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23 views

Question on Realized Vol vs Implied Vol

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 ...
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0answers
29 views

Help with R normalization function [closed]

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 ...
0
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1answer
49 views

To use daily volatility or annual volatility

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 ...
0
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0answers
25 views

Pricing Autocallable Structured Products using Finite Difference Method [closed]

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 ...
0
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0answers
27 views

Robust Sharpe ratio

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 ...
2
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0answers
45 views

Realistic Modeling of Capacity in Backtesting a trading strategy

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 ...
1
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0answers
30 views

How to derive the CAPM from maximizing the Sharpe ratio?

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 ...
0
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0answers
17 views

Finding stock symbols for alpha vantage api

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 ...
0
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0answers
25 views

Benchmark for fund in Fama French 3 factor setting

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 $\beta_{M}=0.8$, $\beta_{SMB}=0.4$,...
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2answers
53 views

Proof European call price is always less than stock price. (proof verification)

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 ...
0
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0answers
33 views

Fama French Question(China) [closed]

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 ...
0
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2answers
57 views

How and why is there a restriction on short sales?

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 ...
0
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0answers
30 views

Macro momentum analysis

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, ...
0
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0answers
19 views

How to approximate expectation and variance of an integral from a discrete Time series financial dataset?

I have discrete time series financial data, with time($u$), price($S$) and someVariable($q$) which looks something like this. ...
0
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2answers
84 views

Implied volatility is returning infinity

I am trying to calculate implied volatility using javascript , I have following code ...
0
votes
1answer
32 views

What is Variance of delta of brownian motion [closed]

I am new to this. If variance of Brownian motion b is t, what is the variance of db? db is delta of b
0
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1answer
48 views

Simulation Heston Model, markovianity

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: $$...
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0answers
18 views

Is callable bond pricing available in Quantlib XL?

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 ...
1
vote
1answer
55 views

Covariance of logarithms of geometric Brownian motion

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 ...
0
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0answers
36 views

St. Petersburg Paradox [closed]

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:...
0
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0answers
52 views

Exercise: does Ito integral of a simple stochastic process have normally distributed increments?

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 $\mathcal{F}(t)$ ...
0
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1answer
69 views

Constructing an arbitrage opportunity for a company involving Forwards

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. ...
0
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1answer
71 views

Calculate duration of zero coupon bond

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, ...
0
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0answers
43 views

Measure how cheap is the Gold? [closed]

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 ...
-1
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0answers
34 views

Binomial Model Is Leading to More Expensive Options as Number of Periods Grow

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 ...
4
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1answer
82 views

Markowitz portfolio in reality

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 ...
0
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0answers
45 views

American options & Optimal Stopping Time

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), ...
5
votes
1answer
125 views

What is the connection between the risk neutral implied density and the real world density?

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"....
0
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0answers
31 views

Use AM-GM inequality to generalize price process [closed]

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 ...
0
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0answers
20 views

Forecast dates and related actions

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 ...
3
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1answer
41 views

TeaFile discrete logic - how to write

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: ...
0
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0answers
36 views

Classical Ruin Theory - Lundberg Model

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 ...
1
vote
1answer
47 views

Test statistic of event study

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 ...
1
vote
1answer
63 views

Delta Skew Measure as volatility changes

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 ...
0
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1answer
43 views

Generate Random Variable Using Acceptance Rejection Method

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 ...
0
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0answers
61 views

How to get started with Quant Analysis/Algo Trading? [closed]

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 ...
0
votes
1answer
77 views

Bloomberg: fetching returns based on identifiers

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, ...
0
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0answers
22 views

Share percentage offers to potential investors [closed]

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 ...
0
votes
1answer
82 views

How much to hedge if borrow in EUR to buy USD assets?

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 ...
1
vote
1answer
47 views

Understanding Fama Macbeth Regressions of Returns

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 ...
0
votes
0answers
35 views

Does anyone have any pproximate idea what it would cost to get a FIX and OUCH connection from NASDAQ

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 ...
0
votes
1answer
67 views

Simulating correlated Stock Prices python

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 ...
0
votes
1answer
54 views

Making portfolio Delta and Gamma neutral using 2 derivatives

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: ...
1
vote
2answers
110 views

Why Consumer Price Index is linear, when it should be exponential? And what to use instead?

Consumer Price Index looks like a very nice straight line, perfectly approximated with linear function (considering it only after the 1972). $$cpi(years) = start + ...
1
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0answers
15 views

Finding the selling price of FTR (energy trading) [closed]

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 ...
-2
votes
0answers
55 views

Looking to build a Quants Investing Team [closed]

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 ...
1
vote
1answer
117 views

How do market makers make money

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 ...
0
votes
1answer
41 views

How Were These Depreciation Percentages Calculated? [closed]

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 ...
0
votes
1answer
46 views

T-Forward Measure, LMM & the Zero T-bond

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 ...
0
votes
1answer
115 views

Girsanov Theorem and Probability Measures

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 ...

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