All Questions

0
votes
1answer
12 views

Getting sets of random correlated variables

For the training of a machine learning model I need to add additional features (macro variables), and these features are correlated. I need to run the model N times adding these features with random ...
0
votes
1answer
11 views

BHAR Event Study - Index

I want to perform a BHAR event study. For that, I subtract the compounded returns of a benchmark portfolio from the respective stock. Is my assumption right, that I can simply take any underlying ...
1
vote
1answer
28 views

What mathematical theory is required for high frequency trading?

I am an applied math postdoc and I have been presented with the option of leaving academia to work in high frequency trading. I wanted to get a feel for the field and the theory underlying it so I ...
0
votes
0answers
13 views

Zero rate computation in Quantlib

I am trying following code, zerorates which is received is different than I expect. Can someone suggest where am I going wrong? ...
0
votes
0answers
19 views

Going from normal to Log-normal implied volatility

Let's denote the Implied normal volatility (Bachelier) as $\bar{v}$, and the implied log-normal (Black Scholes) as $v$. When everything else is known (spot, strike, maturity, rates etc) how can you ...
2
votes
1answer
29 views

what are the underlying transactions for SOFR?

Recently I am reading about SOFR (Secured Overnight Financing Rate), which is projected to replace LIBOR to be the reference for risk-free rate in the market. But I still don't understand or imagine ...
1
vote
1answer
35 views

Why is the volatility of an Ito process not the square root of its variance?

The volatility $\sigma$ of an Ito process $dS_t = r S_t dt + \sigma S_t dW_t$ is not the square root of its variance. But you often hear that "volatility = standard deviation". What's going on here?...
1
vote
1answer
25 views

Why the variance of a process is $\left( \frac{dS_T^2}{dt}\right)^2$?

Consider an Ito process $dS_t = f(t,S_t) dt + g(t,S_t)dW_t $ What is the reason that we can compute the variance as: $\sqrt{VaR(S_t)} = \frac{(dS_t)^2}{dt}$
3
votes
0answers
22 views

Annualization of higher order Co-moments

I'm developing a dynamic portfolio optimization procedure based on the implementation of the Modified sharpe ratio. The mentioned ratio depends, among other factors, on the skewness and kurtosis of ...
1
vote
0answers
13 views

How is hypothesis testing work in population sampiling?

I am learning the basics of quant trading from quantconnect's tutorial Confidence Interval and Hypothesis Testing. I understood the first part of the article but I dont understand "Hypothesis Testing"...
2
votes
1answer
49 views

What is the easiest way to learn Option pricing with PDE?

I was reading about Ito's formula and Girsanov theorem, but I am still struggling to grasp how in reality these are combined to compute the price of an option. What are the main source to understand ...
1
vote
1answer
75 views

Are questions in Joshi's book really asked at Quant interviews?

I am reading some questions in Joshi's book on Quant Job Interview Questions, and am perplexed at some of the questions in the book. Some of them are extremely easy (like, "explain the Black Scholes ...
1
vote
2answers
32 views

How to calculate necessary gain to compensate a loss in a financial transaction?

(Feel free to suggest the correct Stackexchange community - or otherwise - if this is not the correct one) When trading financial markets, a gain of x%, won't ...
3
votes
1answer
34 views

How to prove martingality of forward rate under T-forward measure

Let $P(t,T)=\mathbb{E}_{Q_{R}}[e^{\int^{T}_{t}r(u)du}|\mathcal{F}_{t}]$ be the price of a 1-euro zero-coupon bond with maturity $T$ and $r(u)$ the interest rate process. Consider the the forward rate $...
1
vote
0answers
12 views

Does EFP (Exchange Futures for Physical) Involves Cash Exchange?

I am new to the concept of Exchange Futures for Physical (EFP). According to some sources (link), An Exchange for Physical (EFP) is a transaction involving the simultaneous exchange between two ...
3
votes
1answer
52 views

How to comprehend this notation?

I learned mathematical finance from Bjork's Arbitrage Theory in Continous Time, and never once did I encounter the "quadratic variation"-thingy with the angle brackets. So now that I am reading ...
1
vote
1answer
42 views

Why do Factor Models set up their factors differently from regression?

While this may be awkwardly-titled, I hope that my question becomes clearer upon reading. So this is what I gather about Factor Models: they are statistical models set up to explain the returns, ${...
1
vote
1answer
22 views

Is the undiscounted value process of a Euro call option under Bachelier model a Martingale?

Assume that $c_t$ is the UNDISCOUNTED price process for a European call option in Bachelier model. In Bachelier model call option pricing formula the formulas is discussed. The undiscounted value ...
3
votes
1answer
58 views

Estimating a Yield Curve in a country without Bond Stripping

I am currently working under estimating a Yield Curve. From my understanding common procedures to construct a yield Curve like Nelson Siegel have the input of a series of different zero rates and ...
1
vote
0answers
25 views

Fixed Income Portfolio Optimization

I'm trying to solve for a maximum sharpe ratio portfolio in the fixed income space. To do so, i use CVXPY in python. I use this Paper as reference. This is my "setup": ...
2
votes
0answers
23 views

Mean directional accuracy and zero

I'm trying to use mean directional accuracy to evaluate my directional predictions in back-test, but it can't deal with realised directions which are 0, due to the comparison of the signs of ...
1
vote
0answers
31 views

transactions costs and leland modified volatility

When there are transactions costs, we are in a situation of incomplete market. What does the modified volatility of Leland (Option Pricing and Replication with Transactions Costs, 1985) bring us? can ...
1
vote
0answers
19 views

Calculating management fees paid during the last 12 months

I'm looking for a way to calculate the total management fees paid by a customer during the last 12-months. I'm taking the following assumptions: The total accumulation as of today is A The monthly ...
1
vote
0answers
16 views

Units of measurement for Minimum Variance Hedge Ratio

The minimum variance hedge ratio is given by $h=p*\frac{\sigma_S}{\sigma_F}$. I was wondering if you wanted to calculate the S.D yourself and the spot prices were in Dollars per barrel while futures ...
1
vote
0answers
40 views

Newbie question on Net Present Value with Constant Growth

Newbie here, trying wrap my head around on why this doesn't add up: Calculating the discounted cash flow of a perpetuity paying $1000 per year, 15% discount rate and 5% growth. If I calculate from ...
0
votes
0answers
29 views

Any recommended Traders/Software to Trade S & P 500 Futures [on hold]

Like to find how to trade S & P using Ichimoku
1
vote
0answers
54 views

How to solve these SDE Problems

Quuestion1. I make a solution $r(t)$ used by Ito's lemma $r(t)=e^{-a t}r(0)+\int _{0}^{t}e^{a (s-t)}\theta (s)ds+\sigma e^{-a t}\int _{0}^{t}e^{a u}\,dB^{1}(u)$ Is this right? and I try to make ...
1
vote
1answer
54 views

Modeling mortgage loan defaults

I have a machine learning model trained with a list of mortgage features that include macro variables where the field to predict (the label) is "Mortgage Defaulted" = 1 or 0 (Yes or No). Now, I need ...
1
vote
0answers
76 views

Is there a method to interpolate the volatility smile?

I have a small question of interest. During my classes at the university I have learned about the Nelson-Siegel method to fit interest rate curves. With this method you are able to determine interest ...
0
votes
0answers
61 views

Derivative of the Black and Scholes equation [on hold]

What is the financial interpretation that the derivative of the Black and Scholes equation is equal to 0? St n(d1) - Xe^-rt n(d2) = 0
1
vote
1answer
76 views

Least Squares Monte Carlo

Could you explain to me in words (no formulas) the concept of the Least Squares Monte Carlo method to price an American style option?
1
vote
2answers
80 views

Where can I get the actual info about how many stocks are there in markets all over the world?

I need to test an algorithm for large-scale data in stocks market. I wanna know how many stocks are there all over the world and the data source.
0
votes
0answers
60 views

Term structure equation in the Vasicek model

Consider the SDE $$dr_t = (b-ar_t)dt +\sigma dW_t, \text{with } a; b > 0.$$ Let $$F(t; r) = E(\exp(-\int_{t}^{T}r_sds)| r_t = r).$$ (F can be interpreted as price of a zero coupon bond with ...
1
vote
1answer
48 views

Pension funds co-investing with private equity?

Not a quant question, but not suited for Money stack exchange... I've heard rumblings of a trend of pension funds co-investing with private equity and was curious as to the reasoning of that strategy ...
1
vote
0answers
60 views

Valuation of Callable Bonds

Is there any way to price American Callable Bonds (those which can be called on any date before expiration) other than basic CRR interest rate trees, since they won't be accurate enough to give ...
2
votes
1answer
73 views

Convexity in interest rate curve bootstrapping

Whether the bootstrapping is a multicurve one or not, one can use futures quotes. One link these quotes to corresponding (synthetic) forwards (that can be expressed as known functions of zero-coupons) ...
1
vote
0answers
23 views
0
votes
0answers
21 views

Crank–Nicolson for Discrete Type Barrier: Backward propagation

The boundary conditions for Discrete Type Barrier (e.g. Up-and-Out) are: - Dirichelet boundary condition (set to 0 when spot is bigger than Barrier) on Barrier event dates - Otherwise (the other sides ...
0
votes
1answer
46 views

Estimating monthly GDP growth based on quarterly data

Apologies for this newbie question. Given the following quarterly GDP growth: ...
0
votes
0answers
35 views

Gatheral's SVI implementation in Java/Scala

I am trying to fit equity option implied vols using SVI model in Java, and I am using apache math commons library. Some of the option expiries fit very well, but others are completely off, and I am ...
5
votes
3answers
512 views

List of interesting Quantitative Finance podcasts

Which podcasts are interesting to listen too for quants? If you recommend one, why?
-1
votes
0answers
32 views

Risk-factors and autocorrelation

I wonder in how far risk-factors and autocorrelation are related. Detected autocorrelation in stock returns is often discarded as not being profitable and thus not impacted market efficiency. ...
0
votes
1answer
37 views

Does adverse-selection have a time-frame associated with it?

When my limit order gets filled, the price almost always moves against me due to adverse-selection. However, given 'enough' time the price may yet move back in my favour. Has there been any study ...
0
votes
2answers
79 views

Efficient market hypothesis vs random walk

I am having trouble to understand the distinction between the EMH and random walks. If I understand correctly, the EMH states that all available information is incorporated into prices, which ...
1
vote
0answers
102 views

A crash course in pricing

I need to refresh all the pricing theory. Is there anything like a crash course with practical and intuitive explanations? I will provide any further information. I am a mathematical engineer. I am ...
2
votes
0answers
52 views

Fast implied volatility for american options

Peter Jäckel has developped a method to compute implied volatilites from option prices, called "by implication", see the papers : By Implication Let's be Rational on its website -- as well as a ...
-2
votes
0answers
18 views

Anyone know a GJR-GARCH-MIDAS Multivariate

I'am trying to run a model like mfGARCH package but with multivariate, not univariate like mfGARCH does.
2
votes
0answers
65 views

What are the main problems for calculating the implied volatility of in the money American put options?

As stated in the question I have a problem with calculating the implied volatility for in the money put options I have a data set of 2.6 million American style plain-vanilla call and put options. For ...
3
votes
1answer
88 views

When to use which zero curves

I have a very basic question. Why are there many different zero curves for a given currency/market? For example, there are zero curves constructed using gov bonds, swaps, STIR futures, OIS, Inflation, ...
0
votes
1answer
59 views

How can stationary time series data be used as input in an ML model?

I am halfway through "Advances in Financial Machine Learning" by Marcos Lopez de Prado. I understand that a time series like stock prices can be transformed to make it sufficiently stationary. ...

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