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Oct
2
comment Can option prices be characterised by an ODE?
You can alway use a semidiscretization for your PDE or some kind of Galerkin method to end up with an ODE system. I suppose this would correspond to a process with either discrete timestep or discrete state space but thats a guess.
Sep
30
comment Asynchronous Data Across Time Zones - RiskMetrics
Be sure to look at this answer: quant.stackexchange.com/questions/7650/data-synchronization
Sep
30
comment What is the correct Stutzer index and Sharpe ratio relation, assuming a normal returns distribution?
I doubt that it makes a lot of sense with only twelve data points but opinions can vary. Some people may argue that its better to calculate something than nothing. If you calculate it, be sure to compare it with the sharpe ratio. One thing I did not mention above is that the equality with the sharpe ratio only holds when we consider the expectations (instead of approximating them by means as in $I_p$ above). So even for this comparison you would want to have more returns...
Sep
12
comment How to show that the risk contribution function is or is not injective?
The $x_i$ should be a $w_i$ right? In this case $\sigma$ is a function that satisfies the Euler condition as in your other question. You could also add some constraints for your risk measure. Spontaneously, I am thinking about some kind of convexity condition and the implicit function theorem.
Jan
16
comment Comparison of Brownian Motion Expected Drawdown and simulated results
@ManInMoon I edited my post
Jan
7
comment Yield of a risky bond
@Freddy I edited my answer according to your suggestion and hope you can agree with me now. Still, in my opinion, yield-to-maturity is not directly risk related but yield spread is. Nevertheless, I think we are all talking about the same things here.
Jan
7
comment Yield of a risky bond
I am sorry but I disagree on the point where you say simple-to-calculate risk premia. For most corporate bonds for example you have to work hard to separate default risk from other risk factors. Further more, you don't arrive at a "probability measure" but rather at a yield spread as I stated in my answer. The probability of default still remains unclear. You still have to model the default probability for a given yield spread.
Jan
7
comment Yield of a risky bond
@Freddy thats precisely what I said in the second statement about the yield spread. There is no point we disagree on. The textbook way to calculate a yield just depends on the price and the coupons though. Of course the default risk has impact on the price, thus on the yield-to-maturity.
Dec
27
comment How to detect regime change when estimating asset correlation from historical time series?
@strimp099 Are there any resources in these search results you find particularly instructive and interesting? Introductions, surveys, papers, books?
Dec
27
comment Most natural generalization of covariance/correlation to model dependence of extreme events
@vonjd Its the definition of covariance: en.wikipedia.org/wiki/Covariance#Definition
Dec
27
comment How to reactivate a risk mangement rule in an automated process
I think the question was pointing into a different direction. The rules to close the positions are there but when to open them again? I guess this is a very general question (and old) question. To my mind, almost any rule will do - but you should have one. If one has a rule which tells when to close a position one should also have a rule which tells when to open one. Examples of the latter rules where the question here.
Dec
21
comment Most natural generalization of covariance/correlation to model dependence of extreme events
Strictly speaking, there are no assumptions of linearity or normality in the notions of covariance and correlation. The only assumptions needed are: two random variables with finite second moments.
Dec
20
comment What are the best Journals & Conferences in Quantitative Finance?
@montyhall is there a difference to arxiv.org?
Dec
19
comment How to cluster ETFs to reduce cardinality for portfolio selection
I wanted to add one thing here: Elimination of highly correlated assets reduces the condition number of the variance-covariance matrix thus giving you more stable results. At one point in the optimization procedure you have to invert this matrix somehow. So elimination of correlated products is also sensible from a numerical point of view
Dec
19
comment How to cluster ETFs to reduce cardinality for portfolio selection
I would definitely do a preselection by looking at bid-ask spreads, cost/tracking error, trading volume, NAV premium/discount, replication mode (not necessarily in this order but I would advise it). I think you will find that after this analysis your universe will be narrowed down...
Nov
29
comment Recommendations for books to understand the math in quantitative finance papers?
@Gravitas : I think most of the book recommendations below are marvellous books but they are merely primers. I doubt you will fully understand recent academical work after reading them. Its like driving a formula 1 car in your first driving lesson. It feels cool but it will not take you very far. Take these texts as a motivation to plunge into some more serious math and take the problems one step at a time. (and after many years things will still be a mystery I can assure you that :-) )
Nov
9
comment Exposition of Growth in a Perpetuity
Take the dividend discount model for example. In your example the dividend growth rate $g$ would be greater than the investors required return $r$. So the required return should definitely be larger than the dividend growth rate. Finally, you should end up with the price of the stock after all. :-)
Nov
8
comment Is the binomial model wrong?
Hm I am reading your reference right now and I have a suggestion. In the part where you say "It is safe to say the set of traders and risk managers that are able to comprehend this differs little form the empty set". I think you should restate this - it is rather a set of measure zero - but definietely not empty. ;-)
Oct
4
comment How to show that this weak scheme is a cubature scheme?
@TheBridge Is this question still of interest?
Oct
3
comment Encyclopedia of Statistical Tests
@DangerMouse I dont doubt that its a great book I just thought it would be great to read a book review before ordering it. (And I almost surely will) Just to see if it is too theoretical or too "shallow" material.