519 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 ...
233 views

### Is creating constrained random portfolios a hard problem?

Creating random portfolios with weights $x_i$ can be thought of as sampling from the surface of a simplex given by $$Ex = f$$ and $$Ax \le b$$ Where $E$ and $A$ are constraint matrices for equality ...
422 views

### Law of an integrated CIR Process as sum of Independent Random Variables

It is known (see for example Joshi-Chan "Fast and Accureate Long Stepping Simulation of the Heston SV Model" available at SSRN) that for a CIR process defined as : dY_t= \kappa(\theta -Y_t)dt+ ...
114 views

### Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
594 views

### Tools/R code for predicting Dragon-Kings

The theory of the so called Dragon-Kings, esp. by Didier Sornette (ETH Zürich), basically states that financial crises and crashes are predictable (contrary to the theory of black swans). The ...
138 views

### Regression in liquidity risk model of Jarrow/Protter

In the paper "Liquidity Risk and Risk Measure Computation" authors describe a linear supply curve model for liquidity risks in presence of market impact, i.e. impact-affected asset price $S(t,x)$ is ...
338 views

### Can we use White's reality check to compare two Sharpe ratios?

I read a paper from Ledoit and Wolf that proposes a method to compare two Sharpe ratios and a paper from White that proposes a method to compare $n$ trading rules. My question is: Can we use White's ...
253 views

### performance of historical VaR parameters

An historical VaR measure is parameterized in terms of the confidence level and also number of periods. Specifically, the $\alpha$% T-period VaR is defined as the portfolio loss x in market value over ...
80 views

### T-Forward Price on risk-neutral measure

i have and question concerning the T-forward price definition on the Robert J.Elliot's book : Mathematics of Financial Markets. On his chapter 9, definition 9.1.3 p.249. He give the formula without ...
105 views

### Intuitive explanation of the Hansen-Jagannathan bound

The Hansen-Jagannathan bound states that the maximum Sharpe ratio of a portfolio can't exceed the ratio of the standard deviation of a stochastic discount factor to its mean. I more or less understand ...
129 views

### Extreme Value Theory possible for portfolios with options?

Say you have a portfolio with long exposure to a few linear assets (stock indices) and short exposure to a nonlinear asset (say call options on one of the linear assets). I am interested in ...
159 views

### Implied term structure from risky discount curve: does it make sense?

We know that, taken every discount curve, it's possible to calculate its forward rates according to our tenor preferences. We know also that it's actually possible to extract an implied term ...
281 views

### What are modern algorithms for trade classification?

When dealing with trade data, for example from TAQ, a common problem is that of determining whether a trade was a buy or a sell. The most commonly used classifier is the Lee-Ready algorithm (Inferring ...