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5 views

Classical Cramer Lundberg model - Ruin Theory Simple Question

I am trying to solve the following problem: 'An insurance company has an initial surplus of 150 and premium loading factor of 15%. Assume that claims arrive according to a compound Poisson process $(...
0
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0answers
5 views

Fama/Macbeth Regression - negative estimate for market premium

I just conducted a Fama-Macbeth regression to estimate the risk premia of Mkt-Rf, HML and SMB. As a result, I got a negative risk premium for Mkt-Rf which makes no sense in my opinion. As I couldn't ...
0
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0answers
6 views

How to keep a Cloud-hosted trading algorithm private? Encryption? [migrated]

Are there any reliable ways of protecting a cloud-hosted trading algorithm from being seen/copied – for example, by people working at a company who are hosting an algo (like QuantConnect, Quantopian, ...
0
votes
0answers
18 views

Independence of increments of the stochastic process $\frac{1}{t}\int_0^t u dW_u $

Let X_t be a stochastic process such that $$X_{t} =\frac{1}{t}\int_0^t u dW_u $$ I know that for $$Y_{t} =\int_0^t u dW_u$$ $Y_t-Y_s$ is independent of $Y_s$ where $t>s$. But is this also true ...
2
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0answers
27 views

Probability distribution of the stochastic process $\int_{0} ^{t}\frac{u}{t}dW_{u}$

I am wondering about the probability distribution of the stochastic process $$X_t=\int_0^t \frac{u} {t} dW_{u}$$ I thought of using the Kolmogorov equation but after converting this into An SDE $$...
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0answers
23 views

Heston calibration not working well

I'm using the code used here in R, but the price are very far from those of the markets, and so is the stochastic volatility. Do you have any advice ? Thanks. ...
1
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0answers
25 views

FX Volatility surface bid/ask

I have bid/ask vols (straddles, risk-reversals and market strangles) for FX pairs, I want to create a mid/bid/ask volatility surface in strike/maturity space after a consistent smile calibration ...
1
vote
1answer
118 views

Cos Method in Finance / Practice

A lot of my professors advised me on doing an undergrad thesis that has something to do with the "relatively new" cosine method (~10 years). What applications are there in Finance of the FFT/Cosine ...
0
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1answer
58 views

European Swaption Pricing Using Normal volatilities

On page 6 of this paper a forumla is given for payer swaptions, I am just wondering what is the formula for receiver? My implementation of the formula for payer and receiver is here, but I am not ...
0
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0answers
19 views

Quantlib gives error message when Valution date is backdate

Valuation Date As Backdate(12 November 2019) On calcuating Vanilla Swap, Quantlib gives error message as below ...
0
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0answers
20 views

Why Degree of Operating Leverage (DOL) reduces with increase in sales? [on hold]

Please explain to me the effect of sales on Degree of operating leverage
0
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1answer
32 views

Fama Macbeth regression with rolling window

I am confused about how to run fama macbeth regressions for portfolios with rolling window. For example if I have 25 portfolios and time period is 50 years(monthly), rolling window period is 5 years. ...
2
votes
1answer
27 views

QuantLib: Which CalibrationHelper to use for Normal Volatilities

I am using the SwaptionHelper class to create the swaptions. Reading the documentation: https://www.quantlib.org/reference/class_quant_lib_1_1_swaption_helper.html I realize that one of the ...
2
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0answers
40 views

Leverage of various option types

Does the standard European option calculation of leverage, Embedded Leverage = Delta times (Underlying price/Option price) change across the various option ...
2
votes
0answers
51 views

Calculating % Return in Pairs Trading Strategy

Hi guys Could you help me here? I would like to calculate the return of a Pairs Trading strategy. For example: 18/11 - Open the Trade: I will go long on A and Short on B: Stock A : $ 32.24 Stock B ...
0
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0answers
18 views

Call Option on the Square of a Log-Normal: Process of Underlying under Stock Measure and Risk Neutral Measure

I'm working on some quant interview questions from the book called Quant Job Interview Questions And Answers (by Mark Joshi and other authors). Here are the questions from the bookd, and the answers ...
1
vote
1answer
16 views

How to solve for effective interest rate of a government bond on HP 10bll+ financial calculator?

Price of bond = 100.44 Nominal coupon interest rate (compounded annually) = 1.5% Duration: 10 years Face value (what you get back after 10 years, may be poor translation): 100 Spent hours now trying ...
2
votes
1answer
61 views

Stop-Loss strategies

Does anyone know some bibliography about the problems or limitations of using Stop-Loss strategies in a portfolio? Let me explain better: for example you can have a portfolio of 30 stocks from ...
0
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0answers
17 views

Is the order of the individual groups in a repeating group guaranteed?

If I send a FIX message that contains a repeating group, will the recipient of the message also see the groups in the order I specified? In other words, is the ordering of groups within a repeating ...
4
votes
2answers
131 views

Quantitative Finance Interview: Brainteaser Question/Birthday Problem

I'm reading an interview book called A Practical Guide to Quantitative Finance Interview by Xinfeng Zhou and I cannot make sense of the solution provided by the book, so I really appreciate your ...
0
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0answers
20 views

Share Repurchase Impacts in Abnormal Earnings Growth Model (AEG)

I am implementing an AEG model based off Ohlson (2005). The formula is as follows: $$ V_0 = \frac{E_t}{k} + \sum_{t=1}^n{\frac{1/k * (E_{t+1} - (1+k)E_t+kD_t)}{(1+k)^t}} $$ I'm debating how share ...
2
votes
1answer
77 views

Pricing of compounded swaps

As far as I understand, a compounded swap rolls up individual payments into one final payment which becomes: $$ V(t_n) = N \prod_{i = 0}^{n-1}(1 + d_i L_i)-N $$ where $d_i$ is the day fraction for ...
0
votes
1answer
32 views

Accumulation Rate of Variance in Random Walk

I am slightly confused with the terminology Shreve (2008), he states: "The variance of the symmetric random walk accumulates at rate one per unit time, so that the variance of the increment over ...
1
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3answers
87 views

Why is Portfolio Theory not using the distribution of portfolio returns

Portfolio Theory uses things like Expected Value, Risk, Confidence. I wonder why it's not ...
0
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4answers
68 views

T-bond of what maturity to use as risk-free rate when calculating excess return?

I am comparing different asset classes in order to estimate the expected return and the risk of a portfolio. I have historical data (adjusted close price) for my asset classes for the last 5 years ...
-2
votes
1answer
115 views

Specific Hedge Fund Filed Returns

https://mebfaber.com/2008/12/27/tracking-jim-simons-renaissance-technologies/ But, like always, I will let the data speak for itself. Top 10 holdings, back to 2000, equal weighted through 12/19/2008:...
-4
votes
0answers
70 views

How to use Machine Learning to predict portfolio performance?

It's possible to use some algorithm to predict the future price of a stock in a form of probability distribution. But, usually the end goal is the performance of a portfolio, not a single stock. The ...
1
vote
1answer
55 views

Justify a backward differential equation

Regards of 4.5.1, how we get 4.5.5?
1
vote
1answer
49 views

How to change the Libor rate to Forward Libor rate in Swap?

The realised PV of a swap (notional is 1 ) is : $Swap(t)=\sum^n_{i=1} \tau_i \times D(t,Ti) \times (L(Ti, Ti, Ti+ \tau_i) - K)$ How do we get the expression with forward rate : $Swap(t)=\sum^n_{i=1}...
1
vote
1answer
34 views

Market risk FRTB: calculation of Vega risk charge

I recently started working on a project that requires me to deal with the new market risk standard issued by the Basel Committe: https://www.bis.org/bcbs/publ/d457_faq.pdf I am trying to calculate ...
2
votes
1answer
53 views

Pairs Trading parameters

I am looking to optimize the open/close signals and time for a pairs trading strategy my partner and I are researching. We don't want to go p-hacking so we have been trying to decide: We have 20+ ...
1
vote
1answer
27 views

Value premium analysis - Equal or Value-weighted Portfolios?

I got a question regarding the analysis of the value premium in the U.S. stock market. The task is to use the market-to-book-value ratio to split the S&P500 in five portfolios (rank 1-100,101-200,...
1
vote
1answer
85 views

Effective gamma/vega hedging

I want an options position where I can short some options to pocket the premiums and benefit from the time decay. I also want to be vega and gamma neutral. Is there an established way to find which ...
0
votes
0answers
36 views

Constructing Daily Term Structure

I am very new to QuantLib and am trying to do Swaption Model calibration following the example here:http://gouthamanbalaraman.com/blog/short-interest-rate-model-calibration-quantlib.html Appreciate ...
0
votes
0answers
30 views

volume of SP500 index on yahoo finance

I noticed the SP500 index (^GSPC) daily volume on yahoo finance was about the same as the the SP500 index (SPX) volume on stockchart.com at the time of market close. But it became about 2x larger on ...
0
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0answers
25 views

How to effectively execute a strategy with close price? [duplicate]

I backtested a strategy based on close price. However, for real trading, in order to decide my position for the next day, I need to know the close price for the current day. In other words, I need to ...
0
votes
0answers
23 views

I am getting an Invalid API call from Alpha Vantage TIME_SERIES_DAILY_ADJUSTED for Mexico or Toronto Stocks (with a period). Why?

I have used the following: https://www.alphavantage.co/query?function=SYMBOL_SEARCH&keywords=URBI&apikey=nnnnnnnnn I get back this: ...
0
votes
1answer
101 views

Statistics related question about ruin theory

I am trying to solve the following problem: 'An insurance company has an initial surplus of 150 and premium loading factor of 15%. Assume that claims arrive according to a compound Poisson process $(...
0
votes
0answers
26 views

How do CCAR models come together to create a prediction of capital adequacy?

I have a question about the Comprehensive Capital Analysis and Review (CCAR) process for US banks. I understand that the PPNR (Pre-Provision Net Revenue) Models and Loss models can create a predicted ...
0
votes
1answer
38 views

Arithmetic Asian Option

Assume the risk-free bond Bt and the stock St follow the dynamics of the Black & Scholes model without dividends (with interest rate r, stock drift $μ$ and volatility $σ$). Let $A_T:=\frac{1}{T}...
-6
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0answers
28 views

Specific Hedge fund [on hold]

Was the success of the Renaissance fund genuine? Or did they simply pile everything into mortgage backed securities and everyone withdrew in 08 because they were using it like a bank?
0
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0answers
23 views

Replication; modelled or historical distribution?

For a limited time (a few months) only, I want to replicate a target portfolio (consisting of asset classes) with all the asset classes in such target portfolio minus a few. I only have 5+ years of ...
0
votes
0answers
21 views

inverse futures hedging

This is my first question here and I hope I don't make any mistakes. I have kind of a problem with spreading and hedging inverse futures such as Bitmex 3m or 6m XBTUSD contracts due to their non - ...
0
votes
1answer
55 views

Black Scholes theta as function of time to maturity

I would like to understand why the Black and Scholes greek letter theta for european call option behave in the following way: as time to maturity is far away (right part of the x-axis in the the ...
0
votes
0answers
33 views

Why does MVO cause highly concentrated asset allocations?

Why does Mean Variance Optimization resulted in highly concentrated asset allocations? This is standard knowledge that it does but Im unable to find the reason for it. And Robust Optimization seems to ...
0
votes
1answer
51 views

Downward-sloping volatility skew in equity prices

I’m learning the market price for FRM, and I’m having a hard time understand a question in the assessment: From my understanding, the volatility skew for equity is the graph on the right upper corner:...
1
vote
4answers
138 views

Survival bias when backtesting

I have been doing backtesting, and I am seeking to see if there are any flaws in my program, as it seems to be too good to be true. Based on stocks with market capitalization of > 10B, go back in ...
0
votes
0answers
33 views

Black-Scholes model - Calibration of the risk-free rate

I know there is a lot of content about this topic, but I have not seen a post which gives a satisfying answer to my problem. I am trying to hedge a European call option with real market data under ...
0
votes
0answers
33 views

Notation for the variance in papers

Here is a screenshot from : LIM Quadratic hedging and mean variance portfolio selection with random parameters in an incomplete market When I deal with mean variance portfolios, I usually see the ...
1
vote
1answer
95 views

Asian Options-Change of Numeraire

Assume the risk-free bond $B_t$ and the stock $S_t$ follow the dynamics of the Black & Scholes model without dividends (with interest rate r, stock drift $\mu$ and volatility $\sigma$). Show that ...

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