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7

Bernd Scherer has done exactly this test in his text "Portfolio Construction and Risk Budgeting 4th Edition". There is an SSRN paper by Scherer called "Resampled Efficiency and Portfolio Choice (2004)" you can take a look at as well. I would suggest you skip re-sampling (especially if you have a long-only portfolio) and take a look at Meucci's Robot ...


5

There is no way to calculate returns here. Let me stop you right there. You didn't open a brokerage account with zero dollars. The money you put-up for margin is your starting position. After a year of trading, you have a stopping position represented by a different amount of money in your account. The change from your starting position to your stopping ...


3

You're not the first to trip on this, and unfortunately the fact that the provided example is from a different era doesn't help. Quite simply, you're not writing rates correctly. The 5-years swap rate, 0.3523%, must be written in decimal form as 0.003523. The same goes for the deposit rates. As your code is now, you're writing that the 4-years rate is ...


3

There is a great deal of misinformation and out-of-date information on this site. Many of the references in this discussion and elsewhere have serious research flaws. The Michaud efficient frontier was invented and patented by Robert Michaud and Richard Michaud, U.S. patent # 6,003,018. The alternatives discussed here are not patented nor in many cases ...


2

You are going to need to interpolate in some way shape or form.... Linear is the easiest and most basic, however it may not capture the curvature, you can use splines to better capture the curve. A nice guide to doing so is here: It's a guide to bootstrapping and it has all the components. http://www.business.mcmaster.ca/finance/deavesr/yieldcur.pdf


2

While @Baruch Youssin answers correctly in the general sense, the first part of his answer isn't what happened in the example code. While QLNet is a port of QuantLib, it's not a direct port. Your quoted example doesn't show up in QLNet. The example in QuantLib was written in a very complicated way, in fact it's a simple example. discountingTermStructure is ...


2

I do not yet know QuantLib but one question is general and easy to answer: My first question is why do they use different yield curve? These two curves differ by risk levels inherent in them - the credit spreads over the risk-free yield curve (e.g., the OIS curve). The discounting curve, discountingTermStructure, embeds the risk that this particular ...


2

Answering my own question: All the indicated numbers as obtained from ICAP need to be divided by 100, as they are percentages The OptionletStripper1 takes an IborIndex, which should have a tenor equal to 1Y. I had set it to 6M, and that seemed to cause problems Ouch!


2

Unfortunately, financial markets are not like physical measures, where you know the "true" value of a physical variable but you just access to it thanks to noised sensors. We do not know the "true" volatility, just because there is not such one value... In statistics you have two kinds of modelling procedures: the ones dedicated to estimate the unknown ...


2

Let $\delta$ be 3 month and consider points of interest $\{T_i\}_i$ evenly spaced with $T_{i+1} -T_i = 3 month$. The Forward Rate $F_m^n(t)$ from period m to n at time $t$ is defined by $$(1 + \delta (n-m) F_m^n(t)) = \frac{B(t,T_m)}{B(t,T_n)},$$ where $B(t,T_i)$ is the time $t$ value of a zero coupon bond that matures in $T_i$. A swap rate $S_m^n(t)$ a ...


1

The correct procedure for parametric bootstrap is: 1) fit the data with a distribution of the parametric family (normal, Student's t, etc.; you should choose the one that fits the data in the best way, using some criteria to choose, such as Akaike Information Criteria or others); 2) draw n random samples from the fitted distribution, and estimate the ...


1

Your $P_I(t,T)$ is the formula for the so-called "pseudo" discount curve. It can be used to compute relevant LIBOR forward rates and LIBOR zero rates. The "true" discount curve is of course the OIS discount curve, which can be built independently of the LIBOR curve.


1

It is true that intraday/market-making strategies don't have a reasonable "return" metric. For this reason you can't characterize them with the Sharpe Ratio, which depends on a capital basis and how that basis is leveraged (not to mention the risk-free rate on the capital basis). What you're asking is how to characterize the performance of a daily stream ...


1

The formula seems to be correct. Negative interest rates are not impossible in these days. http://www.bloombergview.com/quicktake/negative-interest-rates Have you checked the algorithm with values that produce positive rates? And in what area lie the negative ones? In the case of negative interest rates the discount factors should be greater than one, of ...


1

I think that's it, you just strip your OIS rates while boostrapping. Most OIS Swap Rates are Bullet contract par swap rates, so you might want to obtaint the Zero Curve. If you were quoting Zero Swaps, you wouldn't need to.


1

Bootstrap is a very interesting method to obtain the variance of any estimator. This means you can rely on it to obtain de variance of your Sharpe ratio (SR), but what you try to do is to deduce something (the probability to be positive) from the distribution of it. From a methodological viewpoint, if you boostrap your SR a "standard" way (i.e. ...



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