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"The same past data can confirm a theory and its exact opposite! If you survive until tomorrow, it could mean that either a) you are more likely to be immortal or b) that you are closer to death."


2d
revised Estimating Beta from unevenly spaced price history
Minor edit of "hats" since they were slightly difficult to see
2d
suggested suggested edit on Estimating Beta from unevenly spaced price history
Apr
18
answered if technical analysis rules for predict stock prices is unique for all cases, why should we learn neural networks?
Apr
17
comment Engle Granger test returns a 0 in matlab, while correlation factor is .80+. Am I doing something wrong?
To answer your question. Correlation and cointegration is basically not the same thing. I wish I could answer your other question as well on Johansens (I think that was the test you used), unfortunately I don't know that test well enough to ensure my credibility.
Apr
16
comment Engle Granger test returns a 0 in matlab, while correlation factor is .80+. Am I doing something wrong?
I advice you to read a book on time series analysis. It is strongly recommended to know what you're doing in statistics.
Apr
16
comment Significance of Data
Is the question to recommend a book or to help you interpret the results? In case of the latter, then you should consider giving more details of the problem. It looks like you might be testing for stationarity of the cointegrated process (pair). It's very unclear though...
Apr
15
comment How to calculate the rho of an index future
Rho is the derivative w.r.t. the risk free interest rate. So after after you have "decided" for a price function it is straight forward to differentiate.
Apr
13
comment Pricing of a simple contingent claim
Hmm, it might be necessary in some cases. It worked nicely now since you took the power of an exponential, so you could just multiply the $\beta$ into the exponent and then the expectation became very easy. If this is not the case you should try to find the dynamics "of the whole claim" instead.
Apr
12
accepted Profiting from price discrepancies between stock exchanges
Apr
12
answered Pricing of a simple contingent claim
Apr
12
comment CVaR/VaR Ratio as alpha goes to 1
Well, is that the expression you really want to compute the limit of? If the denominator is the CVaR then you have the wrong expression I believe. It should be something like $\phi(\Phi^{-1}(p))/p$.
Apr
11
answered CVaR/VaR Ratio as alpha goes to 1
Apr
10
awarded  Critic
Apr
10
comment Divergent or Convergent Strategies? Which is the way to go?
Of course, having multiple strategies is certainly better. That requires a lot of recourses thought, in particular human capital.
Apr
9
comment Divergent or Convergent Strategies? Which is the way to go?
Well Ok, obviously I can't really argue against it since I haven't seen the figures. What you mention last is more to my point though. So the weaker funds do niche strategies that for some period of time makes a lot of money. But then, as a result of some rare event, they lose a lot of money. In other words they have a very fat left tail. This is typical characteristic of the convergent strategy. My point is now that even though it is a niche strategy, it must not be convergent. If they instead deployed a divergent strategy they could survive these rare events.
Apr
9
comment Divergent or Convergent Strategies? Which is the way to go?
I know, after googling the terms I can see that the notions are not widely applied in finance. Nonetheless, I think it is a useful way of thinking. Of course you can classify in terms equity, FX, commodities and what not. It doesn't tell you much more than what you're actually investing in. With regards to your last paragraph, that is not the CLT. Frankly, I think it's both naive and ludicrous to think that the aggregated returns of a hedge fund would be normally distributed just because they have multiple strategies (or in any case).
Apr
7
asked Divergent or Convergent Strategies? Which is the way to go?
Mar
29
comment Options with a stochastic strike
Well, I wouldn't say that the strike is stochastic, because that is not entirely true. I mean the strike is always K, but the whole claim is either 0 or some value X depending on what happens up until maturity. On the other hand, one could see the strike as either K or $\pm \infty$ (depending on if it is a call or put).
Mar
28
comment Options with a stochastic strike
I think one reason for having Asian Options, and other similar instruments, is that players with large positions in vanilla options have great incentive to "manipulate" share prices in order to avoid great losses or being able to exercise one's options, even if it means incurring losses from selling off/buying lots of shares in the underlying. With Asian options, however, this becomes much more difficult.
Mar
23
awarded  Yearling