All Questions

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 ...

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; ...

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{\...

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 ...

How to statistically examine FM Regressions to check if they are time-varying?

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} × ...

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?

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 ...

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 ...

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 ...

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 ...

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 ...

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 $dY_t=B_tdt+t\cdot dB_t$ ...

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?

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 ...

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, ...

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 ...

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 ...

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 ...

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 ...

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 ...

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 ...

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 ...

What does it mean in asset-pricing if something is priced or not?

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 ...

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 ...

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 $...

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 ...

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 ...

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 ...

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 ...

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 ...

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 ...

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-...

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 (...

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 ...

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 ...

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 ...

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

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 ...

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 ...

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=-...

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 ...

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 ...

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 ...

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: ...

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&...

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 ...

Assuming the options do not pay dividends, is there a strike price that satisfies this?

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: $...