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3 views

Using monthly CRSP EWRET to build equally weighted portfolios based on market equity and book to value ( SAS)?

I was wondering if it is possible to download the EWRET variable from Wharton in order to construct equally-weighted portfolios and rebalance every June? I have seen a few fancy codes for this ...
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0answers
3 views

Deriving the VIX formula

I am having trouble filling in a few steps in the derivation. From Martin (2017), we get the following assumptions: Constant continuously compounded rate $r$; The underlying doesn't pay dividens; ...
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2 views

Link between gamma and vega under Black-Scholes model

Under Black-Scholes model, the price of a european option is given by the following equation : $$\frac{\partial V}{\partial t} + \frac{1}{2}\sigma^2S^2\frac{\partial^2 V}{\partial S^2} + rS \frac{\...
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0answers
8 views

Question about financial mathematics, meeting a claim

I have a question regarding exercise 12, chapter 1 of "A course in Financial Calculus" by Alison Etheridge. It is as follows: "Suppose that the value of a certain stock at time $T$ is a random ...
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0answers
3 views

Time varying Fama French Risk factors

How to statistically examine FM Regressions to check if they are time-varying?
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0answers
14 views

Where does the 50.14348112 coefficent in the US Dollar Index formula come from?

The formula for the US Dollar Index (DXY) that every resource on the internet provides is: $$DXY = 50.14348112 × EURUSD^{-0.576} × USDJPY^{0.136} × GBPUSD^{-0.119} × USDCAD^{0.091} × USDSEK^{0.042} × ...
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0answers
5 views

How to analyse Intercept of FM Regressions

How to analyze the value of the Intercept in FM Regressions. What does a positive and what does a negative value say and what does a 0 say? For which value do we strive for?
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0answers
8 views

Trading Ranges for Tactical Asset Allocation

Do methods exist to determine trading ranges around benchmark weights/strategic asset allocation weights for a tactical asset allocation from the correlation structure between the individual asset ...
0
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0answers
6 views

Performance attribution of indices to their sector weights

Is it possible to attribute performance of indices (monthly returns and risk measures - Sharpe ratio, etc.) to their sector weights (if I know them)? Example: I know the monthly performance of ...
1
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0answers
10 views

How to calculate strike price for an American put given its value at time 0 and the binomial tree of stock prices?

Given the interest rate, prices of the stock at time 0,1,2 where T=2 is the expiry date, and the value of the American put at time 0, how do I calculate its strike price? The question gives it the ...
2
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0answers
28 views

Dual curve construction

I'm new to curve construction for swaps pricing concept and I am having hard time to understand dual curve construction and what difference it from single curve ? how do we construct it ? can someone ...
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0answers
23 views

Bootstrap a worst-off put/call

To use the MC technique "Bootstrap"/re-sampling on a single underlying or a basket is straight forward: select any time series from which you want to sample a distibution. take the log return on the ...
2
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0answers
23 views

Ito formula for $Y_t=tB_t$

someone can help me to solve this problem: $B_t$ is a Standard Brownian Motion. Let $Y_t=tB_t$. Using Ito formula, find drift and volatility of $Y_t$. The result I found is $dY_t=B_tdt+t\cdot dB_t$ ...
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17 views

Steepness of a curve?

Sorry if this question is simple, but in the place I work they want to implement a daily check to check the swap's curve steepness. What does this mean and why would this check be necessary?
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1answer
44 views

How am I buying at the bid?

I've done some active trading in my personal account at Fidelity. With surprising frequency when I enter market orders I am filled at the bid for buys and at the ask for sells! How and why does this ...
1
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1answer
30 views

How comprehensively do actuarial exams cover quantitative finance?

Some context: The actuarial curriculum offers two papers on quantitative finance (QF): CT8: Financial Engineering (Utility theory, Measures of risk, MVPT, CAPM, Binomial model, stochastic calculus, ...
1
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1answer
38 views

Newly issued convertible bond conversion price typically higher or lower than current stock price?

Reading this news about the valuation of airbnb makes me wonder. https://www.reuters.com/article/us-airbnb-debt/airbnbs-new-1-billion-investment-comes-at-lower-valuation-sources-idUSKBN21P3IM ...
3
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1answer
45 views

What are non-variance (non Markowitz) based theories of capital allocation between non-correlated assets?

A large amount of literature in finance accepts the standard deviation in return as if it were an accurate measure of "risk." What are some other financial theories for how to allocate capital ...
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1answer
32 views

Back of the enveloppe forward irs pricing

trying to have a back of the enveloppe way of working out generic forward starting swap rates like 2y2y or 5y3y to put in a spreadsheet without too much loss of accuracy. Whats a good way to look at ...
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0answers
19 views

Call option value when stock price remains as strike price till maturity

I was asked the following question in an interview: Given the standard European call option, if we know that the stock price will be the same as strike price from now till maturity, what will ...
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0answers
10 views

monotone convex interpolation using QuantLib

I have one yield curves for EUR6M and I want to produce EUR3M using a parallel shift to EUR6M curve. I can just add spread in 6M curve. I am facing problem that my EUR3M curve will have many more ...
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0answers
17 views

Optimization on D-Wave quantum annealer (application in finance)

Does anybody know wheter any bank uses D-Wave quantum annealer for doing optimization? Quantum annealers are single purpose quatum computers used for optimization. They implement quantum simulated ...
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0answers
12 views

How to set constraints on the VAR matrix of a Markov-switching VAR model in R?

I’m trying to estimate a Markov-switching VAR model in R and I want the autoregressive matrixes to be constant across the states. In other words, only the intercepts and the covariance matrixes are ...
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2answers
46 views

Asset pricing: Is Beta priced or not?

What does it mean in asset-pricing if something is priced or not?
1
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1answer
19 views

Quantitative risk management for energy markets

I'm currently preparing an exam about energy markets. The knowledge of notions of quantitative risk management accounts for the 50% of the total exam. During my university education, though, I didn't ...
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0answers
15 views

In Java, Which is best data-structure & design pattern to develop Future (Level based) algorithms / order Book?

I am new to Future Investment algorithms. Scenario : I have some ranges (High & Low). On these ranges I am writing some logical conditions and if that conditions will true then I will place a ...
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0answers
19 views

Initial price of digital option with barrier

Given that $S_0 = 1, u = \frac{5}{4}, d = \frac{4}{5}, r = \frac{1}{40}$: The payoff of a digital option with a barrier B > S_0 on the running maximum is: 1 if $max\{S_0, ..., S_n\} \geq B$ 0 if $...
3
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2answers
83 views

How would you forecast volatility without using any programming languages or machine learning or anything of that sort?

I am trying to forecast volatility. I am on the tactical asset allocation team. No one on our team knows machine learning or any programming languages. We are fundamental equity research analysts ...
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0answers
14 views

Create a Synthetic Single Stock Future

Is it possible to create a synthetic long single stock future using the stock and it's vanilla options with the caveat that selling naked puts is NOT allowed? That is, you can write puts, but they ...
4
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2answers
154 views

Why do some principal-protected notes reset the gains to zero?

I was looking through the principal-protected notes issued by Lehman Brothers. One of them was the "100% Principal Protection Absolute Return Barrier Notes Linked to the S&P 500 Index". The ...
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1answer
40 views

Why would a 15Y swap index=EUR3M and discount=OIS, show only a EUR3M-delta at 15Y

When computing the index-delta for a swap in a multi-curve framework, only the last cash tenor seem to show sensitivity. Could anyone explain with formulas why it is the case ? For example a 15Y swap ...
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1answer
35 views

Do Fama-French factor portfolios require optimization?

I am going to perform factor crowding analysis for my dissertation and I am struggling to build factor portfolios from the S&P 500 in r. I built my dataset from the S&P 500 and I am able to ...
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0answers
48 views

Vega vs Gamma. Implied vs realized vol

I was reading the answers to this question: Long Gamma vs Vega , but I still I feel I am missing a bit of context. Let's say I am long an European call today. From the plots shown in the second ...
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0answers
27 views

SOFR Discounting & Price Alignment Transition

CME Group is planning to migrate the discounting to SOFR from Effective Fed Funds Rate (EFFR). Below is the link to their article: https://www.cmegroup.com/education/articles-and-reports/sofr-price-...
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0answers
17 views

Lognormal asymmetry implication on Value at Risk

To examine the Value at Risk implications for a portfolio consisting of a spot and futures time series I have generated a 1-day monte carlo simulation. I was long in the spot and short in the future (...
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0answers
17 views

SOFR Term Structure and Discounting

Recently I have been going through a lot of documents for SOFR (Secured Overnight Financing Rate). For Debt Markets (loans, etc.) - I understand that SOFR Forward looking term terms rates are ...
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0answers
40 views

How Can I determine Swap rate?

I should calculate a swap rate of IRS contract by knowing that the risk free rate is $r(0) = 0.5$ and the defaultable rate, $r_1$, evolves in discrete time following a 2 period multiplicative binomial ...
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0answers
26 views

Is time diversification effective?

If the returns are log-normal, how do I find the probability of negative returns, since log can only take positive values as an argument. Also, for time = more than 1 year, how do I find the ...
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0answers
37 views

black scholes put options [closed]

could someone please show me how to equate the LHS with the RHS! it is driving me crazy! many thanks]1
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0answers
24 views

Is there a mathematical way we can show that low strike implied vols show variability of underlying conditional on it going down?

Is there a mathematical way we can show that high strike implied vols show variability of underlying conditional on it going up, and low strike vols show standard deviation if it goes down? This ...
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0answers
18 views

Rolling Hedge Performance

So I have Time Series data for Gas Spot and Futures Prices (first 6 front quarters and first 3 front years) from 2009-2019 and I want to evaluate the performance of a 3- year static hedge vs. 3- year ...
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0answers
14 views

Expected Value of Mean-Reverting Jump Process

I cant see the link between my method of calculation and the method done in the book Cartea and Jaimungal (Algorithmic and High Frequency Trading, page 220.) We have a mean-reverting process $$d\mu_t=-...
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0answers
18 views

Calculate percentage change within sliding window

i have aggregated minute OHLC data and looking to find large percentage changes of y% within a sliding time window of t for the close value - for example a change of 4% within 15 minutes would be the ...
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0answers
9 views

Let $L$ denote the three-month US dollar LIBOR rate and an interest rate swap arrangement where fixed rate is $L$ and floating rate is $24\% - 2L$

The following is a question taken from Heard on the Street. Let $L$ denote the three-month US dollar LIBOR rate. Consider an interest rate swap arrangement where Party A pays $L$ to Party B, and ...
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0answers
56 views

Trading options - real life vs. textbook?

I'm a Management with Finance student and we have recently learned about options. Because I find it easier to learn these things when I have some context to apply them to, I put $100 in my brokerage ...
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0answers
13 views

How can I calculate forecast returns given volatility and mean forecast?

I have built a model for mean and volatility forecasting of SPY. Now I want to combine these two into a return forecast. For doing this, I have written the following code in R: ...
1
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0answers
29 views

Realized Volatility of Volatility Index

I'm trying to examine the prediction power of the VIX and VVIX in a simple experiment where I compare the two to their realized volatility. For the VIX it is rather easy, because there is the "S&...
2
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1answer
66 views

Why is volatility unobservable even ex post?

I am looking into how to measure volatility, and I am not sure if I have confused myself too much in my research. So now I really need your help. So please either confirm my understanding of ...
1
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1answer
54 views

Are there values of the strike price for which an American put and European put have the same no-arbitrage price?

Assuming the options do not pay dividends, is there a strike price that satisfies this?
0
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1answer
38 views

Prove that $d\hat{W}_t = dW_t - \frac{1}{N_t} \cdot dN_t\cdot dW_t$ gives a Brownian motion under forward measure

Let $N_t$ be a numeraire and $(W_t)$ be the standard Brownian motion under the risk-neutral probability measure $P$. Recall that forward measure $\hat{P}$ is defined as the Radon-Nikodym derivative: $...

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