All Questions
20,036
questions
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CENTRAL BANK SWAPS REGULATION
I could not find much information on central bank swaps.
Do wall street Banks execute any swaps with foreign central banks or fed?
Are central bank swaps cleared or uncleared? is there any regulation ...
1
vote
0
answers
12
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B&S pricing of option with convex transformation
Assuming B&S world, is it possible to price an (European) option on a general transformation $f(\cdot)$ of $X$? What kind of assumptions should we make on $f$? Is convexity sufficient to find some ...
- 157
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0
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9
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Is it possible to construct an efficient frontier without the mean?
If we assume the estimator for a sample mean is biased and if the optimal portfolio weights vary with the estimated mean, is there a way (similar to the zero beta portfolio approach wrt the risk free ...
- 468
1
vote
0
answers
8
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How to calculate the gaussian VaR for a portfolio with 3 corporate bonds and 1 IRS payer?
As data I have the daily change of zero coupon spot rates for some vertex (0.25, 0.5, 1, 2..) and the daily change of z-spread for corporate bonds, also by vertex
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29
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How to calculate the log return of portfolio?
Suppose that we have five trades each day with these returns ($R_{day,trade}$) and we have 300 days in total:
$R_{1,1}$, $R_{1,2}$, $R_{1,3}$, $R_{1,4}$, $R_{1,5}$
$R_{2,1}$, $R_{2,2}$, $R_{2,3}$, $R_{...
- 275
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11
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Modelling forward and correlation dynamics for options on the best-of multiple commodity spreads
I am looking at best-of options on futures (commodities), let's take for example the following payoff specification:
$ max(a_{1}-c_{1}, \ a_{2}-c_{1}, \ a_{3}-c_{1}, \ b_{1}-c_{1}, \ b_{2}-c_{1}, \ ...
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14
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Estimating difference in implied volatility from difference in PV
Le us assume that depo and repo rates are zero. And let us assume I can read the ATM implied volatility of 1y option from the volatility surface. I now have some algorithm to reprice this option (let'...
- 510
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18
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Assistance understanding relation between the "Bid-ask bounce" and the "Tick rule"+"Quote rule"
I need some assistance in understanding the relation between the "bid-ask bounce" and "the tick rule" + "quote rule". I have an exercise were we are asked the following:
&...
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2
answers
36
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Automatically Import Stock Data - Yahoo Finance & Microsoft Excel
How to import Growth Estimates: Next 5 years(per annum) from yahoo finance to microsoft excel?
- 1
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answers
52
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Inconsistency between simulation and the probability of a "stock" hitting take profit before stop loss
Let's assume a stock at time $t$ is worth $X(t)$. If the returns of $X(t)$ are i.i.d. and normally distributed,the probability of $X(t)$ hitting a value $H>X(t)$ before $L<X(t)$ is $\frac{H-X(t)}...
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30
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Best approach to select strike prices for an Iron Condor?
Options beginner here.
I'm aware of three popular ways to select strike prices for Iron Condor.
Select strikes such that they are equidistant from the CMP.
Select strikes such that the they form a ...
- 1
0
votes
0
answers
33
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Commodity Futures Cascading in Python
I am new to Quantitative Finance so please bear with me. I have the following data set:
...
- 101
-1
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0
answers
70
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Does the usual theory (e.g. Black-Scholes) make sense for FX options?
When you open any book about option pricing theory, you have this kind of setting:
A risky asset whose value at time $t$ is $S_t$.
A risk-free asset whose value at time $t$ is $S^0_t$.
A portfolio ...
- 99
-1
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0
answers
19
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Correlation Calculations in googlesheet not matching tradingview native corr
I am trying to compute the 20 day Correlation between 2 (x,y) securities using googlesheets correlation function as under
...
- 1
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answers
46
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how can I linearize a constraint of the form sum(min(x(i),y(i))) for a linear optimisation problem?
I have an linear optimisation problem with the objective :
$ max PortfolioSpread(x_1,x_2,....x_N) = ∑_{i=0}^N(x_i*s_i)/budget$
s.t.
$∑_{i=0}^N x_i = budget$ (+ other constraints)
$∑_{i=0}^N min(x_i,...
- 1
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0
answers
40
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what exactly is a time bucket? [closed]
I am refferring to kaggle optiver realized volatility prediction competition.
In their intro : https://www.kaggle.com/code/jiashenliu/introduction-to-financial-concepts-and-data/notebook
there is a ...
- 33
1
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answers
22
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Betas and weighted average ERP
Whenever analyzing a particular company through CAPM, I used to take the Equity Risk Premium (ERP) of the country where the company was listed/headquartered. However, recently I came to know that some ...
- 25
-4
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0
answers
19
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Replicating Portfolio Questions [closed]
Derivatives questions from mock questions for our exam next week, can somebody please help me with answering them as quickly as possible
- 1
2
votes
0
answers
56
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Marginal Risk Contribution Implementation Questions
Sorry if this is too obvious to you. The marginal risk contribution mentioned here is the same as in this post Marginal Risk Contribution Formula .
I understand the concepts and derivation on the ...
- 31
1
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answers
53
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Deviation between spot price and implied spot price of S&P500 mini-futures
From Derivatives Markets (McDonald) it is stated that we may price a financial forward and, equivalently, get an implied spot price from a given futures price:
$$
F_{0, T}=S_0e^{(r-\delta)T} \implies ...
- 11
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0
answers
25
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Reasonable way to price swap under realized forwards assumption
I'm looking for a way to price swaps in QuantLib under the assumption of realized forwards, i.e. couple of weeks or months from today the yield curve would be the same as it is expected by the market. ...
- 149
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votes
1
answer
27
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SDE linear combination of stock price
Assume that $X_t$ is a process with dynamics $dX_t = \sigma X_t dW_t$ is where $W_t$ is a standard Brownian motion. Given two deterministic functions $p(t)$ and $q(t)$, compute $\mathbb{E}[p(t)X(t)+q(...
- 1
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answers
31
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Why does changing the step size in my Binomial Tree changes the final stock prices so much?
I am trying to price a convertible bond by using a binomial tree. For this, I wrote a binomial tree for the stock price. I noticed that changing the step size (timesteps), changes the final value of ...
3
votes
0
answers
54
views
Are Black-Scholes Greeks bounded?
For time to maturity greater than zero, has it been proved somewhere that the Black-Scholes greeks
$$
\frac{\partial^n BS}{\partial x^n}
$$
are bounded, where $x := \log S$ and $S$ is the current spot ...
- 4,789
1
vote
1
answer
96
views
What is the APT trying to say?
I'm reading through Active Portfolio Management, and I can't get my head around the APT.
As far as I can tell, the statement in equation 7.2 translates into:
"If you can get better than consensus ...
- 165
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answers
19
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What exactly is revenue leakage?
I just found out about the term revenue leakage in the paper linked below. However, this paper and other resources mentioning it do not provide a definition of the term.
However, for my thesis I ...
3
votes
1
answer
139
views
When to use a Local Vol model vs Stochastic Vol Model?
I'm new to volatility modeling, I'm struggling to understand when to use a Local Vol model and when to use Stochastic Vol Model, Also now we use a hybrid model combining the two models ? Can someone ...
- 436
2
votes
1
answer
66
views
How to correctly explain the current price action in a trading chart with the Hurst Exponent found?
I watched this video tutorial to learn how to estimate the Hurst Exponent using an Excel spreadsheet and a time series sample of 1025 data.
I decided to use futures 1H markPriceKlines data from ...
- 23
1
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answers
33
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Is there a closed form solution to calculate Fugit for stock options?
I am trying to find a quick and dirty way to estimate fugit for a basket of American options real time. Is there a quick way to provide a proxy? I know one can do binomial tree or monte carlos ...
- 23
2
votes
0
answers
30
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The price of liquidity
We are currently in the US Treasury roll period when investors are rolling from the previously issued notes and bonds into the currently issued notes and bonds, aka "Rolling from Off-The-Runs to ...
- 5,030
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answers
21
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How to predict what stage of business cycle we are currently in based off of unemployment indicators
I am trying to predict what part of the business cycle (Early, Mid, Late 1, Late 2) we are currently in by looking at unemployment indicators.
Qualitatively, I've reasoned that:
.
Early
Mid
Late 1
...
- 111
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0
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104
views
How would the following be priced?
Suppose we introduce the following: a token S with an initial supply of a 1000. At $t_0$, a 1000 different parties $P_1,\dots,P_{1000}$ each buy a single token for $1$\$.
Whoever has the most tokens ...
- 127
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votes
1
answer
18
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Credit rating of an Issuer
When to analysing historical movement of credit rating, sometime credit rating is put as Non-rated or NR.
Is there any industry acceptance definition of ...
- 211
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43
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short rate, yield curve and zero-coupon bond price formula under CIR mode: How to calibrate the market price of risk
I recently read a document posted by a user in QF, who said that "In the past, I have calibrated simple short rate models to the term structure by using maximum likelihood to get the parameters ...
- 409
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0
answers
14
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Why is the P/E Ratio in this dataset different from what I would have expected?
Checking the S&P 500 Companies with Financial Information dataset, the P/E Ratio for MMM would be 222.89 (Price) divided by Earnings/Share (7.92), which gives 28.14. However, the Price/Earnings is ...
- 101
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0
answers
39
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Kyle model for market-maker price
Now I make research about market making for cryptocurrency. I’m using model like Avellaneda-Stoikov for optimal control inventory, and I can’t understand how to find S(t) price. Of course, taking the ...
- 1
1
vote
0
answers
28
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Constructing a Replicating Portfolio : Regression on Individual Constituents or their Average?
I would like to replicate a portfolio of stocks $S_1, \cdots, S_n$ using other instruments, $X_1,
\cdots, X_m$. Using the letters above with a subscript $t$ to denote the forward returns over some ...
- 281
1
vote
0
answers
26
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Determine if stocks are hurt by rates or recession fear
Looking at a portfolio of growth stocks which traded at high multiples until end of last year.
Stocks have been underperforming (no surprise there) but I'm trying to find ways to determine, ...
- 495
3
votes
1
answer
47
views
Do managers information ratios exhibit autocorrelation? Ie. are they stable over time?
I'm reading through Active Portfolio Management, and I can't get my head around Information Ratio's real world applicability.
In table 5.6 it lists some empirical infomation ratios:
However, there is ...
- 165
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0
answers
31
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Estimating Intraday Volatility with OHLC Data [duplicate]
I'm trying to estimate intraday volatility for some ETFs, but don't have the intraday data to actually calculate it. I do, however, have historical daily OHLC data for the ETFs. I thought I saw ...
- 98
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answers
22
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Is it possible to simulate yield spreads for different bonds?
Let`s say I have different bonds from multiple issuers and I know the yield spreads for today. Is there a way to simulate those spreads for a future period like 1 month? I dont just want to simulate ...
- 1
2
votes
0
answers
83
views
How did Bachelier characterize the Brownian motion?
The model for a stock price
$$
dS_t=\mu dt + \sigma dB_t
$$
where $B_t$ is a Brownian motion on $(\Omega, \mathcal{F},P)$, is commonly attributed to the work that Bachelier has carried out in his PhD ...
- 221
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49
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Questions on the calculation of time series momentum
I read Moskowitz, Ooi, Pedersen's Time series momentum (2012).
The ex-ante volatility estimate (equation (1) in the paper) is
I am not sure about the period of the return reflected in the volatilty ...
- 11
1
vote
0
answers
25
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Fitting model between security price and intraday volatility
I'm trying to construct a model which shows how much the closing price of a security ($P_t$) differs from the VWAP of that security on that day ($VWAP_t$). I'm calling this measure the "VWAP ...
- 98
1
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0
answers
19
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Should I include factor loadings as explanatory variables for regression of abnormal and raw returns?
My research is to explain stock returns in a regression model. My dependent variable is raw returns and abnormal returns calculated from 3-factor model (Fama and French). Besides regressing against my ...
- 66
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10
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Can subcomponents of a variable be used as instrumental variable?
I conduct research to assess the relevance of ESG scores on COVID-19 crisis stock returns. To calculate abnormal returns I use time series, but the investigation is actually cross section returns at ...
- 66
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answers
27
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Options Market making, what to do with ITM options
I am a option market maker.
Say at some point in the time, I end up having only but ITM options in my portfolio and I want to reduce my risk exposure ( delta, Vega, gamma), what can I do to make ...
- 118
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votes
1
answer
48
views
Alpha calculation inconsistent across methodologies
I'm fairly new to finance, and this does not make sense to me.
Consider benchmark & active monthly returns as shown here:
If I do a line of best fit, I get an intercept of 8.4%
Which is meant as ...
- 165
0
votes
0
answers
43
views
Weekly S&P500 options price data
I cannot find free data on S&P500 options price, call and put, at different strikes of weekly options, on a daily basis, with maximum and minimum prices. I would like to have this data to study it....
- 1
1
vote
3
answers
144
views
Why are monthly active returns averaged? Should they not be multiplied?
I'm looking at this video: https://www.youtube.com/watch?v=fZmuJ2A9TC8 @4:43 but the issue is more general.
Here the speaker is taking monthly active returns and averaging them
...
- 165