347 reputation
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bio website about.me/stephen.rush
location Providence, RI
age
visits member for 3 years, 8 months
seen Sep 19 at 11:09

Experience is just inference from a limited and biased sample.


Dec
30
comment Using the termstrc package in R
They appear to be.
Dec
21
comment Using the termstrc package in R
I spent the day replicating this format and it does not solve the original problem. Producing an object with the exact same structure as the "couponbonds" class is still a list that is rejected by the est_nss function.
Dec
21
comment Using the termstrc package in R
Thanks, Josh. My understanding is that the YieldCurve package doesn't handle variable coupon bonds which will eventually limit my data set.
Dec
20
comment Using the termstrc package in R
Thanks! After an hour or two of skimming through 80 pages, I would never have found that tidbit without any reference to the couponbonds class.
Dec
4
comment Are there comprehensive analyses of theta decay in weekly options?
The fundamental model of small changes in the derivative increasing to larger changes in the derivative as time to expiration decreases is true in all cases. What changes is the convexity. As volatility increases and all else is held constant, the change in the rate of time decay increases. Another way to look at it: as volatility approaches 0, the graph will approach a straight line but the top left portion will always have smaller changes than the bottom right.
Dec
4
comment Are there comprehensive analyses of theta decay in weekly options?
My last comment on the time value would apply.
Dec
4
comment Are there comprehensive analyses of theta decay in weekly options?
I'm not sure what you mean by extrinsic value. If you mean "intrinsic value" it would be maximized when the stock price is highest compared to the exercise price for a call and the opposite for a put. This would be considered in the money not at the money or out of the money. If you're referring to when the time value is greatest, that would be when the option is out of the money and would have a greater time decay. Assuming we hold constant time to expiration, the risk free rate, and strike price such that a call option is at the money, time decay increases with volatility.
Sep
13
comment How to shift amongst asset classes in response to relative value views?
Another way to approach the problem would be to run simulations to determine the TAA bands to place on each asset class to maximize long run returns incorporating transaction fees. This method would be sensitive to initial weights so a risk neutral portfolio framework may be a useful starting point. I use a block bootstrap to account for auto correlation in the return series and time varying correlations.
Sep
10
comment How to shift amongst asset classes in response to relative value views?
The basic problem of allocation based on manager conviction can be solved with Black Litterman. To address the transaction cost constraint, you need to determine how good the managers are particularly under different asset class correlations. This is necessary to determine whether a given level of conviction is sufficient to overcome transaction costs. Without understanding the skill level of managers, you will not be able to find the magnitude of the trade. In studying the skill level of managers, you will need to determine the time horizon that a manager can accurately express views.