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Aug
22
comment Black (1976) model: boundary conditions with non-convergence of spot and forward prices
@JoaoSerafim, I deleted my comments because I felt they were misleading. Quick summary of what I have been trying to say: The Black model is just the base framework. Depending on the underlying-forward/futures relationship (equity futures, commodity futures, currency futures, index f), the Black framework needs to be slightly adjusted and you end up with an extension of the Black framework, such as with Garman-Kohlhagen.
Aug
22
comment VSTOXX Implied Volatility Calculation
thanks for the update. Could you please comment on the y-axis units? It says ImpliedVol but the values do not correspond to reasonable implied volatility levels.
Aug
21
comment VSTOXX Implied Volatility Calculation
@Eli, would you mind sharing some of your findings? Of course only material you do not define as edge, I am simply curious what kind of analysis you have performed and the results you found as far as you feel comfortable commenting on. Would be a rare but highly pleasant treat.
Aug
17
comment How to compute a sector's volatility within a portfolio?
So, you want to calculate the variance of a specific portfolio subset (= sector), then why would you need the correlations of assets in the other sectors? All you need is the same inputs as if you calculate portfolio variance (asset weights (need to sum up to one within the sector), asset variance, and pairwise asset correlations within the same sector).
Aug
16
comment Black (1976) model: relationship between spot and forward prices
@JoaoSerafim, I meant the asset on which the option is written, which could be a foreign exchange rate, a futures price or an interest rate,...please note that the risk-adjusted probability distribution of the above mentioned product has to be lognormal.
Aug
15
comment VSTOXX Implied Volatility Calculation
@Eli, the 14% jump in just 1 hour right now in VIX reminds me on your question you asked yesterday. Hopefully this is the kick-off to higher vol markets after this summer lull...
Aug
14
comment VSTOXX Implied Volatility Calculation
ok, sorry, misunderstood then. Will post something shortly
Aug
14
comment VSTOXX Implied Volatility Calculation
Forget models, take a look at the methodology, there are a variety of calls and puts involved, no magic there...stoxx.com/download/indices/rulebooks/stoxx_strategy_guide.pdf
Aug
14
comment VSTOXX Implied Volatility Calculation
There is nothing up to interpretation or choice about VSTOXX. It follows a very well defined methodology. What do you mean with "you experimented" with ...?
Aug
14
comment What is the difference between the Interactive Brokers demo account and a personal paper trader account?
I would not call the sampled data coming from IB inaccurate. It surely does not reflect a complete market as IB does not target high or ultra high frequency trading strategies with its API. But the prices are accurate and especially at times, when many assets print 5-10 times as many trades and most data feeds start to have a hard time to catch up, IB's feed looks pretty stable. Of course I am not talking about the top of the cream feeds worth several thousand dollars a month, but that is not IB's league anyway. I think IB targets buy side discretionary and retail.
Aug
14
comment Partial Least Squares Discriminant Analysis
Let me get back to you with some references that include examples...
Aug
14
comment Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output
well, what have you tried so far in R re your real question, result ranking? (Re earlier messages, do not get me wrong please, I do like your question and +1, just wanted to clarify...)
Aug
14
comment Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output
Ok, I get that but that is not related in any way to Kalman filters (other than that the prior algorithm involved a Kalman filter), correct? I was just confused because you spend 90% of your question on data acquisition and Kalman filter but your real question seems to be one of how to rank results. But maybe that is just my wrong impression
Aug
14
comment Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output
I am not exactly clear what your question is, do you mind rephrasing it a little or expanding on it? Thanks
Aug
14
comment How popular is the IRR as a tool for capital budgeting, nowadays?
thanks for explaining. Well, I can certainly add my take and references, though it will not be from a corporate finance practitioner's perspective.
Aug
13
comment How popular is the IRR as a tool for capital budgeting, nowadays?
I do not see any other SE site that may match with what you are looking for. Sorry I cannot help further
Aug
13
comment Partial Least Squares Discriminant Analysis
A simple google search gives you all you need. First 2 pdfs: enpub.fulton.asu.edu/cseml/06summer/pls_dis.pdf, users.stat.umn.edu/~sandy/courses/8801/articles/pls.pdf
Aug
12
comment Industry convention to track trading performance against market indices?
a) because what if you deposited 200 throughout the year (and had in no way accounted for that) then you would not have generated a return 20% but of 0%. b) What if your fund rose 20% but with a maximum drawdown of 50% and wild swings while the Dow returns were very steady with low variations? A case can be made that some may prefer to invest in the Dow even though it yields less. Can you imagine that there are people who are offered but reject to play a game to either win 1 mln USD with a probability of 99% or lose their lives with 1% probability? You need to build risk into your equation.
Aug
9
comment How popular is the IRR as a tool for capital budgeting, nowadays?
I used hurdle rate in a very loose manner, sorry for the confusion. If there are otherwise no other required rates then an example of "hurdle rate" would be 0%, meaning, the project is expected to be net profitable. But then as mentioned I have ever worked in corporate finance and so please excuse my incorrect usage of terminology.
Aug
9
comment How popular is the IRR as a tool for capital budgeting, nowadays?
Without knowing for sure I would reckon that IRR is still used in one form or the other because in the end IRR really just measures some kind of "hurdle rate" and the question becomes is this a return that overcomes the cost of funding, the required return, a competing return. In the end that is what most everyone is concerned about whether it be personal finance, trading, funding, capital budgeting. But it is just a hunch and definitely does not qualify as answer so maybe someone with direct knowledge can add more value...