Top new questions this week:
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I am having a slight brain meltdown because I do not seem to be able to understand the following basic thing.
Consider a BS economy, and two assets $X$ and $Y$
$$
dX = \sigma X dW
$$
$$
dY = \nu Y dZ
...
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I have a time series $X_t$ generated from a standard GBM
$$dS_t = \mu S_t dt + \sigma S_t dW_t$$
If I take the log returns over a rolling window of length $l$
$$r^{(l)}_i = \log \left( ...
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Hello I am interested in portfolio optimization . Previously I when I have done portfolio optimization I would take the historical returns of a stock and use them to perform a mean variance ...
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Today seems to be question day for me, sorry.
The complex process
$$
dX = i\sigma dW
$$
where $i = \sqrt{-1}$ and $dW$ is a standard (real-valued) Brownian motion will have a negative variance ...
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Recently, I read a great paper by De Prado et al. on backtest overfitting problem in Quantitative Finance titled Pseudo-Mathematics and Financial Charlatanism: the Effects of Backtest Overfitting on ...
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The lecture notes have the following theorem:
Let $\theta\in \mathbb{R}$ be given and $B(t)$ stands for the Brownian motion which is a martingale, then $Z(t)=exp\{-\theta ...
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I am trying to fit an O-U process to a discrete time series (log prices). I am calculating the reversion rate and the mean level from coefficient of the linear regression between the log prices and ...
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Greatest hits from previous weeks:
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How do the in-sample estimates and out-of-sample estimates I so often hear authors refer to in emperical analysis of MVO differ?
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Just read some materials about SVaR. Is there only holding period that changes in comparison to VaR methodology?
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I try to understand the basic idea of copulas, however I am still struggling and hope that someone can help me.
I understood that in general a copula is a function which links several marginal ...
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I have seen the following formula for the tangency portfolio in Markowitz portfolio theory but couldn't find a reference for derivation, and failed to derive myself. If expected excess returns of $N$ ...
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I'm comparing the performance of Fama French three factor and Carhart four factor models. For the regression analysis, I have used the 25 Value Weighted portfolios sorted on size and B/M.
The Table ...
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I'm working on a small application that will provide some charts and graphs to be used for technical analysis. I'm new to TA but I'm wondering if there is a way to algorithmically identify the ...
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In most textbooks Ito's lemma is derived (on different levels of technicality depending on the intended audience) and then only the classic examples of Geometric Brownian motion and the Black-Scholes ...
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Can you answer these questions?
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A dollar neutral strategy invests the same amount of money long and
short without accounting for the volatility (risk) of either side.
Depending on volatility you either end up positively or ...
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I have a list of equity indices that I got through Eikon API (with Python). I successfully got their time series but at this point I would need the corresponding implied volatility, which is not ...
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Let $B=(B_t^1,B_t^2,B_t^3)$ a $\mathbb R^3$-valued Brownian motion.
Let $r_t$ (risk free rate) be bounded and deterministic.
Let consider the DISCOUNTED market
$$d\overline ...
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