245 reputation
114
bio website myindigolives.wordpress.com
location Arizona
age
visits member for 3 years, 6 months
seen yesterday

Probability, finance and due diligence - @EllieAsksWhy


Dec
1
comment How to Delta Hedge with Futures?
Contango and clearinghouse requirements are more than mere issues. As @Matthew said, if they undermine the arbitrage, they render the theoretical question pointless as currently stated. You need to determine whether the costs of contango and clearinghouse margin changes are quantifiable (seems unlikely...) and are less than the arbitrage value of the trade strategy.
Jan
6
comment Inflation swap liquidity versus inflation-linked bonds
This is an interesting answer! I can tell you have direct experience with these markets. I spend an unfortunate amount of time with (so-called) Austrian types. They never mention Japan, I realize, which should be a sort of heavenly ideal, as there is never any inflation. As you point out, there is this unfortunate OTC behavior, probably motivated by investors' search for returns, and the snake oil salesman who prey on it. That is a good explanation for what appears to be an anomalous market, where off-market securities become more liquid than government bonds. Have I understood correctly?
Dec
4
comment What advanced statistical techniques are quant researchers using?
It is possible that for some other, exogenous reason, that hedge fund did not need additional staff with PhD level statistical expertise. Yet they would have no reason to reveal that, especially if you do not have whatever it was that they did need e.g. OCaml skill, or antenna physics for microwave transmission of data for super-fast HFT or how to configure daisy-chained Cray's, or subject matter expertise in a non-quantitative field due to say, a tax or export/ import arbitrage opportunity.
Dec
4
comment What advanced statistical techniques are quant researchers using?
I find this very unlikely too. When I first read your question, I thought that "They claimed that they found that the statistical techniques they were using were too advanced" meant that the hedge funds considered the methods used by PhD's in math/stats/physics to be excessively advanced for what was actually needed for work at hedge funds! We could try asking gappy, as he would know.
Oct
6
comment data on historical stock price of bankrupt companies
@JoshuaChance is correct. In fact, the Engineering Returns website guy even says that he purchases his data from Norgate Investors Services premiumdata.net
Apr
27
comment Is there an open source alternative to Reuters Kondor+?
VERY nice list you found! Thank you, it is comprehensive. (I know you! I am Demeter when I'm not here as Feral Oink.)
Mar
20
comment What are the effects of turning a backed currency into a fiat currency?
This was rather confusing to me "the government was still manipulating the money supply even in 1819, and therefore the gold-backed money was still not a free market money" The U.S. government hadn't existed for many years at that time. Had there ever been a time when the U.S. government didn't manipulate the money supply? This manipulation pre-dated the founding of the Federal Reserve by a century, AND the U.S. was on the gold standard, yet you say the dollar even then was not a "free market money"?
Mar
7
comment Tools in R for estimating time-varying copulas?
I have to do dishes and cook supper first though. But if it would be helpful, just let me know here, okay?
Mar
7
comment Tools in R for estimating time-varying copulas?
I kind of suspected as much! Would it be useful to you if I listed some R libraries that have been used for the purpose of estimating time varying joint distributions for/ via copulas that I haven't used personally? I have a few in mind, from citations in papers.
Mar
7
comment Tools in R for estimating time-varying copulas?
This was similar stats.stackexchange.com/questions/19431/… but probably not that helpful, as I think Quant Guy actually answered that question!
Feb
5
comment Why are GARCH models used to forecast volatility if residuals are often correlated?
GARCH models worked quite nicely for me. Just an ad hoc comment. They weren't terribly complicated or difficult to work with, and as I recall, weren't supposed to be afflicted with auto-correlated residuals! +1 to you...
Jan
22
comment How to use macroeconomic indicators for long/short trading strategies?
Wow, you're right. That was an amazing answer from @Quant Guy!
Jan
8
comment Can you fully hedge an option in the presence of counterparty risk?
@klon Yes, that is what we did at NSCC! I referred to it as a short-term collateral tithe, which sounds odd. It is just as you described, daily collateralization, based on the historical volatility over the time until settlement, T+3 for equities, T+1 for gov't securities etc. The ISDA Master Agreement is an excellent suggestion and is used for (many but not all) OTC derivatives.
Jan
8
comment Can you fully hedge an option in the presence of counterparty risk?
I answered the question that you asked. Then four hours later you edited the question, adding some very specific details. If I can, I'll respond to the edits, but will do so as a separate answer. I'm not complaining, okay? It is allowed to give two answers to the same question on StackExchange sites.
Jan
7
comment Mersenne twister random number generator in Java for Monte Carlo Sim.
@quant_dev I smiled when I read: This is not cryptography. You're right!
Dec
15
comment Are there any new Option pricing models?
That URL has a pay wall unfortunately. That's my problem, I think, not yours, and I appreciate your answer. You gave additional content so I have a starting point. Might you have any other links that are more accessible?
Nov
25
comment How reliable is Benford's Law in forecasting crises?
Oh, one more thing. I wasn't able to access that second URL you posted, which I've been eager to read for quite awhile (Handelsblatt journalist Olaf Storbeck wrote about it too). Any suggestions about that? (Your first URL was cross-published in the FT by the way, and it was quite a fine article).
Nov
25
comment How reliable is Benford's Law in forecasting crises?
I appreciated the econerdfood post. What a good econ blog (written by an assistant professor, so I shouldn't be that surprised). Make sure to read her follow-up article, econerdfood.blogspot.com/2011/10/… posted after you wrote this. Her findings were less conclusive in some ways, and more in other ways in the follow-up.
Oct
21
comment How to calculate unsystematic risk?
You mean the calculation of beta in the Capital Asset Pricing Model, no? As @Quant Guy mentioned, I was also puzzled by the "CAPM formula" in the question.
Oct
21
comment Why write options on a volatility target index?
Excellent answer. Perfectly explains why some would do this, even if they are "paying through the nose" so to speak. EDIT: That is a very old expression, nothing to do with any illegal activities. Just occurred to me!