Quantitative Finance Stack Exchange Community Digest

Top new questions this week:

Most complete list of investment mistakes in stock markets

I'm looking for a (hopefully exhaustive or at least extensive) list of behavioral biases that are currently observable in the stock market. I'm well aware and replicated some of the evergreens such as ...

equities asset-pricing behavioral-finance
 asked by T123 Score of 13
 answered by Kevin Score of 13

ATM Implied Volatility and Expected Variance

This answer claims that $$\sigma^2_{ATM}\approx E^Q\left(\frac{1}{T}\int_0^T\sigma^2_t dt\right)$$ ie implied ATM vol = risk-neutral expectation of integrated variance. Is there some proof available? ...

option-pricing implied-volatility risk-neutral-measure stochastic-volatility
 asked by Alex Score of 3
 answered by Frido Rolloos Score of 6

Portfolio Optimization Problem

I have the following expression for which I wish to find the $\vec{w}$ which minimizes it: $$L = \frac{\vec{w}^TA\vec{w}}{\vec{w}^TB\vec{w}} - \lambda(\vec{w}^T\vec{1} - 1)$$ The partial derivates ...

portfolio-optimization
 answered by Pontus Hultkrantz Score of 1

Pricing Options on Inefficient/Illiquid Assets

I'm currently trying to gather more information on option pricing in very inefficient markets for the underlying. By inefficient, I mean markets with consequential bid-ask spreads (5% or more) and ...

options pricing
 asked by arqer8 Score of 2

Why are monthly active returns averaged? Should they not be multiplied?

I'm looking at this video: https://www.youtube.com/watch?v=fZmuJ2A9TC8 @4:43 but the issue is more general. Here the speaker is taking monthly active returns and averaging them ...

portfolio-management returns modern-portfolio-theory
 asked by MYK Score of 1
 answered by fesman Score of 1

The option is "purer" in its risk---what is meant by this?

In the book "The Concepts and Practice of Mathematical Finance" author M. Joshi writes on page 12 the following: "From the point of view of risk, we can regard an option as an attempt ...

options finance risk
 asked by herbhofsterd Score of 1
 answered by Jan Stuller Score of 1

Hedging large single asset positions

I recently came across an article that described how big market participants like GS, JPM, etc. take off large equity positions (block trades) of their clients, and putting that risk on their own ...

 asked by rekrob Score of 1

Greatest hits from previous weeks:

Symbols for DAX from Alpha Vantage

I found the website https://www.alphavantage.co as an alternative for yahoo finance stock API. I am interested in the top 30 DAX symbols, but I seem to cannot find them on Alpha Vantage. Is there a ...

programming exchange
 asked by user3079834 Score of 4
 answered by J_P Score of 4

Difference between CAPM and single index model

which is the difference betwee a model like CAPM and a single index model? Is the first a special case of the second? Best

capm
 asked by Klapaucius Score of 5
 answered by nbbo2 Score of 6

Difference between OIS Rate and Fed Funds Rate

I understand Fed Funds Rate is the rate at which banks lend/borrow to/from each other to maintain their daily reserve requirements at the Central Bank; also it is unsecured-meaning no collateral. Is ...

interest-rate-swap rates ois
 asked by Preetam Score of 16
 answered by Dom Score of 22

What are some useful approximations to the Black-Scholes formula?

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 \$...

options option-pricing black-scholes optimization
 asked by knorv Score of 60
 answered by olaker Score of 55

How to check if a timeseries is stationary?

I'm using KPSS Method to check if the series is stationary, but I would also like to use another test to confirm if the series is stationary or not, what method coudl I use?

time-series stationarity
 asked by Dam Score of 20
 answered by Shane Score of 16

What is the difference between volatility and variance?

How do volatility and variance differ in finance and what do both imply about the movement of an underlying?

volatility variance
 asked by Jaydles Score of 36
 answered by Dirk Eddelbuettel Score of 28

Why are there no papers about stock prediction with machine learning in leading financial journals?

I'm writing my master's thesis about stock price prediction using machine learning methods. During my literature review, I noticed that a lot of research produced on this topic is of poor quality, ...

machine-learning market-efficiency
 asked by Psychotechnopath Score of 27
 answered by Bob Jansen Score of 37

What is the definition of contract notional value for a futures contract (use futures price or spot price)?

I'm a bit confused about the definition of contract notional value for a futures contract. It is not defined in John Hull's Options, Futures, and Other Derivatives. I find two definitions online. Both ...

futures
 asked by L. Francis Cong Score of 1

Future price of an index always less than expected index future value?

In the following practice problem: Is the futures price of a stock index greater than or less than the expected future value of the index? Explain your answer. The answer given is as follows: The ...

futures index
 asked by rb612 Score of 1

Treasury futures wild card option (Monte carlo simulation)

I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an ...

fixed-income bond