# Quantitative Finance Stack Exchange Community Digest

## Top new questions this week:

### Use of interest rate swaps in liability-driven investing

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 ...

interest-rates derivatives yield-curve interest-rate-swap leverage asked by AK88 Score of 4 answered by Jan Stuller Score of 3

### Aggregation of (cross-sectional) Factor model

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 $K$ ... asked by bfg Score of 3

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 $$\frac{dS\... jump-diffusion merton-model asked by Skumin Score of 2 ### Hagan's explanation of the Local Volatility model Long story cut short: I am asking why the Local Volatility function can be thought of as a function of the underlying, when in fact it appears to be the function of the strike. Long story: The well-... options option-pricing stochastic-calculus local-volatility sabr asked by Jan Stuller Score of 2 answered by Frido Rolloos Score of 3 ### Definition of continuously compounded yield for perpetual defaultable coupon bond In continuous-time asset pricing, the price of a defaultable perpetual coupon bond is given by$$P(V) = \frac{c}{r}\left[ 1- \left(\frac{V}{V_b}\right)^{-\gamma}\right] + (1-\alpha)V_b \left(\frac{V}{...

fixed-income bond asset-pricing continuous-time default-risk asked by Luca Gi Score of 2

### Interpolating implied volatility term structure when IV is sampled at fixed delta points

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 ...

options implied-volatility volatility-surface asked by Special Sauce Score of 2 answered by jherek Score of 1

### How do you handle non integer time intervals in Quantlib for options pricing (ie intraday pricing)

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 ...

options option-pricing programming quantlib asked by Nezo Score of 2 answered by Luigi Ballabio Score of 3

## Greatest hits from previous weeks:

### How useful is the genetic algorithm for financial market forecasting?

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 ... asked by Graviton Score of 59

### What is the difference between convertible bond and bond with warrant?

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 ...

convertible-bond asked by Michael Johansen Score of 6 answered by Marc Shivers Score of 6

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 63 answered by olaker Score of 56 ### 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 ### Implied interest rate from FX swap 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.... interest-rates fx forward asked by PBD10017 Score of 9 answered by perry Score of 9 ### Except Zipline, are there any other Pythonic algorithmic trading library I can choose? Except Zipline, are there any other Pythonic algorithmic trading library I can choose? Especially, for backtesting? python backtesting algorithmic-trading asked by Terence Ng Score of 46 answered by J. Morris Score of 30 ### Integral of Brownian motion w.r.t. time 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 ... stochastic-calculus brownian-motion asked by Toofreak Score of 47 answered by Gordon Score of 58 ## Can you answer these questions? ### Why is Implied Volatility more important than skew for put spread pricing? 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 ... options volatility implied-volatility spread-options asked by dopller Score of 1 answered by Cloudman88 Score of 0 ### How does one get exposure to stock borrow rates? 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 ... equities swaps yield asked by actinidia Score of 1 ### Comparative statics on$c/r$using fundamental asset pricing equation 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 \...

fixed-income bond asset-pricing continuous-time asked by Luca Gi Score of 1
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