Top new questions this week:
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You probably have home across recent events in the UK bond markets. The Financial Times article "The reason the BoE is buying long gilts: an LDI blow-up" from Sep. 28, 2022 goes through why ...
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Suppose I have a large factor model for security returns, i.e. I have a vector $\mathbf{Y}(t) \in \mathbb{R}^{P}$, with factor loadings $\mathbf{\beta} \in \mathbb{R}^{P \times K}$ over a set of $K$ ...
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I'm trying to calculate the variance $\mathrm{var}\left(\log\frac{S\left(t\right)}{S\left(0\right)}\right)$, where the dynamics of the stock $S$ follows a jump-diffusion process given by $$\frac{dS\...
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Long story cut short: I am asking why the Local Volatility function can be thought of as a function of the underlying, when in fact it appears to be the function of the strike.
Long story:
The well-...
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In continuous-time asset pricing, the price of a defaultable perpetual coupon bond is given by
$$P(V) = \frac{c}{r}\left[ 1- \left(\frac{V}{V_b}\right)^{-\gamma}\right] + (1-\alpha)V_b \left(\frac{V}{...
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According to the accepted answer to a question in this site on the interpolation in the term structure of volatility surface:
A simple linear interpolation on implied variance along iso-moneyness ...
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I'm using QuantLib (python version) for options pricing, and am trying to figure out how to handle non integer dates. If you try and price an option at 9:30 AM and at 4 PM, you should get different ...
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Greatest hits from previous weeks:
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There is a large body of literature on the "success" of the application of evolutionary algorithms in general, and the genetic algorithm in particular, to the financial markets.
However, I feel ...
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One site suggested the difference is that the warrant in the bond with warrant is a fixed price on company stock. E.g. for a \$1000 bond, you can buy 500 shares at \$2 each. And that convertible bonds ...
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Let the Black-Scholes formula be defined as the function $f(S, X, T, r, v)$.
I'm curious about functions that are computationally simpler than the Black-Scholes that yields results that approximate $...
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How do volatility and variance differ in finance and what do both imply about the movement of an underlying?
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This is not homework. I am trying to calculate the implied interest rate of one currency (C2) using an FX swap and the interest rate of another currency (C1 - base). I have the following:
Spot: 7....
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Except Zipline, are there any other Pythonic algorithmic trading library I can choose? Especially, for backtesting?
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Let
$$X_t = \int_0^t W_s \,\mathrm d s$$
where $W_s$ is our usual Brownian motion. My questions are the following:
Expectation?
Variance?
Is it a martingale?
Is it an Ito process or a Riemann ...
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Can you answer these questions?
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It is said on page 26 of the book "Trading Volatility: Trading Volatility, Correlation, Term Structure and Skew" by Bennett (2014) that:
A rule of thumb is that the value of the OTM put ...
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Suppose I am long equity borrow rates, but I don't know exactly when borrow will increase. What is the most effective way to trade this?
The naive strategy of borrowing the stock now and then lending ...
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Consider the fundamental asset pricing equation for a perpetual coupon bond:
$$rP = c + \mu P' + \sigma^2/2 P''$$
with standard boundary conditions $P(\bar x) = \bar x$ and $\underset{x\rightarrow \...
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