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Jul
18
comment Why do stocks fall so quickly? Technical explanations
Not apart from the dozens (hundreds?) of papers that have been written on the subject.
Jun
18
comment LIBOR with different tenor
Didn't you already ask this once? What happened to that question?
Jun
18
comment Can Gaussianity of returns depend on the time frame?
Yes, the variance ratio test is based upon the non-Gaussian scaling of aggregated data. Long story short, it's not always Gaussian, but nor is it completely unpredictable. "An Introduction to High-Frequency Finance" goes into the scaling properties of high-frequency data in some detail. You might also be interested in the "Epps effect" which distorts the autocorrelation and IID properties of high-frequency trade data.
Jun
17
comment Sharpe ratio and leverage
Yup, I deleted my comment, you are correct.
Jun
14
comment What are “Autoquotes”?
That sounds like pre-Reg-NMS stuff, I am almost (but not quite) certain that quotes like that are now protected, and must be traded through. I wonder why, in 2008, people were still writing about locked markets in 2003... 2005 was when Rule 611 came into effect, I think...
Jun
1
comment SABR calibration: simple explanation and implementation
Does anyone know the derivation of the approximations Sibetz Nowak uses on Slide 34? eg $f-K = sqrt(fK)log(f/K)[1+(1/24)log^2(f/K)+(1/1920)log^4(f/K)]$ It's clearly some kind of series expansion, but I can't seem to find the source.
May
14
comment What is the best alternative of Quantlib library
FINCAD has the F3 product, which is very flexible, and has built-in adjoint algorithmic differentiation, for very fast risk calcs. It is implemented internally in C++, but they have supported bindings for Java, .NET, MATLAB, and maybe Python. Disclosure: I work for FINCAD.
Feb
11
comment How to apply the “Knapsack Problem” to minimise a portfolio's volatility?
Cardinality-constrained with inequalities optimization is pretty interesting stuff. di.ens.fr/~aspremon/PDF/MeanRevVec.pdf is a good resource (and his other papers) for some alternatives to LASSO, though I haven't gotten around to implementing myself yet.
Jan
23
comment Any New Discoveries in Quantitative Finance?
The field is not stagnant; HJM/BGM models were huge advances. CVA->XVA is a big deal, and funding issues in general. Local volatility was a brilliant derivation. Replication with market impact is ongoing. There's tons of stuff happening, but I don't think that "Scalar" model is a part of it, at all. EDIT: In fact, I'm a little suspicious that this entire post is to drive traffic to that wiki "user" page.
Dec
22
comment How to price a futures spread option?
Might be simpler to model the spread directly as a normal process, then price with a Bachelier model? Otherwise you could check Haug's book, I don't have it handy...
Dec
8
comment Combine together different strategies in one portfolio
I guess it depends how sophisticated you want to get. Equal weight is or equal risk is pretty simple. Optimizing multivariate empirical distributions is harder. Meucci's book might have something to say on this, though I admit I haven't gotten around to reading it yet.
Dec
3
comment PEGY Ratio: Does it make sense?
That said, we are adding unlike terms, so it doesn't make much sense.
Dec
3
comment PEGY Ratio: Does it make sense?
Cash paid as dividends will not be used to finance internal reinvestment, which drives earnings growth. Arguably G+Y represents the internal + external compounding of returns on equity.
Dec
2
comment How do I artificially generate intraday ticks data from a given input (Open,High,Low,Close,Volume) using Brownian Bridge method?
Why don't you do some analysis of high and low times from actual tick data to calibrate your model?
Nov
19
comment Why IV shares an inverse relationship with underlying
I would just add that this is often due to increased correlations during declines, perhaps due to forced sales due to margin calls and other contagion. Also worth pointing out that this is a very equity-centric point of view. In FX, very often, there's a smile but no skew.
Nov
16
comment Price 3m libor autocap with LMM calibrated on 1y swaption data
You can get much more breadth of swapping got data than that. And to calibrate correlation, you probably want some CMS spread options quotes too, though those are harder to find.
Nov
12
comment Key Rate Duration for MBSs greater than Key Rate Tenor
Well, first of all, the "duration" in a "key rate duration" is really just the sensitivity of the instrument to changes in that particular rate. The sum of them should roughly add up to the duration of the instrument to a parallel shift. KRDs can get muddied if the curve is using a global interpolation, and in exotics and MBS, it all depends a lot on the pricing model, for instance, how prepayments are correlated with particular rate shifts. That said, I'm not an MBS expert. Definitely don't think of "duration" as any sort of time, it's just a delta.
Nov
12
comment Logging FIX Messages
You should also look into Chronicle, or perhaps the newly-released Aeron by Martin Thompson
Nov
10
comment Implied volatility and pricing of vanilla options
A large contingent will view the question as meaningless, since vanilla option prices are quoted, hence don't need to be priced. The model clearly is not correct, since there exist volatility smiles. It is arguably useful to price those vanilla options which are not exactly quoted, by interpolating the implied volatility. I suppose it depends if you are trying to price vanillas better than the market, or more interested in pricing non-vanillas which you can hedge with vanillas, as others have pointed out.
Nov
9
comment Is there a better way to price options than with historical volatility?
I quite like the Yang-Zhang volatility estimator, which uses the daily OHLC data: atmif.com/papers/range.pdf