Community Digest

Top new questions this week:

Stochastic Integral Graph

As we can represent the integration of $f(x)$ on $[a,b]$ with the graph below, I was wondering how to represent the following integral with $X(t)$ a Brownian motion, $f(t)$ any function and $t_j = ...

stochastic-calculus brownian-motion  
asked by TmSmth 7 votes
answered by Magic is in the chain 2 votes

Numeric example to understand the effect of option gamma

Gamma of an option is the second partial derivative of the theoretical value of an option wrt the underlying. It should be the rate of change of Delta wrt to a small change on the underlying. However ...

options greeks gamma  
asked by luca dibo 5 votes
answered by KeSchn 7 votes

sign of CVA (Credit Value Adjustment)

I recently read chapter 14 of Gregory's The xVA Challenge. He defines CVA as (formula 14.2) $$ CVA = -LGD \cdot \sum_{i = 1}^m EE(t_i) \cdot PD(t_{i-1}, t_i), $$ where $LGD$ is the Loss Given Default, ...

credit-risk cva counterparty-risk  
asked by Cettt 3 votes
answered by byouness 0 votes

Is the vega of a portfolio of a long 0.5 delta and short two 0.25 delta calls positive or negative?

More specifically what I am trying to find out is whether the following relationship is always true or not. Same underlying for the calls, assume the most simplistic assumptions (interest rate = ...

delta call vega  
asked by mebiles 3 votes
answered by Mats Lind 0 votes

How can the solution to a optimal stopping problem be superharmonic?

A general result (Peskir and Shiryaev: Optimal Stopping and Free Boundary Problems, 2006, Thm. 2.4, Page 37) is that the solution to an optimal stopping problem $\sup_\tau EG(X_\tau)$ where $X$ is ...

put stopping-time  
asked by findurcards 3 votes

Overall CAGR calculation

I'm one of those data analysts who doesn't have a MBA, so I'm still figuring out the basics of finance as work gets assigned to me. Here's the exact wording I was given: What's the unit cost ...

asked by Flynn Rausch 2 votes
answered by Mehdi Zare -1 votes

Produce the random variable for an asset from a uniformly distributed random varible

I'm working on a quant interview question from the book called Quant Job Interview Questions And Answers (by Mark Joshi and other authors). I cannot understand the following question(not the answer, ...

probability distribution numerical-methods  
asked by M00000001 2 votes
answered by Oskar 6 votes

Greatest hits from previous weeks:

What is a Constant Maturity Swap (CMS) rate?

I have been searching in books and on the internet for a basic definition and explanation of CMS rates, but I cannot find anything clear and simple. Can you explain (maybe with an example) what a CMS ...

derivatives swaps spread-options cms credit-derivatives  
asked by MarinD 3 votes
answered by compilation-error 5 votes

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 11 votes
answered by Dom 10 votes

What is the Swap Curve?

What is the so-called Swap Curve, and how does it relate to the Zero Curve (or spot yield curve)? Does it only refer to a curve of swap rates versus maturities found in the market? Or is it a swap ...

yield-curve swaps interest-rate-swap  
asked by rex 24 votes
answered by Helin 33 votes

How fast is QuickFix ?

In my firm we are beginning a new OMS (Order Management System) project and there is a debate whether we use Quickfix or we go for a professional fix engine? Because there is a common doubt that ...

asked by ali_bahoo 37 votes
answered by murrekatt 27 votes

How to calculate unsystematic risk?

We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ...

risk risk-management risk-models risk-premium  
asked by Norlyda 13 votes
answered by Ram Ahluwalia 11 votes

Calculating Bollinger Band Correctly

My bollinger band comes out like the below, which doesn't seem right. Any idea what is wrong with my code for calculating upper and lower bollinber bands? I obtained my data from here start, end = ...

python moving-average charts  
asked by user3314418 8 votes
answered by Sohel Khan 14 votes

Why are GARCH models used to forecast volatility if residuals are often correlated?

The answers to this question on forecast assessment suggest that if the sequence of residuals from the forecast are not properly independent, then the model is missing something and further changes ...

volatility time-series forecasting best-practices  
asked by kaybenleroll 22 votes
answered by Richard Herron 15 votes

Can you answer these questions?

Call price in case of AOA

I have this exercice, and for the last question, i tried to say that with lower bound, $C > S_0 - Ke^{-rT}$ which is $-8$ something but it doesn't make sense so i don't know what to do. Could we ...

option-pricing derivatives risk-neutral-measure  
asked by TmSmth 1 vote

Should the NPV be equal to zero in liquid markets?

My question is actually very simple. I would like to motivate it by bringing the following example: suppose we have a (conventional) bond which generates $CF_1;CF_2;...;CF_n$ cash flow (for ...

yield present-value  
asked by sane 1 vote

Quantlib Yield Curve

Is it possible to create yield curve object in Quantlib given some function of time? For example, given Nelson-Siegel parameters, create yield curve which can compute zero yield for any date >= ...

yield-curve quantlib  
asked by Alexander 1 vote
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