolio by something that resembles a pie chart. But... the fund/portfolio contains things that have negative value (think of liabilities such as: ...
1
vote
2answers
22 views

Questions on the relationship between option price and maturity

From the plot of volatility surface, as maturity goes up, the implied volatility will decrease. Dose it mean that options with the same strike have higher value when maturity is larger. If so why ...
2
votes
0answers
17 views

Using FX ATM Volatility to Estimate Smile

Suppose $S$ is some FX rate, EUR/USD say, and $\sigma_{S}(K,T)$ is the implied volatility for some option written on $S$, sourced from the surface $\sigma_{S}(\cdot,\cdot)$ (alternatively, consider ...
0
votes
1answer
83 views

Forward Curves and Par Yield Curves

I'm recently reading a research paper on the yield curve by Salomon brothers and in it it states that when the forward curve is above the par yield curve, it is seen as cheaper. If for example, the ...
1
vote
1answer
16 views

Test .mql4 (meta trader 4 editor) when the fx market offline

I am coding some simple .mql4 program, you know, the fx market is offline on weekend, and the market will be not shown in Meta trader 4 platform. I wanna test my program in meta trader 4 on weekend. ...
0
votes
0answers
24 views

Calculating R Squared in this Problem

I am attempting to complete a homework problem and surprisingly, I am completely stumped. In one economy the risk free rate is 5%, the risk premium is 7%, and the volatility of the market is 18%. A ...
1
vote
0answers
8 views

ECM model - tests

I am writing my bachelor (undergrad) thesis at the moment and in the final stages I ran into two problems. First of all, I use a error-correction model (ECM). this model is like: S= c(1)*( S(-1) - ...
2
votes
0answers
13 views

Variance replication using options

I would like to understand the intuition behind the following question: Why a certain weighted sum of prices of put and calls is equivalent to the implied variance of an underlying? A variance swap ...
1
vote
3answers
34 views

Obtaining intra-day values of the EUR-USD exchange

I need for my project the values of the EUR-USD exchange (both intra-day and ticker). I've been playing around with the Yahoo's YQL API and at this moment I can obtain the current value of the ...
7
votes
1answer
249 views

Time series analysis on illiquid price data?

Say for example I have the following company in some specialized industry: A - Company that is about to be listed in Exchange 1, i.e., no price history B - Company that produce similar products as ...
3
votes
1answer
114 views

How to estimate CVA by valuing a CDS of the counterparty?

I'm trying to estimate CVA of one of my derivatives by valuing a credit default swap (CDS) of my counterparty. However, I don't know how to set up the CDS deal (notional amount, maturity, etc.). ...
2
votes
0answers
21 views

Bloomberg scripting language (BLAN)

Did anyone work with Bloomberg scripting language (BLAN is the name I guess). If so is it really flexible and is it competitive with other valuation services (say Super Derivatives). Does it enable ...
1
vote
0answers
20 views

Bloomberg tick data timezone offset

I am using python to access the Bloomberg Desktop API and am running into issues with the timezone conversion for their tick data. The data they deliver is supposed to be UTC but there is something ...
2
votes
1answer
50 views

Questions about exponential Brownian motion

Let $(\Omega,\mathcal{F},P)$ be a probability space, equipped with a filtration $(\mathcal{F})_{0 \leq t \leq T}$ that is the natural filtration of a standard Brownian motion $(W_{t})_{0 \leq t \leq ...
0
votes
0answers
14 views

johansen cointegration test eviews interpreation

I am not sure whether i am interpreting the cointegration test correct. This is the test result : Because of the probability of the test i understand that my series are cointegrated of order 2. ...
2
votes
1answer
223 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 ...
0
votes
0answers
10 views

How do you calculate the asset drift rate in the Merton model? (used in N(-d2))

Can I replace it with the internal rentability rate? I only have the financial statements and some market data, but I can't find the expected returns anywhere. The goal is to calculate the probability ...
5
votes
1answer
95 views

How to interpret the French-Fama SMB factor?

I regressed ten portfolios on the Fama French factors and get significant loadings on the SMB factor. However, if I look at the actual average market cap of these portfolios, the portfolios with the ...
1
vote
0answers
16 views

FOMC Unscheduled Meetings

If you look at the FOMC announcement schedule here, you will see that since 2011, there have been 4 unscheduled meetings. By any chance, though they are "unscheduled" do market participants know one ...
1
vote
0answers
18 views

the incremental value of Kelly Criterion under difference circumstances

I know that the Kelly Criterion maximizes bankroll, but i was wondering how much value it contributes to the total return and under what circumstances. I'm trying to understand the difference between ...
4
votes
1answer
36 views

Multidimensional Ito's Lemma for Vector-Valued functions

Consider the vector of $n$ Ito processes $$ d \mathbf{X}_t = \mathbf{\mu}(\mathbf{X}_t,t)dt + \Sigma(\mathbf{X}_t,t)d\mathbf{W}_t $$ where $\mathbf{\mu} \in \mathbb{R}^n$ and $\Sigma \in ...
3
votes
0answers
36 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 ...
2
votes
1answer
36 views

List competitors for a given stock?

Where can I find a reasonably-priced or free API, database or CSV which contains a list of competitors for a given stock symbol? For example, I want to find competitors for various symbols, like ...
11
votes
11answers
25k views

What is the difference between Option Adjusted Spread (OAS) and Z-spread?

I am preparing for the CFA level 2 exam, I got confused by the concept Z-spread and OAS. When a call option is added to a bond, since it is not favorable to the bond buyer, they would require more ...
13
votes
4answers
642 views

Is R being replaced by Python at quant desks?

I know the title sounds a little extreme but I wonder whether R is phased out by a lot of quant desks at sell side banks as well as hedge funds in favor of Python. I get the impression that with ...
5
votes
1answer
80 views

Why Must Dividends Be Reinvested to Use Risk-Neutral Pricing?

Assume the price of a stock $S_t$ paying continuous dividend $a$ satisfies $$ dS_t = S_t\left((\mu - a)dt + \sigma dW_t\right). $$ The risk-neutral pricing formula states that if $\mathbb{Q}$ is any ...
4
votes
2answers
136 views

R package for portfolio

In the context of modern portfolio theory, one often wishes to minimise $\mathbf{w}^{\mathrm{{\scriptstyle T}}}\boldsymbol{\Sigma}\mathbf{w}$ subject to $\mathbf{w}^{T}\boldsymbol{\mu}=c_{1}$, ...
1
vote
1answer
44 views

On a source for a mean-variance portfolio optimization result

In the context of a mean_variance framework consider an optimizing investor who chooses at time $T$ portfolio weights $w$ so as to maximize the quadratic objective function: $$U(w) = E[R_p] - ...
0
votes
1answer
23 views

Lease Accounting / FX Embedded Derivatives

I have a lease agreement where the functional currency is USD, domestic currency is UAH. Lease agreement is written in EUR (rent rate) and payments are to be done in UAH in the amount of rent rate ...
0
votes
0answers
20 views

Compare performance buy-and-hold strategies after stock-split

QUESTION: How should I analyze the statistical significance of the difference between two buy-and-hold strategies (or the relative performance) when the samples are not independent? Background: I ...
2
votes
2answers
1k views

Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations

I am trying to determine a step-by-step algorithm for calculating a portfolio's VaR using monte carlo simulations. It seems to me that the literature for this is extraordinarily opaque for something ...
0
votes
1answer
45 views

Calculating VaR with Monte Carlo simulation

I would like some help here :) I have a problem calculating VaR with the Monte Carlo Simulation. I have followed then next steps, is this a right way to calculate VaR or I need something more? ...
1
vote
1answer
62 views

Mean reversion time estimation

I am new to mean reversion trading, and I would like to get some good references about how to estimate the time it takes to a mean reverting process to cross its long term mean.
2
votes
1answer
67 views

Arbitrage question

Consider a hypothetical Payment in Kind (PIK) bond of XYZ Corporation. The bond has 2 years to maturity, a face value of $1000, and has an annual coupon rate of 10%. Coupons are paid annually. XYZ ...
2
votes
1answer
50 views

Black Scholes Model and Dividends

My question can be summarised as such: Consider a portfolio. Say it has a price $\Pi = x$. Portfolio consists of a stock and a sequence of call options underlying on the stock. It has been announced ...
1
vote
1answer
31 views

How to identify the orders p and q for ARIMA model using least squares method?

I would like to identify the orders p and q for ARIMA model using least squares method in Matlab. I have got also two data files (one with noise and one without) Previously I identified p and q for ...
-1
votes
1answer
32 views

Calculating or finding info about the value of a market? for example Cloud Storage [on hold]

I am assembling a pitch which will aim towards investors by the end of this year/beginning of next year, and I need to gather information such as how much the Cloud Storage market is worth and how ...
1
vote
1answer
319 views

ex ante tracking error correlation between funds

I have two portfolio's called Comb & Global. They both have the same investable universe lets says 3000 stocks & are measured against the same benchmark. So it is possible that both funds hold ...
4
votes
1answer
84 views

Why Lie groups, differential geometry and string theory relate to MF?

I'm reading Peter Carr's "A Practitioner’s Guide to Mathematical Finance". When talking about the math used in mathematical finance, he mentions Lie groups, differential geometry, string theory. Can ...
3
votes
1answer
62 views

What is the difference between a book value and a market value?

0 down vote favorite I would like to understand the following problem. A 2yr zero-coupon bond has an annual yield rate of 11% per year. A 4yr zero-coupon bond has an annual yield rate of 19% ...
6
votes
2answers
124 views

What's the point of discounting in risk-neutral pricing?

Let $\phi$ be a self-financing strategy that replicates a time $T$ option payoff $X$ on stock $S$. By definition of a trading strategy, $\phi$ is previsible. Finally, let $V_t$ be the time $t$ value ...
3
votes
0answers
33 views

How to calculate the JdK RS-Ratio

Anyone have a clue how to calculate the JdK RS-Ratio? Let's say I want to compare the Relative strength for these: EWA iShares MSCI Australia Index Fund EWC iShares MSCI Canada Index Fund EWD ...
-4
votes
1answer
23 views

Matlab loop statement is driving me mad [on hold]

Can someone please help me out with this loop over here? Matlab simple refuses to consider the for o=k:k-20 statement inside the if statement. :pullingmyhair: ...
3
votes
1answer
71 views

ETNs as bank funding

I've just read the article in the link below and would like to know if someone can elaborate on a statement. I have added the whole paragraph, but highlighted the part about the use of ETNs as cheap ...
1
vote
2answers
34 views

Build spot rate curve with multiple treasuries for each maturity

I have the following treasuries: T 0 1/4 01/31/15 at 100.1236 T 2 1/4 01/31/15 at 101.1257 T 0 1/4 02/15/15 at 100.1251 T 4 02/15/15 at 101.9994 T 11 1/4 02/15/15 at 105.6269 T 0 1/4 02/28/15 at ...
3
votes
1answer
89 views

Fitting transition matrices in R by solving for coefficient

I'm using various matrices to impute a fitted transition matrix for credit ratings by solving for a variable [S]. Essentially the idea is to determine a base matrix and stress matrix to compare to a ...
2
votes
0answers
23 views

pdf of simple equation, compound Poisson noise

I would like to find the probability density function (at stationarity) of the random variable $X_t$, where: \begin{equation*} dX_t = -aX_t + d N_t, \end{equation*} $a$ is a constant and $N_t$ is a ...
2
votes
1answer
77 views

Building curves using onshore or offshore JPY overnight rates?

I am trying to build Japanese Yen interest rate curves. When defining the curve instruments for the 'OIS' (discount) curve (aka TONAR), I am uncertain as to which rate to use for the overnight deposit ...

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