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Deriving the greek Theta from Black-Scholes formula

I am deriving all greeks from BS, im just stuck at theta and im confused about it because depending on the page or forum i look at i see different formulas some shorter than others. Using the formula ...
minibeto666's user avatar
2 votes
1 answer
135 views

How is this greek calculation meaningful?

For a swaption, the "Pricing And Hedging Of Swaptions" paper by Akume et al (2003) says: I get that he's just taking the derivative of the swaption valuation formula (which is N * A * ...
Nope's user avatar
  • 21
0 votes
0 answers
23 views

simulation of stock prices paths

in my work I want to run a monte carlo simulation for stock price paths in high-frequency framework. is it reasonable to set the initial midquote of the bid-ask prices equal to the initial stock ...
XY0's user avatar
  • 13
0 votes
0 answers
35 views

Floating side value of a swap [duplicate]

I have some trouble to understand on valuing the floating side of a swap. In my book, the value of floating side at the time t is; $$ P(t,T_0) - P(t,T_n) $$ Where $$ P(t,T_n)$$ denotes the value of ...
FMM's user avatar
  • 1
0 votes
1 answer
34 views

Trading term structure of skew

Is there a way to trade IV skew between two maturities? For example, bull put in near maturity and bear put in far maturity.
smg_08's user avatar
  • 1
0 votes
0 answers
41 views

Nonlinear Dynamics in Finance [closed]

I would like to know whether studying nonlinear dynamics and control is useful or not for quantitative finance and which are the main applications of this field in the financial framework.
Alessandro Cicalese's user avatar
1 vote
1 answer
56 views

Change of measure when the underlying dynamic is Ornstein-Uhlenbeck

Let the $r$ riskless rate to be constant. Let's consider the following underlying dynamic under the $\mathbf{P}$ “physical measure” $$dS_{t}=\mu_{t}S_{t}dt+\sigma_{t}S_{t}dW_{t}^{\mathbf{P}},$$ where $...
Kapes Mate's user avatar
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0 answers
32 views

Correlation risk between protection (seller) and reference entity

I am learning about central clearing. In my understanding, CDS are usually cleared via central clearing. But at the same time I heard that in case of too much correlation such as US bank selling ...
neko's user avatar
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0 answers
56 views

Quanto CDS pricer in Python

I am sales and would like to grasp rough levels of quanto CDS, such as BMW denominated in USD, without askin traders each time. What i'm thinking is to calculte it using Python. But i cannot build up ...
neko's user avatar
  • 3
0 votes
0 answers
31 views

Derive foward put formula [closed]

I need help with this question: Derive a pricing formula for a forward-start put option on a dividend yield-paying stock, with dividend yield y, in which the strike price will be greater than the spot ...
Johnny's user avatar
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0 votes
2 answers
31 views

Basis risk between future and a non-dividend paying stock

I am a bit confused about the definition of basis risk, and how it applies to a zero dividend stock. A study manual that teaches me about that mentioned basis risk happens when there are mismatches in ...
Preston Lui's user avatar
0 votes
1 answer
28 views

Is it possible to price a call option given a daily underlying returns distribution?

Apologies in advance if this problem is somewhat ill-posed. But I was thinking given the price of a call option can be formulated in terms of a implied probability density function at time $T$, would ...
Tarun Srivastava's user avatar
2 votes
0 answers
75 views

Models for tick-by-tick / high-frequency data

I've spoken to one or two persons at some market making shops, and I'm under the impression that for modelling tick data, aside from the rise of ML, a pure jump process such as the variance gamma ...
Frido's user avatar
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1 vote
0 answers
55 views

Maximising skewness for a portfolio

I am trying to recreate the Mean-Variance-Skewness-Kurtosis-based Portfolio Optimization work done by Lai et Al. (2006) (link). I reached the part where in order to run the PGP model, you need to feed ...
csrfnc's user avatar
  • 11
1 vote
0 answers
59 views

How did Jim Gatheral come up with the SVI parameterization?

I know it has nice properties relating to Roger Lee's moment formula and the Heston model asymptotics, but I am just curious how Jim Gatheral came up with this formula in the first place. I read a ...
Michael's user avatar
  • 171
0 votes
0 answers
25 views

Does the Binomial Options Model use a discrete or continuous compounding rate for its risk-free rate? [closed]

If I am given a risk-free rate of 10% compounded annually, must I convert this discrete compounding to continuous for use in the binomial option model?
Query User's user avatar
2 votes
0 answers
76 views

What theoretical distribution best fits the vix? [closed]

What theoretical distribution best fits the vix?
Lmnop's user avatar
  • 29
0 votes
0 answers
21 views

Static Multiperiod Optimal portfolio

I am interested in optimal portfolios in a multi-period setting To be more precise, say I have an investment horzion over $T$ periods and the market consists of $N$ assets. I simulated future asset ...
Cettt's user avatar
  • 1,436
0 votes
0 answers
30 views

Stock clustering for Statistical Arbitrage Trading

Has ML based stock-clustering been practically adapted by the industry in arbitrage trading strategies like pairs trading for forming pairs instead of other traditional techniques like cointegration?
Rohan Kuntoji's user avatar
0 votes
1 answer
58 views

Some US AAA Corp are borrowing below UST for 10yr paper. What could be the reasons for this?

Any particular situations which can lead to this?
quantpadawan's user avatar
0 votes
0 answers
39 views

Swap IRS - SOFR lookback

I have a fixed-float swap valuation to realize. The floating leg is referenced to SOFR with a 10 days lookback. The first coupon has already started, on 01/09/2023, and ends on 01/12/2023. The first ...
Nc27's user avatar
  • 1
0 votes
1 answer
53 views

EM currency bond pricing and swaps

EM ccy denomimated bonds (such as MXN, TRY) are often priced using cross currency swap rate (MXN-USD, etc). I guess this is because their fundings are in USD. My question is who are the participants ...
neko's user avatar
  • 3
1 vote
1 answer
68 views

Volatility Mismatch in SABR Calibration

Problem Statement Hi, I am trying to calibrate SABR on a new asset, which is not 'forward swap rate'. While using the vanillaSABR calibration, I find the parameter 'sigma' (one of model parameters, ...
anmo's user avatar
  • 11
2 votes
2 answers
184 views

Calculating DV01 for Treasury Futures with CTD switch risk

With rates rising, certain contracts, such as the USZ3, are prone to frequent CTD switches with sometimes large differences in the DV01 of an underlying CTD. Does anyone know of any resources for ...
Tim W's user avatar
  • 23
0 votes
2 answers
76 views

How does the recent increase in shorting of US Treasury futures explain the spike in yield for US Treasury?

My understanding is that HF that short the US Treasury will need to buy the spot in order to deliver at the maturity date. Won't that increase the demand for UST and reduce yield instead?
Jay's user avatar
  • 21
0 votes
0 answers
24 views

Pricing illiquid CSO with Monte Carlo

I'm trying to price a CSO on Soyoil. The instrument is extremally illiquid. To proceed, I simulate both leg by Monte Carlo, using the historical correlation over the 75past days and their respective ...
Jojo's user avatar
  • 1
-2 votes
0 answers
38 views

VBA excel code for LMM+ [closed]

I am looking for the VBA excel code to implement the interest rate spot curve for an Economic Scenario Generator
Basseck's user avatar
0 votes
0 answers
37 views

Combination of bid ask of two instruments

You have 2 instruments: X in which you are quoting 35 @ 40 and product Y in which you are quoting 15 @ 30. We want to make a market on the product X+Y. What is the bid-ask spread you will quote? Got ...
Kai's user avatar
  • 43
0 votes
0 answers
25 views

Commercial bank mortgages schedule calculation

I need to calculate the schedule of a fixed rate mortgage and an adjustable rate mortgage. Is there an open source library, preferable in python, that already makes these calculations? I tried ...
ps0604's user avatar
  • 40
0 votes
0 answers
88 views

Backtesting One-Factor HJM model with selling European Receiver Swaption

I am attempting back test the performance of a model - namely the Musiela equation used to model instantaneous forward rates with constant time to maturity: $$r(t,x)=r(0,x)+\int_0^t\left(\frac{\...
user67245's user avatar
0 votes
0 answers
42 views

Building SOFR curve - explanation of the formula used

I am studying a previous post on how to build SOFR discount curve here Libor transition: Building SOFR discount curve However, I struggle to understand the below ...
Brian Smith's user avatar
1 vote
0 answers
28 views

Bloomberg SWPM: Floating Leg cash flow [duplicate]

I am trying to replicate mechanism behind SWPM function of Bloomberg. As you can see from the screenshot from my excel file, I am able to find exact cash flows from excel file (it not discounted), ...
Lamiyə Bədəlova's user avatar
0 votes
0 answers
54 views

Loan modelling using Opensource risk engine (ORE)

The problem is to calculate the cash flow schedule for a simple fixed rate loan where principal amortization periodicity is not equal to interest payment periodicity. For example, amortization is ...
SergeyS's user avatar
0 votes
0 answers
22 views

Understanding the application of Asset-Correlation to credit risk models

Suppose we have a portfolio of $n$ credits. In order the estimate the Portfolio Value at Risk (99,9) we use a standard vasicek model with the Ability to pay variable $A_i=\sqrt{\rho}x+\sqrt{1-\rho}z_i$...
Alex's user avatar
  • 1
9 votes
11 answers
5k views

Probability Puzzle from a Quant Interview

An urn contains 20 balls colored each of the 7 colors of the rainbow (140 total balls). We select balls one-by-one without replacement. Given that in the first 70 draws we selected 5 more red balls ...
kaddy's user avatar
  • 172
1 vote
0 answers
38 views

Delta sensitivity calculation according to SIMM

I have come across below link on how to calculate the delta sensitivity for interest rate product https://ibkrcampus.com/ibkr-quant-news/delta-sensitivity-of-...
Bogaso's user avatar
  • 740
0 votes
1 answer
54 views

Confusion about payoff for an option [closed]

My teacher said that the payoff of a put is $\mathrm{max}(K-S_T, 0)$, where $K$ is the strike price and $S_T$ is the spot price at maturity. Why isn't it $K$ if $K-S_T > 0$ and $0$ otherwise (i.e. $...
Cyclopropane's user avatar
0 votes
1 answer
51 views

Test significance for information ratio

Suppose that we have an estimated Information Ratio $IR^*$ calculated from the relative returns between a portfolio and a benchmark. I am looking for a way to quantify the uncertainty of this ...
mpqnt's user avatar
  • 1
0 votes
0 answers
34 views

How to construct the probability of default (PD) with not much historical data (<1 year)?

If a financing company has a new funding program, is there a statistical method that can be used to construct a probability of default (PD) for IFRS 9 ECL calculation purposes? Considering that ...
Daniel Dayan's user avatar
0 votes
0 answers
93 views

S490 curve: Bloomberg zero swap curve calculation [closed]

I have given a task of replicating ICVS S490 swap zero curve of Bloomberg. Unfortunately, even though I get close numbers using their white paper, I am not able to find the way that they are getting ...
Lamiyə Bədəlova's user avatar
11 votes
8 answers
4k views

What are some factually incorrect quantitative finance answers generated by AI?

One question and AI-generated response per answer. Community wiki flag and an explanation of why the AI response is wrong are encouraged. The AI program can optionally be identified. Including the ...
0 votes
1 answer
137 views

Repo/Fwd/Spot/Bond Futures

I have a slight confusion with regards to what price the repo rate impacts. Assume the repo for a particular bond richens. My current thought process is, spot should also richen (as now that bond ...
user67825's user avatar
0 votes
0 answers
63 views

Performance Swaps

I am trying to find more information regarding performance interest rate swaps. The only source that I have found so far after digging extensively is the following. However, I am not as satisfied as I ...
Xiarpedia's user avatar
0 votes
0 answers
27 views

Computation of CouponLegNPV using IsdaCdsEngine

I've recently been trying to work on and understand the concepts around CDS. By making simplifications (flat hazard rate, flat forward rate), I wanted to compare the values I could obtain by manual ...
Sakhr's user avatar
  • 1
0 votes
0 answers
56 views

Genetic Algorithms and Genetic Programming in Computational Finance [closed]

I'm curious if anyone within this community has read "Genetic Algorithms and Genetic Programming in Computational Finance" by Shu-Heng Chen. Would you recommend this book? Additionally, I'm ...
quantenthusiast123's user avatar
-1 votes
1 answer
46 views

How to calculate weighted return of two stock prices? [closed]

I have 2 list of returns A = [0.00538467, 0.04701923, 0.00170811,...] B = [0.00299271, -0.0060228 , -0.07761099,...] I take long position in A and short in B. How to calculate the total return and ...
Pogger's user avatar
  • 99
0 votes
0 answers
51 views

Is there another method besides DCF to evaluate a fixed-rate bond?

I am a beginner who recently found a job in the FICC sector. My superior gave me this question to think about: 'We have a bond with a 5% coupon rate and a maturity of 10 years, and the discount rate ...
FSH's user avatar
  • 1
1 vote
1 answer
64 views

Calibration of Heston using implied vol as $v_0$

I am looking at the difference if you calibrated the heston from market data using objective function minimisation. In scenario 1, I calibrate all the parameters from market data In scenario 2, I ...
THAT'S MY QUANT MY QUANTITATIV's user avatar
4 votes
2 answers
261 views

Calculation of Cashflows Using ISMA Day Count in Fixed-Rate Bond

I'm working with a fixed-rate bond in QuantLib, and I have set the day count convention to ISMA, but I would like to understand how this specific day count convention is used in the calculation of the ...
Roshan Yadav's user avatar
1 vote
2 answers
206 views

Selling Strangle or Selling Straddle

Assuming positive skew premium & continuously delta hedged, is selling OTM strangle always a superior strategy than selling ATM straddles (hence P&L is theoretically simplified as 0.5 * Gamma *...
wjd's user avatar
  • 11

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