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Mar
5
comment How to assess stock price movement from implied volatility?
One would need $\mu$ but an option does not tell you anyting about the drift as it is assume to be the risk free rate (or you look at the implied forward) ...
Mar
4
comment What to use as portfolio diversification measure?
@John this sound interesting. Do you have a link to that paper too?
Mar
4
comment What to use as portfolio diversification measure?
@mtiano No, if your assets are linearly independent the PCA will not give you eigenvalues of zero. The covariance matrix will have full rank and all eigenvalues will be bigger than zero. If you have more assets than observation times then you have to use another estimator for the covariance matrix (e.g. shrinkage)
Mar
4
revised What to use as portfolio diversification measure?
added 232 characters in body
Mar
3
comment What to use as portfolio diversification measure?
"PC analysis assumes the existence of zero variance portfolios" - no, it does not. It is rather the opposite ... where do you have this from? Any proof or reference?
Mar
3
answered What to use as portfolio diversification measure?
Mar
2
awarded  Taxonomist
Feb
25
revised hedging correlated instruments
added 20 characters in body
Feb
25
answered hedging correlated instruments
Feb
25
answered Markowitz Mean-Variance Implied Returns
Feb
24
answered Copulas simply explained
Feb
24
answered Why an option has sometimes and implied volatility greater than 100%?
Feb
24
comment Why an option has sometimes and implied volatility greater than 100%?
Very good answer! Log-return can be less than $-100\%$ and the price is still positive. And the standard deviation can be whatever.
Feb
24
comment Non-Negative Matrix Factorization - Estimating the Mean
I am aware of the PCA of a covariance matrix and I have seen NNMF being applied to data. But how is NNMF applied to a covariance matrix? A covariance matrix is usually negative too. Is it transformed? In my experience NNMF is hard to interpret.
Feb
23
answered Incorrect characterization of spot rate?
Feb
19
comment VIX-implied Volatility calculator
Right, I agree.
Feb
19
comment VIX-implied Volatility calculator
I would put it a bit differently. CBOE VIX still represents implied (not realized) vol as it is derived from option prices. I think if you can put it like: buy amount $X$ of option 1, buy amount $Y$ of option 2 then you have a portolio and you can use cost-of-carry. But as VIX equals square-root of something you can not buy it. It just does not exist in the market. You can neither buy VIX spot (because VIX is not an asset ....) and you can not buy sqare-root of the portfolio. For cost-of-carry you have to be able to buy spot.
Feb
19
comment VIX-implied Volatility calculator
I added some more details in the answer.
Feb
19
revised VIX-implied Volatility calculator
added 613 characters in body
Feb
19
answered VIX-implied Volatility calculator