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| bio | website | |
|---|---|---|
| location | Tokyo, Japan | |
| age | ||
| visits | member for | 1 year, 3 months |
| seen | 33 mins ago | |
| stats | profile views | 657 |
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Jan 12 |
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Asymmetric Volatility Modeling (Interpretation) I was about to say the same, not only that but you may want to mention the user whose answer you chose as your co-author. |
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Jan 11 |
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What data transformations to use in regression of credit spreads on equity prices? @Yugmorf, sorry I lost you, I honestly do not understand your problem. But I hope you can solve it. |
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Jan 10 |
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What data transformations to use in regression of credit spreads on equity prices? I can only repeat to run principal components and see for yourself which volatility measure dominates in explaining spx returns. Obviously you need to be careful in considering how you lag one ts vs another. |
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Jan 10 |
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What data transformations to use in regression of credit spreads on equity prices? I strongly discourage you to do so. Vix is priced at times completely uncorrelated to historical standard deviations of spx (and it should if you really look at how vix is computed). |
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Jan 10 |
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What data transformations to use in regression of credit spreads on equity prices? @Yugmorf, I am not sure I understand why you consider this a problem. First, I am not sure what you consider the numerator and denominator here. Spx returns are one time series, Vix returns are an entirely different time series, and then implied vols are again another time series. When I talked about normalization I referred to the normalization of each time series itself, not across all time series. I was referring to normalize time series x's returns -> time series x's standard deviation measure away from its own mean. |
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Jan 9 |
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What data transformations to use in regression of credit spreads on equity prices? Would you not think you slightly aim to overshoot here? You basically suggest the entire arsenal of quant tools to look at some basic relationships and attributions. |
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Jan 9 |
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What data transformations to use in regression of credit spreads on equity prices? @John, just wanted to clarify what you mean, I recommended using normalized data not percent returns. I had standard deviations away from some sort of own mean in mind |
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Jan 9 |
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What data transformations to use in regression of credit spreads on equity prices? thats why I suggested you start with PC so you understand the explanatory power of each component first. |
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Jan 8 |
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Why is short term implied volatility typically higher? I would not say that it has to do with mean reversion, but I think you elegantly described why iVol[t]*Sqrt(xxx/(T-t)) != iVol[t+i]*Sqrt(xxx/(T-t+i)), where xxx denotes the chosen annualization factor. Still, I am missing the math behind your answer. |
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Jan 7 |
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Yield of a risky bond agree, from our exchange I sense we talk about the same thing (more or less) here after both our adjustments. I was just thinking of newcomers who may get confused. Adjusted my vote. |
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Jan 7 |
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Yield of a risky bond @vanguard2k, I edited my answer |
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Jan 7 |
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Yield of a risky bond I disagreed with your first paragraph. The question has nothing to do with how to calculate yield-to-maturity, I think we can all agree on how its done. The question was whether risk premiums are embedded in the yield-to-maturity, and for me it is a resounding yes (through the price), while saying "the notion of yield to maturity is independent of any risk notions" hints at a different interpretation. "Notion" refers to the idea or conception not to how to calculate things. Not trying to be anal, but if you hold others to high standards you may want to be precise yourself. |
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Jan 7 |
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Yield of a risky bond @vanguard2k, fair point, "simple" is subjective, I would not say, though, its "hard". Its standard practice and there is a reason for every bond trader in the market there are most likely 20-30 analysts working on this kind of stuff (buy-sell-side combined), not because its so hard but because they use risk premiums for all kinds of things plus accounting for the sheer number of corporate bonds out there. I equate probability measure (not used in the statistical sense) with yield spread in this case, I meant to mean isolated risk factors.The non-standard lingo most likely confused you, sorry |
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Jan 6 |
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Rubinsteins Implied Binomial Tree - how to calculate the cumulative returns you asking this question I respectfully recommend you to start over and first familiarize yourself with the basic building blocks before you hack away functions on spreadsheets. Conversely, programmers never start hitting code into their machines but rather carefully design use cases, requirements, available resources... Maybe you want to focus on a more basic paper which touches on the basics of the binomial tree model. |
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Jan 5 |
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Yield of a risky bond I posted my answer already and yes this question is about risk premiums and how they are embedded. With all due respect you seem to quite frankly seem to not understand the question. |
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Jan 5 |
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Yield of a risky bond Exactly because this is not about yield curve construction you miss the topic almost entirely. It's about risk premiums which you did not touch on at all hence my downvote . |
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Jan 5 |
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Yield of a risky bond sounds like you are contradicting yourself. In your answer you start with bond prices now you start with yields... |
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Jan 5 |
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How to choose model parameters? @hulik, correct. As long as we can find arbitrage portfolios that make us indifferent about future values of the underlying in 'P', we do not have to care about individuals' risk preferences. That is the beauty of risk-neutral pricing. Check out one of my earlier answers, I discussed it at length and it should make it clearer, including supplied references and links. |
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Jan 5 |
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Yield of a risky bond by the way you describe the flow is definitely not market practice. Even in the theoretical realm I can show you many models that output yields and not prices. One could even argue that your assertion that yields are derived from prices is not universal. |
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Jan 5 |
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Yield of a risky bond @John, my point being that risk is very much priced into ytm as well as the price of each and every single bond in this universe (and I do not know of a single bond series trading free of risk). We do not know how risk breaks down into, e.g. risk of corporate or sovereign default (heck ISDA does not even know how to define and interpret default, judging from the many court cases). But I think OP asked a straight forward question which is "how is risk embedded in the yield and prices of bonds". At least that is my take of it |
