All Questions

I have heard the following argument- barring transaction fees, if my estimation of realized vol is 30% and 1-month ATM implied vol is 20%, then I could potentially buy a 1-month ATM call/put and wait ...

after reading the paper "Custom v. standardized risk models" (Kakushadze, Zura; Liew, Jim Kyung-Soo (2015)) I tried to understand the R functions they provided at the end (eg: Appendix A) and the very ...

From Joshi's Quant Interviews books: The statistics department from our tell you that the stock price has followed a mean reversion process for the last 10 years, with annual volatility 10% and ...

I am trying to price autocallable structured products, with single underlying asset and discrete call dates. I am stuck by the boundary condition when the underlying asset price $S$ hits the call ...

The denominator of the Sharpe ratio is sample portfolio volatility, $\sigma_p$, which is the square root of portfolio variance based on the quadratic squared loss, L2. Alternatives for the denominator ...

Typically the backtest of a quantitative trading strategy assumes a fixed period and fixed capital at the start to backtest a strategy. However, each strategy has a capacity (due to non-linear trading ...

I know how to derive at the CAPM from a microeconomic foundation. In a recent University course I stumbled over a slide that derived the CAPM solely from the Sharpe ratio: I cant come up with that ...

So i just made my first program in Python wich reads stock symbols in excel. I tried going to "data" in excel and importing a text file with symbols and company names and some other stuff as well but ...

I found this question during my preparation for an exam. It looks easy, but I am not quite sure how to answer it. Consider a fund A with following factor exposures $\beta_{M}=0.8$, $\beta_{SMB}=0.4$,...

Let $C_K(t,T)$ be the value of a European call with strike $K$ and maturity $T$ on a stock with value $S_t$ at time $t$. Then for all $t\leq T$ we have $$C_K(t,T)\leq S_t.$$ $\textbf{Proof}$: We ...

I am from china, I can't use USA factors for SMB,HML,WHL....directly from website, my question is how can I calculate these kind of factors? for example, SMB. is it very difficult? any example code ...

I'm taking a course on the fundamentals of financial mathematics. This is my first quantitative finance course, so I'm still getting acquainted with a lot of the ideas. We covered the notion of a ...

I am conducting macro momentum analysis. In this, first I rank countries based on each macroeconomic indicator such as GDP, inflation, monetary policy etc. After this according to each indicator rank, ...

I have discrete time series financial data, with time($u$), price($S$) and someVariable($q$) which looks something like this. ...

I am trying to calculate implied volatility using javascript , I have following code ...

I am new to this. If variance of Brownian motion b is t, what is the variance of db? db is delta of b

I am trying to simulate the instanteneous volatility of a Heston process. My equations are the following : wealth process: $$dX_t = r_t X_t + \theta \sqrt {V_t} u_t dt + u_t dW_{1t}$$ Volatility: $$...

I am able to find documentation for pricing callable bonds in Quantlib Python or C++, however, I am struggling to locate it for Quantlib XL. Is there a way to price callable fixed-rate bonds in ...

Suppose I have a Geometric Brownian Motion process, $$dX_t=\mu X_t dt + \sigma X_t dW_t$$ I'd like to find the covariance of $\log(X_t)$ and $\log(X_s)$ where $s<t$. We can write $\log(X_t)$ in ...

I am currently trying to solve the St. Petersburg paradox from the lecture notes, but somethings bugs, me. Bernoulli shows that we can solve it using marginal utility theory. This is how it is derived:...

I am trying to solve the following problem (exercise 4.3 from Shreve's Stochastic Calculus for Finance, Vol. 2, my adaptation): Let $W(t)$, $0\le t\le T$ be a Brownian motion, and $\mathcal{F}(t)$ ...

Let's say an investor enters a long forward contract on 100 units of underlying assets $S$ and maturity $T$ = 4 years. The asset $S$ pays no dividends and the spot price of one asset is $S_0$ = £5. ...

I am currently studying interest rate risk management, and i can't seem to get the derivation right, and I would like to do all of the steps, to be sure that I understand what is going on. Let Pz (t, ...

It's possible to measure how cheap stocks are, because we can compare asset price to its output. $$Rate = {Revenue \space \over Capitalisation}$$ And then at any given moment we know how cheap ...

I've coded up a binomial model. It spits out the right numbers that the book I'm currently reading is using for the given inputs. For example, Stock Price 100 Strike Price 100 Number Of Periods 3 ...

I am in academia and begin to work on topics including portfolio optimization. I just read lots of paper discussing different extensions to the Markowitz approach, given different (possibly ...

From Shreve's book (Stochastic Calculus for Finance II), assuming stock dynamic as standard GBM (without any dividends), the discounted American put price process (which is a super-martingale), ...

I understand that we can use option prices to imply volatilities and ultimately to imply a risk neutral density. I also understand that this implied density is not the same as the "real world density"....

Consider the following 2 investing strategies. Strategy $A$ buys $1$ share in every period. Strategy $B$ invests a fixed amount of money in every period. $B$ seems better because for the same ...

My question is quite general and is about the coherence between forecast horizon, then forecast dates, and related actions. As example we can keep in mind the asset allocation problem. It seems me ...

I have been working with TeaFile from discreteLogic and I'm strugling to understand how i can insert data inside a file. Let's take this example: ...

In classical risk/ ruin theory, I see this formula crop up in my notes but my lecturer didn't explain to me why/ when it's employed: $M_X(r) = \int_{-\infty}^{\infty} e^{rx} f(x) dx$ I understand ...

Following the event study paper USING DAILY STOCK RETURNS The Case of Event Studies let us suppose that I have daily stock returns for 50 companies from the date 2012-01-01 until 2014-01-01. and I ...

I'm reading Trading Volatility (Colin Bennett) and there's a phrase regarding delta skew measure on p. 208 that I don't quite understand: An example of skew measured by delta is [25 delta put - 25 ...

I have a question about acceptance rejection method and really appreciate your advice: Suppose we want to generate random variable that has probability density function $f(x)$, since we're using ...

I’ve been a crypto trader for about a year, using mainly technical and fundamental analysis to trade. I want to start spending some time learning how to perform quantitative analysis and perhaps build ...

I have a list of about 8000 global companies identified using SEDOL identifiers and tickers (for whatever exchanges the companies are listed). I need to retrieve data about these for a regression, ...

I'm delighted to join your community as a new member to learn a lot from you as a founder of a new start up in my country. Recently after I finalized my business plan, I've started searching for ...

Suppose an investor borrows EUR1m to buy USD stocks. He wants to hedge away the currency risk through EURUSD futures. He should go long EURUSD to hedge this risk. The question is how much of EURUSD ...

I'm trying to understand what the Fama-Macbeth regressions of returns actually mean. The source of confusion is a 2013 Novy-Marx paper, in which he states the following: "The first specification of ...

I would like to know how much the exchange fees would be to connect and place orders directly with NASDAQ using one of their third party suppliers or directly. I took a look at the pricing page but it ...

has anyone tried simulating correlated stock prices via a geometric Brownian motion? I have done it in python but I have no idea if my code is correct since I can't compare it to anything. I would ...

We have an option portfolio with delta =2 and gamma 3 and we want to making this portfolio delta and gamma neutral using two derivatives D1 and D2: ...

Consumer Price Index looks like a very nice straight line, perfectly approximated with linear function (considering it only after the 1972). $$cpi(years) = start + ...

I have been reading the forum here for a while but this is my first question. I am trying to figure out (for an assignment) the price some FTRs (Financial Transmission Rights) were sold. Here is an ...

I am looking to build a great quants team to start build a true Quants trading system for a new Fund. I want to build a great team and I know its not going to be easy to build fully automated trading ...

I was looking into market making and the common idea is market makers make money by capturing the spread. I am a little confused about how this works, since on an exchange if the stock is listed that ...

This is for my second year finance class in university. The chapter is on "Using Discounted Cash Flow Analysis to Make Investment Decisions." Here is the example problem: This is the solution written ...

the zero-coupon T-bond is widely used in the industry as a tool to derive pricing formulas: for example it is used in the derivation of the Libor Market Model. The way in which it is often used ...

The Cameron-Martin-Girsanov theorem, in a simplistic way, states that: The probability measure $\mathbb{P}$ is induced by a Wiener process $W(t)$. There exists another process $X(t)$ under the same ...