All Questions

0
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0answers
10 views

How to compute gamma for at-the-money regular calls and puts when they approach expiration?

When and at-the-money regular call or put approaches expiration, gamma tends to infinity. However, for practical purposes, there is only a finite change in delta. The problem is that if any of the ...
0
votes
0answers
13 views

Yield Curve Trading Strategy Explaining Books

Recently I really enjoyed being here while getting great recommendations. Would like to thank you all. Could you please recommend some books/papers on trading strategies, lets say yield curve ...
0
votes
0answers
17 views

When a stochastic volatility model is calibrated?

In an Investment Bank, how often a stochastic volatility model is calibrated ? Is it calibrated daily ? Is it calibrated whenever a pricing is required ? Thanks.
0
votes
0answers
20 views

Exposure of two companies in a transaction involving an FX option

An American company $A$ has sold a manufactured product to a German company $B$, and they agree for the payment of 100,000 EUR in 1 year ($T$). What type of exposure does $B$ have? What type of ...
-1
votes
0answers
13 views

Type II error share price event study

I have a question regarding the type II error for a specific event study. It is a case study (i.e. one observation) with daily share prices. I want to test whether event day abnormal returns are ...
0
votes
0answers
21 views

Resource to learn about Long / Short Commodities portfolio

As title says, I'm looking to learn more about Commodities trading and how to report and monitor a Long short Portfolio. Can anyone point me to a good book / website where I can improve my knowledge? ...
0
votes
0answers
14 views

Using quandl premium datasets with zipline

Im trying to use options data with zipline for backtesting. I noticed there are some premium datasets on quandl for options. Has anyone successfully managed to use any of those datasets with zipline?...
1
vote
0answers
25 views

How to price equity options using a Black76 implied volatility surface?

I would like to calculate the fair value of american and european options on various equities and indices using QuantLib C++. Since I do have discrete dividends available for most underlyings, I use <...
0
votes
0answers
32 views

How to compute Delta of a future contract priced with MTM?

Let's assume a commodity future contract priced with MtM. This price moves on a daily basis there is a price : 50, 51, 49, $48... I'm trying to compute the delta of this contract at a certain date. I ...
0
votes
3answers
360 views

What actually drives a stock price up ou down?

Can someone please explain to me how stock prices go up and down? What are the underlying physical and information technology phenomena and algorithms that drive a stock up or down? Books just say ...
-2
votes
0answers
19 views

Would bonds issued in the EU be comparable to UK after Brexit

We have been treating bonds issued in UK as a good benchmark to price bonds issued in the European Union - or vice versa. Does this still make sense post-Brexit?
1
vote
0answers
32 views

Interpretation of Market Price of Volatility Risk

In option pricing with market model equipped with stochastic volatility, there are numerous times mentioning "market price of volatility risk" without even define or give any explanation regarding the ...
0
votes
0answers
33 views

Why can we assume the bid-ask spread equals to one tick?

I am reading Price dynamics in a Markovian limit order market by Rama Cont & Adrien de Larrard. They explained the bid-ask spread $s^a_t - s^b_t$ is equal to one tick more than 98% of the time. ...
0
votes
0answers
24 views

Historical prices and fundamentals for US market with the right to re-publish

I would like to build analytical web-site similar to Yahoo Finance, but can't find the data provider with the reasonable prices. Do you know if there's free datasets or costing <1000$/year ...
0
votes
0answers
38 views

Question about Bergomi's Model

I have a question pertaining Bergomi's modela and rough Bergomi's Model. It seems that it is the second gerneration of stochastic volatility models, (after Heston), because they are 2d stochastic ...
0
votes
0answers
33 views

Bulk Volume Classification Algorithm

I'm thinking of implementing the Bulk Volume Classification algorithm on my data of hourly OHLC bars and associated volume, but my sense of it is that hourly granularity is insufficient and that ...
0
votes
0answers
29 views

Optimal strategy - HJB equation [on hold]

I am sitting with the following control problem. Given know the controlled Markov equation\ \begin{equation*} \begin{aligned} dX_t&=-\lambda X_t\cdot dt+ U_t\cdot dt+\sigma\sqrt{1+X_t^2}\cdot ...
1
vote
0answers
30 views

Vasicek model: joint simulation with discount factor

In Vasicek model, we have the following relation to get Discount factors given the value of short rate: $$P(t\,,T)={{e}^{A(t,T)\,-\,B(t,T){{r}_{t}}\,}}$$ So, Discount factors are known as soon as we ...
0
votes
0answers
19 views

Numerical solution to Convection diffusion equation [on hold]

I am looking to numerically solve the convection diffusion equation given by $\frac{dp}{dt}=-\frac{d}{dx}\big(u(x)p(x,t)-D(x)\frac{dp}{dx}(x,t)\big)$ where $D$ and $u$ are fixed functions, but NOT ...
0
votes
0answers
16 views

Creating the spread between inverse assets?

I'm fairly new to quant finance/trading, and I've been reading up on material regarding pairs trading. One thing that I'm confused on is pairs trading inverse assets. Say you have an asset that ...
0
votes
1answer
34 views

VXX Put pricing

Last week at Friday's close, the Dec 14 37.5 Put options were selling for \$.68 with VXX at \$40.29. This week at Friday's close, the Dec 21 37.5 Put options were selling for \$.38 with VXX at \$40.50....
0
votes
1answer
40 views

Bond is maturing in 10.25 years, YTM calculation

Bond is maturing in 10.25 years and has an annual coupon rate 4.15% paid semiannually and price 92-12+ I need to calculate yield to maturity Ok so I know that 92-12+ is basically 92 + 12/32 + 1/64 =...
1
vote
0answers
18 views

A hitting time of an open set for a càdlàg process is a stopping time

In Protter Stochastic Integration and Differential Equations, Springer (2003), the following definition is given: Definition. Let $X$ be a stochastic process and let $\Delta$ be a Borel set in $\...
0
votes
0answers
12 views

Understand conditional expectation w.r.t. sigma -algebra [migrated]

When a random variable $X$ is discrete, the definition of conditional expectation of $X$ with respect to a decomposition $\mathscr D$ is $$ E[X|\mathscr D] = \sum_{i = 1}^m x_i \sum_{j = 1}^n P(X|\...
2
votes
0answers
61 views

How to justify the martingale condition

By Radon-Nikodym theorem, the conditional expectation of $X$ with respect to a $\sigma$-algebra $\mathscr F$ is a nonnegative random variable denoted by $\def\E{\mathbf E}\E(X\mid \mathscr F)$, such ...
1
vote
1answer
70 views

How to calculate monthly momentum strategies J6K6?

I am doing PhD on momentum investment (Jegadeesh and Titman, 1993). My supervisor has some concerns over the momentum strategy that I know. Let me explain my steps in J6K6 momentum strategy, i.e. ...
4
votes
2answers
71 views

Why is there a convexity adjustment if the payment date differs from Libor end date?

A 3 month LIBOR that fixing at $T$, paying in 3 months does not have a convexity adjustment. However, 3 month LIBOR fixing at $T$, paying in 6 months needs a convexity adjustment. How is this shown ...
1
vote
1answer
81 views

Most profitable? High % but low probability or Low % but high probability

I have identified a pattern in different assets where a quick spike/flash crash often occurs, dropping the price between -5% and -15% for a few seconds and then going back to previous average. I am ...
0
votes
0answers
20 views

False advertisement and fees on the credit line [on hold]

Last year I opened a credit line using the bank's promotion, but account was opened without mentioned bonus. contacted the bank saying I am not paying anything on that line until you recalculate ...
-1
votes
0answers
21 views

Spread in crossing network?

Since in crossing network traders buy and sell at $\frac{(A_{1}+B_{1})}{2}$, this means that the bid-ask spread is equal to 0. And also in theory the depth of the market shouldn't change, but volume ...
-2
votes
0answers
26 views

Calculating Intraday Volatility Using Tick Data

I have exchange tick data and I was wondering how to calculate intraday volatility without having to resample the data set (e.g. to 1 or 5 minutes). I have a time series of n rows of the security's ...
0
votes
0answers
20 views

Assessing the quality of the Empirical Distribution

When calculating the Pricing Kernel, one of the most common approach is to divide the Risk Neutral Density (thanks to options data) with the Empirical Density. Estimating a good Empirical Density is ...
0
votes
0answers
49 views

Studying Market Microstructure

There's a pretty good list of books suggested on Market Microstructure here -- Book on market microstructure I'm also interested to know if there are any courses (either mooc or on-campus), ...
-2
votes
0answers
27 views

Correlation coefficient [on hold]

Dear fellow python programmers, I have gpcc data for which I am trying to compute correlation coeeficient along the time dimension. it has some missing values therefore my results is always nans. ...
0
votes
0answers
22 views

What is the use of undiscounted Futures/Option Prices

Reading the great book of Gatheral on Vol Surfaces (link) I can't help but notice that throughout he uses undiscounted option prices (though he obviously never assumed rates to be zero). See e.g. ...
0
votes
0answers
22 views

What are the implications of the random walk hypothesis? [duplicate]

If RW hypothesis holds true for a particular market or stock, what does it mean in terms of returns and log-returns autocorrelation and predictability? For instance, if prices are RWs, then the ...
0
votes
1answer
29 views

Synthetic equity index futures calendar spread using options

I understand it is possible to synthetic a future using long call and short put ATM options which has the same expiry as the futures. Can we do the following to synthetic a future calendar spread? $...
1
vote
1answer
71 views

Derive a mathematical equation for Eurodollar future rate

If we suppose that r(t) follows a Vasicek model, which is: $$dr(t) = (\mu - \kappa r(t))dt + \sqrt\sigma dW(t)$$ How to derive an expression for Eurodollar future rate?
1
vote
1answer
32 views

Is there any open source library for commodities trading (pricing/risk managment)?

I think the question is no, as commodities trading requires far more exotic payoffs and hence higher variety of code. I know that there is a private company known Allegro, one of the main suppliers ...
1
vote
1answer
32 views

Levy process and random measure

I am wondering if random measures are used under a Levy process and how this connects to finance (particularly pricing). Any paper or books for suggestions is welcomed.
0
votes
0answers
21 views

zeroCurve with zero rates as simple quotes

I want to define my interpolated zero curve directly from the zero rates themselves, as if these latters were quoted, leading to something like: ...
0
votes
0answers
17 views

Survival rate for mortgage loans

I am trying to search for some papers that calculate the survival rate for mortgage loans based on a number of characteristics like loan-to-value, FICO, etc... The survival rate is essentially a ...
1
vote
3answers
52 views

What's a reasonable way to extrapolate a bond curve?

I have a corporate bond curve which stops at 15 year maturity. I want to extrapolate the curve to 25 year maturity. I'm looking for a reasonable approach, not necessarily deeply technical. Thanks ...
3
votes
0answers
42 views

Solving BSDE in R

I was wondering how to implement a BSDE approximation in R. For example, if I have the toy BSDE $$ dX_t = \mu dt + \sigma dW_t ; X_T\sim N(\mu_1,\sigma_1), $$ for fixed real numbers $\mu,\mu_1,\sigma,...
0
votes
1answer
29 views

Calculating the diviend yield for a sector?

I have the cash dividend amount for each company and its sec code, how would i go about calculating the dividend yield of the sector? What other data would I need?
0
votes
0answers
39 views

Interpreting the bid-ask spread calculated by the Corwin and Schultz (2012) method

On the homepage of Corwin (https://www3.nd.edu/~scorwin/) there is an excel spreadsheet which showcases the calculation for the bid-ask spread, which is expressed as a percentage. What is this a ...
3
votes
0answers
81 views

How to interpret CDF($d_1$)/PDF($d_1$) from BS model ?

In my research on put options, I come across the ratio: $\frac{(1-\mathcal{N}(d_1))}{\mathcal{N'}(d_1)}$ where $d_1=\frac{\log(S/X)+(r+\sigma^2/2)t}{\sigma \sqrt{t}}$ and $\mathcal{N}(.)$ is the ...
-6
votes
0answers
60 views

HEDGING POSITION [on hold]

Assume that the current S&P index value is 2000. Suppose that the \$1,000,000 portfolio has a beta of 2.5. The portfolio manager wants to use index put option to protect the portfolio value to a ...
2
votes
1answer
173 views

DB quant research

I'm trying to find DB quant research papers in "Signal Processing" series - particularly interested in "Signal Processing: The options issue" (2010). Would appreciate if anyone could share it.
4
votes
3answers
114 views

arbitrage free volatility surface

Why is calendar spread arbitrage equivalent to $\partial_t \omega(k,t) \geq 0, \forall k \in \Bbb{R}$ where $\omega(k,t) = \sigma^2(k,t) t$ and $\sigma(k,t)$ represents the Black-Scholes implied ...

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