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Jan
9
revised What data transformations to use in regression of credit spreads on equity prices?
deleted 1838 characters in body
Jan
9
comment What data transformations to use in regression of credit spreads on equity prices?
That's effectively PCA on a correlation matrix, so what I said probably wouldn't apply.
Jan
9
comment What data transformations to use in regression of credit spreads on equity prices?
@Freddy 1) If both the equity returns and spreads are in percent, then the equity returns will dominate the first PC (if done on the covariance matrix). 2) I used to create factors when some variables were stationary and mean-reverting, but I have been less comfortable with that approach over time. Have you noticed any downside?
Jan
9
answered What data transformations to use in regression of credit spreads on equity prices?
Jan
8
answered Regime switching in mean reverting stochastic process
Jan
8
comment How to fit ARMA+GARCH Model In R?
In practice, it is often easier to just make the AR part of the ARMA long enough so that it encapsulates however much MA the series is. This way you can just use normal regression methods instead of relying on numerical methods for ARMA.
Jan
5
comment Yield of a risky bond
@Freddy I see your point, but then what he really would want to know is, not what the yield is and how to calculate it, but how to price the bond. A broad topic, to be sure, but the OP did not provide sufficient information in the question to be sure that's what he was wondering about.
Jan
4
comment Is this comment right about subadditivity?
Your interpretation is the correct one. VaR is not subadditive, but Expected Shortfall/CVaR is.
Jan
4
answered Optimizing a currency only portfolio with negative weights
Jan
4
comment Yield of a risky bond
To find the yield to maturity for zero-coupon or coupon-paying bonds, the calculation is the same whether the bond is default-free or not.
Dec
21
comment How to enumerate all the possible portfolios with a given target volatility?
@SRKX The algorithm I discussed would generate a potentially infinite number of portfolios. I would think you'd have to impose some kind of cardinality constraints (like you can't hold half a share of stock but only a full share) in order to obtain some kind of unique solution. But even then, I imagine the set of all potential portfolios to be quite large.
Dec
21
comment How to enumerate all the possible portfolios with a given target volatility?
What if you just generated random portfolios, scaled their weights to 1, then blended that with the risk-free return to generate the target volatility?
Dec
17
answered Calculating true value of a stock given the order-book and recent trades
Dec
14
comment Control Bloomberg logins in a library
Perhaps this is better directed to Bloomberg help?
Dec
13
comment Missing factor in the factor model
@Jase If you don't have much data, then the estimates may not be precise. As a practical matter it is easier to estimate in a Bayesian framework, which also imposes a computational burden. This makes backtesting take significantly longer.
Dec
12
revised Regression extensions
edited title
Dec
12
awarded  Enlightened
Dec
12
awarded  Nice Answer
Dec
10
comment Monty Hall Model
Not sure what the practical purpose of this is (regime-switching models of asset returns don't usually show much difference in the mean between regimes). Just think it through a second, if information comes out that the return on the market will be higher, would you try to take advantage of that, to the extent that the market will give you a fair price?
Dec
10
reviewed Approve suggested edit on Option pricing before Black-Scholes