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Nov
22
comment Why Statistical arbitrage is no logner useful
One possible answer is that option prices no longer follow the normal distribution and instead follow a "fat tailed" distribution.
Nov
22
comment Is the Volatility of the Fx Inverse process same as Fx
Since volatility measures the change in Log[Fx], and Log[1/Fx] = -Log[Fx], this appears to be apparent.
Nov
22
comment Why doesn't Black-Scholes assume the absence of statistical arbitrage?
Black-Scholes is known to be inaccurate, but not for this reason. Can you show an example where Black-Scholes behaves poorly for statistical arbitrage? Lack of statistical arbitrage is implicit in Black-Scholes and in the market.
Nov
11
awarded  Popular Question
Nov
8
comment Distribution of the differences of the inverse of the integral of a Gaussian Distribution
Er, the log of 1/P is -log(P), same distribution with flipped sign. Does that help?
Nov
8
comment How to prove following order?
Is a consol bond the same thing as an annuity?
Nov
8
comment Normalization of Market Data in Time Series Correlation
You could correlate only where data for both securities is available. Two securities rarely trade at the same nanosecond, so you'll have to create some discrete time interval (eg, 1 minute) for correlation purposes. You can use the median price for the minute to correlate.
Nov
8
comment Binary option expression
This isn't how I would compute the value of a binary option, but your next step would appear to be taking the limit itself as epsilon goes to 0, no? You are effectively looking at the derivative of C(K) by the definition of derivative.
Nov
8
comment What is the best source (book or article) to learn pair trading from for the layman?
en.wikipedia.org/wiki/Pairs_trade would be a good start?
Nov
5
answered Where can I find answers to questions in the book “Paul Wilmott Introduces Quantitative Finance”?
Nov
4
comment Index creation from multiple time-series and variable weights
Are you saying the weights change daily? Do the indices have approximately the same value? If so, INDEX1/2 + INDEX2/4 + INDEX3/4 works. If not, you should decide how to normalize (set them all to 100 on day 0?)
Nov
3
comment how to calculate a cross-currency swap in basis pt?
fxdd.com/mt/en/forex-resources/forex-trading-tools/… might be what you seek.
Nov
3
comment American put on a foreign currency
You might want to look into "rollover rates", the money you make or lose daily for holding currency. Selling currency early could save you money if you're paying rollover, or even make you money if you're taking a short position in the currency.
Nov
3
comment Logging FIX Messages
This isn't really a finance question, but I'll try answering it anyway: have you tried a RAM disk?
Oct
31
comment Vanna-Volga method to infer vol surface with just few realtime tick data
If you know the value of the underlying, you don't need both put and call pricing: one depends on the other. You probably want ATM call, first OTM call and first ITM call for each maturity. You can get a good approximation of the volatility smile and surface from that.
Oct
30
comment How to exploit calendar arbitrage?
Buy the T2 call and sell the T1 call.
Oct
29
comment What is an efficient method to find implied volatility?
Is the bisection method really that slow? If you bracket between volatility 0 and 1, as few as 20 steps will get you within 10^-6 of the true volatility.
Oct
29
comment How to calculate returns of backtested strategy?
You definitely need to include invested money as part of the computation. This is easy for long positions. For short positions, determine the margin requirement that a broker would've required to allow you to take that short position.
Oct
29
comment What is an efficient method to find implied volatility?
A few more details, please: what original data do you have and what function are you trying to set to 0?
Oct
28
comment How trading in currency pair works, underlying techniques and mechanisms
Your "mechanism B" is the correct understanding. When you buy USD/RUB, you are buying US dollars and paying in rubles. You are given two days to come up with the rubles and get your dollars, but you can keep pushing this debt day-to-day, which may cost you money or even make you money, depending on interest rates. Once you sell the USD, you get back rubles, pay back the loan, and convert the extra rubles to SEK. Remember that FOREX is highly leveraged. With 100 SEK, you can buy 5000-10000 USD (depending on your broker/country's laws), so your profit (or loss!) can be much higher.