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visits member for 2 years, 8 months
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Aug
6
comment Looking for a recommendation for a Fund Transfer Pricing modelling book
Well, its not an easy topic, especially applied because its not purely quantifiable in practice.
Aug
6
comment Why are indifference equations in mean-variance portfolio theory convex shaped
I am afraid you need to elaborate because your "indifference curves", "utility curves" (whatever they are because you have not really defined them yet) are very off, meaning, of non standard shape. I would even argue that a trade-off between risk and return should not look like general utility curves at all. The more you increase risk the higher the chance your expected return is actually gonna be negative. Also, this should not be mean return but expected return in combination with volatility, which I assume reflects future realized portfolio variation and not historical one.
Aug
6
comment Looking for a recommendation for a Fund Transfer Pricing modelling book
@athos, the above I found the most valuable even after further sifting through couple more papers so there is unfortunately not more I found of value.
Aug
5
comment How to choose a rolling window type and size?
At the absolute core of any trading strategy should be a reflection of the admittance of total market dynamics. That means that there is no golden levels, no set parameters that optimize a strategy outcome over time. What works today may already stop working tomorrow. I would start with a verification of such dynamics and attempt to capture changes in dynamics and how you intend to react to those.
Aug
5
comment How does out-of-sample option pricing work in practice?
Indeed. They just isolated the parameters whose predictive power they want to test.
Aug
4
comment Black-Scholes in Delphi
so you posted code where there was no error?
Aug
4
comment Black-Scholes in Delphi
I do not see anything wrong with the BS formula itself. Did you verify matching parameter inputs, or, and I did not check in your solution, are you sure you assigned the values to the right value types, as wrong types may result in rounding errors or worse. By how much are you off?
Aug
4
comment Black-Scholes in Delphi
en.wikipedia.org/wiki/Cumulative_distribution_function
Aug
4
comment Black-Scholes in Delphi
BS is BS is BS, regardless of implementation language used. I venture to say, given you have double checked the formulae that you probably calculate the cdf incorrectly.
Aug
3
comment Liquidity and Prices
Google TCA (transaction cost analysis model )
Aug
3
comment Liquidity and Prices
yes, why would they not lead to lower market prices. I assume you mean execution related costs when you say "market prices"?
Aug
3
comment Why is the mean time-dependent in the Hull-White interest rate model?
the choice of model always should be determined by the specific use case. If you model product with a duration of 30-50 years then sure you are most likely right to assume a long-term mean of around 5%. But if you look to model interest rate products with, let's say, 2 years of maturity then you should hardly plug in a 5% rate in this current environment. Hence some models assume a time varying mean.
Aug
2
comment Why is the mean time-dependent in the Hull-White interest rate model?
Since when are interest rates insulated from time-varying changes? tradingeconomics.com/united-states/interest-rate (chose the start date to be 1971, long-term enough?)
Aug
2
comment Trend in Cointegration relationship
this should answer your question: repub.eur.nl/res/pub/1559/feweco19990414090913.pdf
Aug
1
comment Looking for a recommendation for a Fund Transfer Pricing modelling book
I will look around a bit more but it would help if you could give more specific topics of interest to pinpoint what you exactly are looking for.
Aug
1
comment Backtesting - can you buy/sell at open and closing prices?
@Brian B, I hope you never worked at that certain "prop shop" and I would venture to guess this shop does not exist anymore. Phoning in the securities, direction, and sizes one wants to trade at the close is almost the same as sending your PB a cheque directly (which the PB in turn passes on to their internal facilitation or prop desks who in the meantime pop open another bottle of champagne due to having reached their next pnl milestone).
Jul
31
comment options pricing using vwap
@BrianB, ah now I see what you meant. Yes, agree, and even in 2008 people hugely underpriced the value of liquidity, especially when the CP market went seismic and a number money market funds broke the buck. Or I bet ex Lehman upper management would have paid a much higher price for liquidity in retrospect.
Jul
30
comment Backtesting - can you buy/sell at open and closing prices?
Yes, as realistic as bidding at an auction for a Picasso at 5 dollars. Good luck.
Jul
30
comment How to most optimally perform currency conversions when backtesting on portfolio level?
yes that is how I have done it in the end. Run-time wise it would probably have been the cleanest way because I could have read such time series just in an identical way as the other assets' time series. However, in order to realize a bit more of some sort of "separation of concerns" I stored all dollar crosses (assuming USD is base currency) in a separate in-memory database. (very small footprint as I only use 1 update per day).
Jul
30
comment options pricing using vwap
@BrianB, thanks for mentioning that. Do you have couple products in mind where that was the case? I have traded JGB futures options in the past and felt liquidity was well reflected in the iVol spreads at most times.