All Questions

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Inflation/Rates Correlation

I've been looking into a short piece of maths a colleague has written on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding is correct, or if my ...
27 views

Statistical arbitrage using eigen portfolios

I was trying to understand below paper https://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf Page 20 explains about "Entering a trade". I wan't to know clearly what it means to ...
23 views

PerformanceAnalytics and Annual Charting

I have seen a charts that look's like Is it possible to do something like this with PerformanceAnalytics or is there any other package for doing this? Thanks in advance
29 views

What machine learning method is more suitable for prediction of financial time series? [on hold]

I have some time series from a stock exchange market. For each of them, I want to answer the question that whether the price will grow at least p percent in the d coming days or NOT(and during these ...
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Success of trendlines using dividend-adjusted vs un-adjusted data

I'm curious whether anybody has any experience with using trend lines drawn using data which is vs isn't adjusted for dividends. For periods of sideways trading that give roughly horizontal ...
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Where can I find free historical market cap data? [duplicate]

I am looking to find free historical data for assorted companies listed on the TSX and TSX Venture. I can find daily closing prices (among a few other data fields) on Quandl, but I cannot find daily ...
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Source on pricing / valuation of trust preferred securities?

Is there a good source on pricing / valuation of trust preferred securities? I used GOOGLE, GOOGLE SCHOLAR and NEW YORK PUBLIC LIBRARY, but the results were meager. Found book Handbook of Hybrid ...
9 views

Poisson Process [migrated]

I would appreciate a hint on this problem: A pedestrian wishes to cross a single lane of fast-moving traffic. Suppose the number of vehicles that have passed by time $t$ is a Poisson process of rate ...
28 views

How do foreign banks get rid of USD? [on hold]

If a foreign commercial bank in for example Denmark has built up a reserve of physical USD how can it get turn them into DKK? Will it normally sell its holdings to other banks or its central bank? How ...
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What is the formula for beta weighted delta and gamma?

I am trying to calculate the beta weighted delta and gamma for a portfolio of options of different underlying stocks, but I can't seem to find the correct formula. Can someone point me to it or a ...
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How to price of weather derivatives using a Brownian Motion? [on hold]

I'm currently doing research in the pricing of weather derivatives using the equation above. How to apply daily temperature data into the model? how do I use the model?
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What is the name of this product?

Consider the payoff =$S_T1_{S_T>K}$ where $S_T$ is the asset price at maturity. What is this type derivative called? and is it a liquid option?
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What would be considered a good/competitive throughput for a FIX engine?

I am writing my own FIX engine and I am in the process of running some benchmarks. I am not sure whether my results are good or bad. Can someone with experience in the area provide me with some ...
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Where can I find a list of VaR and CVaR formulas for continuous distributions?

Where can I find more VaR and CVaR formulas for continuous distributions? I collected a list here:
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I have 40 shares in an index and I want to weight them based on their market value, define the known value as $x_i$ In the traditional way, the weight of each share is calculated as: $w_i = x_i / ... 2answers 68 views Relationship between Beta and Standard Deviation I was doing some financial analysis on two firms in the coffee industry. After calculating Beta and Standard Deviation for both firms, I seem to have stumbled on some weird phenomenon. It appears ... 0answers 22 views Variance of “hedged” term structure portfolio increasing? I'm attempting to use PCA to hedge a small fixed income portfolio. I start with one particular bond and chose the nearest other bond to hedge the 1st principle component. This decreases the portfolio ... 1answer 38 views Data on banks’ leverage Does someone know free resources to estimate the leverage of the banking and financial sector at an aggregate level? In particular I would be interested in something like Federal Reserve’s Flow of ... 1answer 19 views Hedging bond with CDS of different maturity Say I buy a 10-year bond with a notional of 100k. To hedge my credit risk entirely I could buy a 10-year CDS, also on a notional of 100k. Now, if there are only 5-year CDS trading and no 10-year CDS, ... 1answer 57 views Expected Shortfall and Spectral Risk Measure Not sure I am understanding spectral risk measures correctly. Why is there an equal weighting scheme placed on the tail losses in expected shortfall. Will that no bias the expected value of the loss ... 0answers 14 views garchOxFit in R-oxo file does not match Could someone please help me with trying to get the Ox interface to work in R. I get the following errors as output: This version may be used for academic research and teaching only Link error: ... 0answers 63 views What are the main flaws behind Ross Recovery Theorem? Stephen Ross’ new paper claims that it is possible to separate risk aversions and historical probabilities if the Stochastic Discount Factor is transition independent using Perron-Frobenius Theorem. ... 1answer 54 views Data on margin volumes? I came across a Financial Times article today that said "Peaks in margin trading have been a precursor to bear runs in the past, notably in March 2000 and July 2007." I'm curious if anyone here would ... 1answer 66 views Negative Eonia rates I'm curious how the current negative Eonia (Euro OverNight Index Average) rates would impact derivatives pricing. Does it mean that if I post cash collateral to you, I also need to pay you interest? ... 0answers 21 views Volatilty Calculation [on hold] I have 3 years historical prices for the commodity . I want to calculate the annualized volatility of the commodity . Can i scale my daily volatility to annualized volatility by multiple with square ... 0answers 31 views Black Scholes Model which Volatilty to use [on hold] Black Scholes Model requires volatility as input . It needs to be annualized/or Daily Volatility for calculation . Input will be appreciated 1answer 40 views how to use known premium of options to determine premium of options with another strike? Assuming constant volatility across all strikes, how to use known premium of options to determine premium of options with another strike? e.g. suppose we know premium of \$40 call and put, \$50 call ... 1answer 60 views Do people actaully use VaR in professional settings? VaR seems like such an obviously flawed metric, I am surprised that it seems to be used so much in the private sector. First, the way it is named and the way it is presented often imply it is the ... 1answer 48 views What are good internship positions I should look for as an undergrad student? [on hold] I am a 3rd year computer engineering student who is interested in quant finance. I was exposed to quantitative courses such as calculus 3, ODEs, optimization, probability and stats, mathematical ... 2answers 133 views If I am very fast (less than 10 microseconds latency) what would be the first strategy to execute? [on hold] Let's assume I found the holy grail of low-latency trading (which I didn't). For educational purposes, what would be the first strategy I would direct my trading code? 1answer 69 views Briefly stated, why does the function N(x) appear in the European call option pricing model? I'm aware of the the mathematical formula for the price of a European call option on a stock however I'd like to think about it in an intuitive way. 1answer 137 views Where can I find literature (books, articles, etc.) about basic HFT / arbitrage strategies? [on hold] I am not looking for your winning strategies. Just the basic stuff from where to start. Can anyone share their opinions about what should I read to hit the ground running? 0answers 16 views run time error 424 in IB TWS Excel DDE API; failed to add combo orders I'm using an Excel DDE to connect to Interactive Brokers TWS via their API 9.72 sample, excel 2013. When I tried to create a combo order, the rum error code 424 said "object required". It seems that ... 1answer 34 views Historical Data on$/yen forward exchange rates

Would anyone happen to know where I can find historical forward exchange rate data between the yen and dollar?
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Volatility skew and how to capture it?

We see in the market that a implied volatility surface is not flat. Based on this observation different models were developed to capture the structure, e.g. CEV / SABR. A measure often used for the ...
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Moneyness and option prices

I'm attaching stock prices from CRSP to a dataset of option prices in order to compute the option moneyness. I'm wondering whether I should adjust the underlying prices taking into account splits and ...
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Can we trade option spreads with more than 4 option legs?

I am wondering why most online brokers restrict multi-legged options spread trades to have a maximum of four legs? Also, is there a broker that allows you to trade say 6 or 8 legged option spreads.
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What are the properties of the Expected Shortall measure when split in multiple time periods?

Suppose I have a single time series of losses $L$ that consists of two sub-parts $L_1$ and $L_2$. Is there a relationship that relates the expected shortfall of $L$ to the expected shortfall of \$L_1, ...
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Transform MPT optimization problem

I am trying to teach myself about MPT and optimization. I understand that MPT solutions can be found using three equivalent optimization problems: Minimizing variance for given return limit ...
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Importance sampling for barrier option like pricing by Monte carlo

I would like to know some references regarding importance sampling algorithms for variance reduction of Monte Carlo barrier options pricing. Please could someone help me leaving some references? If ...
31 views

ICE oil Future Markers

i have seen Brent oil future singapore marker many times. however, i wonder what is the reason for introducing different markers in the future market. FYI - LINK
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Where can I find a list of market-moving news announcements for different asset classes?

Different asset classes have different important news announcements that move the markets intraday. For instance, oil volatility increases after the EIA Petroleum Status Report, but that announcement ...
156 views

What is a good Computer Algebra System for financial engineering?

I would like to know if there exists some computer algebra systems adapted to calculate pricing based on particular models, i.e. pricing YoY Inflation Swap under Jarrow Yildirim Model. I know that ...
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End-of-day holdings vs overnight inventory

I am wondering whether these two terms identify the same thing: overnight inventory end-of-day holdings The way I would explain it intuitively, the inventory that is held overnight should be ...
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Why do Earnings Per Share matter?

This has been bugging me for a while. I've consulted all sorts of guides, but none gave me a satisfactory answer. My question is: why do Earnings Per Share (EPS) matter? What is it about this metric ...
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White's Reality Check versus Benjamini-Hochberg-Yekutielie Procedure

I'm backtesting about 1k different strategies / permutations of strategies and I want to identify which if any of the strategies are better than the benchmark. Based on my readings, I feel like I've ...
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Price of a composite option

how would you calculate the fair value of an option on a fx'ed underlying, e.g. a put on a USD-stock which is changed into EUR? How should I get, in practice, the fx spot vol/correl? Purpose is to ...
51 views

Proof oriented introductory text?

I'm currently taking this Coursera course on financial engineering, which is fine but it's very focused on applications instead of proofs. They recommend Investment Science as a companion text, but ...