Questions tagged [finance]

Finance describes the management, creation, and study of money, banking, credit, investments, assets and liabilities as well as the systems to handle these instruments.

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13 views

Forward Price of a Stock with and without dividend

I have some questions about the forward price calculation. These two examples both use special compounding from t to T and no need to use continuous compounding. I hope to understand this concept. ...
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1answer
54 views

What does XIRR show?

I've put aside 1000 EUR for trading strategy test. Made number of trades where each position was worth 5 EUR. At any moment there was invested from 0 to 80 EUR. Entered all cashflows to XIRR function ...
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1answer
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Confusion about candlesticks colors [closed]

Why is the second green candle stick green? Given that its closing price is less than the previous candlestick's closing price, shouldn't it be orange? Source: coninbase 1m chart for ethereum: https://...
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28 views

What is the name of leverage contracts where the worst case payoff is zero?

In a typical leverage futures contract the value of a position can be negative. That is to say, if you go long \$100 with 10x leverage at a price of \$50 and you then sell at \$40, the value of the ...
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4answers
62 views

corporate bonds - general questions [closed]

Newbie here and not trading IRL but for a school assignment. I want to buy corporate bonds because they are a safe bet from what I read. I have a few questions though, I hope I will find an answer ...
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23 views

Latest and currently utilized research on modeling option pricing with IV smile

As per title, where would I find the latest research papers on modeling option pricing, accounting for IV smile? I'm specifically interested in papers that already found practical application in some ...
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2answers
129 views

Starting Point for understanding Financial Theory for a Statistician

I am a Master’s student in Statistics who is interested in the field of Financial Modelling. I have very little experience or knowledge of Finance and have mostly worked on introductory projects in ...
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23 views

What is the shadow cost of capital for a bank?

With regard to banks RWAs (risk weighted assets), what does it mean a trade leads to a positive shadow cost of capital?
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48 views

How do you calculate mergers and acquisitions firepower?

I think the title is pretty self explanatory but I would really appreciate an answer. I am not sure if I am in the right place nor am I certain I use the tags necessary for the right traction. So any ...
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Performance Attribution - changing weights

I would appreciate it if someone could help me tackle this problem. I have daily data of returns for my portfolio, daily weights accounting for various portfolio changes. Could someone explain how I ...
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20 views

How can I calculate Total number of outstanding shares from a SEC 10Q report

I'm trying to calculate the total number of outstanding shares from a 10Q SEC repot. I dont see a field for that in the balance sheet. I noticed that there is As of November 12, 2020, 7,906,250 ...
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75 views

Interpretation of Value at Risk

Let $X$ be a Loss random variable (Positive values of X represents Losses) and let $p \in (0,1)$. I know that the Value at Risk at level $p$ of $X$ is defined as: $$VaR_p(X) = inf{\{x \in \mathbb{R} : ...
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How to find State price vector given inflation rate, bond price, states of nature, and dividend

Suppose you have the following information on prices of some assets. The inflation rate is 2%. The one period zero-coupon bond with a face value of 100 is sold at a price of 96. There are two states ...
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1answer
200 views

Why a probability distribution can be viewed as a price?

in this paper : at page 111, left part, we pass from the distribution p to price p. But I don't see why it's the case. I've searched, and it seems like we can see the LMSR as a n Arrow-Debreu ...
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63 views

Portfolio Risk Contribution

I came across a paper that shows calculations for two types of portfolio risk contribution. The first shows "Asset risk contributions" and the second shows "Correlation-weighted asset ...
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4answers
339 views

MATLAB or Python as starting language? [closed]

I have a fairly rigorous background in mathematics (last year of my undergrad in Pure Maths), and I have been exploring the world of Quantitative Finance as I explore what I might be able to do with ...
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1answer
78 views

Calibration Hull-White

This is more a conceptual question around calibration. My objective is to calibrate a 1-factor Hull White model, and my question relates to calibrating a and sigma (both constants) to swaptions. Let's ...
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38 views

Calculate VaR using method of historical simulation

A bank invests € $1.000.000$ in a hedge fund. The last 500 daily returns can be taken from a database. The worst 20 returns are -4.58 -2.95 -2.95 -2.93 -2.17 -2.08 -2.06 -1.98 -1.94 -...
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1answer
60 views

Do I break any law/agreement by answering/asking question on how vendors (Murex,Sophis,etc) do pricing? [closed]

I doubt it is legal, as I never saw any open access information about any vendor. But, maybe somebody can pinpoint me to some clear answer. Thanks!
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37 views

Chinese Stock Exchange Indexes data and descriptive statistics

I am trying to reproduce the following paper: https://link.springer.com/chapter/10.1007%2F11600930_48 In this study, daily prices from January 4, 2001 to December 31, 2004 for Shanghai Stock ...
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49 views

Derivative Pricing of an Asset

The Stochastic Differential Equation that models the change in an asset price is $$ dS = (12S-sin(S))dt+\frac{\sigma S}{S^2+1}dX $$ where dX's are random variables drawn from standard normal ...
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2answers
182 views

Reinforcement learning in finance

In brief, what are some mainstream and recent applications of reinforcement learning in finance that fall outside of the usual scope of agent-based modeling?
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0answers
56 views

Please help me understand this dataset regarding stock prices

I am supposed to predict column E but I cannot figure out what any of these columns mean. The information provided with the dataset is as follows: column A: past 28 week slope value column B: past 48 ...
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43 views

Should the sharpe ratio always change with number of assets?

I am trying to understand if the Sharpe ratio of a portfolio change if we increase or decrease the number of assets in the portfolio. It would be helpful if you could provide an explanation with ...
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1answer
68 views

Should I calculate a spread using stock prices or the ratio?

So I am creating a trading algorithm thats uses cointegration, for a pairs trading strategy. Imagine there is stock A for 100 dollars and stock B for 25 dollars. My questions is when caulcating the ...
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0answers
19 views

Is there any relationship between General Electric's after-tax charge and their reserve deficit?

I posted a question last year trying to understand what a "Charge" is: What exactly does after tax "charge" mean? But I came back to this GE story and realized I still don't quite ...
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1answer
34 views

I’m trying to construct a binomial model that uses 2 risky model - number of steps varied

So with this question I am unsure how to even do a binomial model with 2 risky assets never mind having n-steps. All the examples I’ve found are either not containing any risky assets or only have one....
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51 views

How can you interpret one of the parameters of optimal consumption at the Merton portfolio problem?

Statement: Let the dynamics of wealth of the agent satisfy $$dX_{t} = \pi_tX_t\Big(\mu dt+\sigma dB_{t}\Big)- c_t X_t dt, \qquad \textrm{with}\quad X_0=x_0 \in \mathbb{R},$$ where $(\pi,c)$ is an ...
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0answers
40 views

Swap curve is unsmooth at front end with naive interpolation

I am looking at swap curve building at front end and find it difficult to get a smooth forward curve with a fast generic algorithm. For example, EUR 6m curve has 6m deposit, and then a series of FRAs (...
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34 views

Quantlib Yield Curve given spot and forward rate

Is it possible to create a yield curve, given the spot rate and the forward rate?
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1answer
139 views

Inverse Covariance Matrix Transformation from CAPM

Beginning with the CAPM model we have (with a risk free rate of 0%): $r_i=\beta_i (r_m)+\varepsilon_i$ with $\varepsilon_i$ the diversifiable risks per assets The variance matrix: $\Omega = \beta'\...
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0answers
32 views

Portfolio Weight Constraints

Hi, So I was asked to calculate the maximum sharpe ratio using solver in excel but it gave me really big numbers for the portfolio weights. So I was wondering what is a good constraint to add and why ...
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2answers
59 views

EONIA 3 MONTHS or LIBOR 3 MONTHS

due to a calculation I have to make I need the OIS 3 MONTHS for the ECB. I tried searching for data for 3 months EONIA but I could not find anything. Can someone help me with this? if not can I use ...
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59 views

Option percentage quotation for structured products

I am having some trouble to understand how option premium can be a percentage for structured products. For example, in an Equity Linked Note, let's say the bond part cost 80% of notional we have 20% ...
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2answers
102 views

Why different compounding in interest rates

This is more a philosophicalquestion than a financial question, let me explain. There exist different types of interest rate (Annual Interest rate, Semi-annual interest rate, monthly interest rate, ...
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1answer
69 views

What are good machine learning projects for a senior student? [closed]

I'm a senior year student, I study software engineering, I recently started with a machine learning tutorial, I want a machine learning projects that are not hard to make and at the same time good for ...
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91 views

Linear programming optimization problems in finance

I'd like to know what are, if any, the applications of linear/non linear programming optimization techniques for financial markets. I'm a business major, and I want to find an argument for my thesis ...
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22 views

What is the correct way to calculate Capital Expenditure (CAPEX) for Free Cash Flow (FCF)?

I have seen many definitions of the FCF formula and not a lot of clarity on some of the differences between formulas, and I've gotten completely wrapped around the axle on this. I'm using Investopedia ...
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1answer
241 views

What is “signal” in quant investing?

Can somebody explain (and give examples) of "signals" in quant investing? What are those? What does this word mean?
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52 views

garch(1,1) Annualised Volitility with python

I am trying to calculate the annualized Volatility of given returns for a stock with Garch(1,1) on python using a code I found online. The value I should be getting is around 27, but the value I am ...
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1answer
46 views

Is a company's exact debt structure publicly available to investors?

I am relatively new to investing and would like to look into some of the details of a few companies. As one example, we can use DAL. To assess the financial future of the company, it would be ...
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2answers
107 views

Reason to hedge a European call option

Assume I write a call option on one share of the stock that I have. After selling the option I have an obligation to sell one share of the stock at some future time. I already have the stock, why ...
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50 views

Which infinite activity Levy process is the most popular for option pricing

Hey I heard about different Levy processes with infinite activity like VG, NIG, Meixner or CGMY process, but which proccesses are the most popular? And which processes can be simulated (as simple as ...
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34 views

Kyle-style models and empirical research

Kyle (1985) introduced a model of insider trading where an informed trader seeks to capitalize on their information by chosing the size of a market order. Of course, many variants thereof have been ...
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1answer
85 views

Equilibrium in the Kyle (1985) model

In his 1985 paper, Kyle presents 3 versions of the same model: a single period model, a multiple period model and the continuous time limit of the multiple period model. When he formalizes the ...
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1answer
43 views

What currencies has LIBOR historically been offered in?

The Wikipedia article on LIBOR says: In 1986, the Libor initially fixed rates for three currencies. These were the US dollar, British pound sterling and the Deutsche Mark. Over time this grew to ...
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150 views

Is it possible to match talib's RSI results down to machine precision using just python?

I want to match talib's RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar. ...
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59 views

The distribution of mean reversion time from the OU process

I was reading the paper Statistical Arbitrage in the US Equity Market and I couldn't understand the figure that plots the histogram of the empirical distribution of characteristic time to mean ...
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7answers
976 views

Learning and applying Quantitative Finance successfully as an individual instead of a team

In the past few months, I became really interested in using machine learning techniques in the realm of quantitative finance and trading. I made a few rudimentary models and I immediately realized how ...
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1answer
90 views

How to compute portfolio returns when constructing a dollar-neutral portfolio

I am trying to wrap my head around this statement: dollar-neutral portfolios are built: dollar amounts of both long and short positions are equal. Furthermore, it is also true at the stock level: ...

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