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Dec
7
comment Who cares about autocorrelation?
Of course publications gloss over this, as it's considered general knowledge among the readership of the paper.
Dec
7
accepted Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
Dec
7
comment Using rolling returns in a multivariate linear regression?
Have a look at the several serial correlation robust bootstrap estimators.
Dec
7
comment Modeling interest rates with correlation
What short rate model is this that multiplies $r$ with drift and $r$ with diffusion? What probability measure is this specified under?
Dec
6
comment Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
Very nice response. Could you address my reply to @pat in the comments section? Then I will accept the answer.
Dec
5
comment What concepts are the most dangerous ones in quantitative finance work?
Could you please elaborate on what you mean by "vanishes". There is no consensus (yet) in the contagion literature as to whether correlations are stable or increase during crises. When accounting for the bias in correlation coefficients caused by increased return variance during crises, Forbes & Rigobon (2002) show that correlations are stable during crises. Some recent evidence shows that correlations tend to increase during crises. But I've never seen any evidence that it vanishes. EDIT:Actually this is just for index level.Perhaps with other asset classes or constituent level you're right.
Dec
5
comment What is Ito's lemma used for in quantitative finance?
This is a fantastic solution! My lecture slides apply Ito's to $e^{aX(t) + bt}$ to get the answer and it takes about 30 lines of working!
Dec
5
comment What advanced statistical techniques are quant researchers using?
Can you please give some more concrete examples? (curious)
Dec
5
revised Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
deleted 54 characters in body
Dec
5
comment Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
@pat I'm talking about strictly positive regressors. For example, the $Age$ variable in actuarial studies. Also, even if the regressor (call it $X_t$) can assume negative values we could just do something like $|X_t|^{1.95}$ to construct a regressor that's almost the same thing as $X_t^2$.
Dec
4
comment Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
@John What are these extra variables?
Dec
4
comment Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
@John I don't understand. Do you mean that it's like this because $2$ looks prettier than $x\in[1.5,2.5]$? Surely parsimonious should be defined statistically instead of based on how pretty something looks from a qualitative perspective.
Dec
4
revised Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
added 46 characters in body
Dec
4
revised Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
added 6 characters in body
Dec
4
asked Why are regressors squared and not ^1.5 or ^2.2 or ^2.5?
Dec
3
comment How to improve the Black-Scholes framework?
Do you have a source for this definition of returns? (where they actually use to word "returns")
Dec
2
comment How to improve the Black-Scholes framework?
I agree that $\frac{S(T)}{S(t)} = e^{(r-\sigma^2)(T-t)+\sigma(W(T)-W(t))}$ is lognormal, but I thought that the most common meaning of "stock returns" in finance is $ln \frac{S(T)}{S(t)}$.
Dec
2
comment How to improve the Black-Scholes framework?
Prices, not returns, are assumed to be lognormal.
Nov
28
awarded  Teacher
Nov
27
answered Monte carlo methods for vanilla european options and Ito's lemma.