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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Automatically Import Stock Data - Yahoo Finance & Microsoft Excel

How to import Growth Estimates: Next 5 years(per annum) from yahoo finance to microsoft excel?
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What exactly is revenue leakage?

I just found out about the term revenue leakage in the paper linked below. However, this paper and other resources mentioning it do not provide a definition of the term. However, for my thesis I ...
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Is it possible to simulate yield spreads for different bonds?

Let`s say I have different bonds from multiple issuers and I know the yield spreads for today. Is there a way to simulate those spreads for a future period like 1 month? I dont just want to simulate ...
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Questions on the calculation of time series momentum

I read Moskowitz, Ooi, Pedersen's Time series momentum (2012). The ex-ante volatility estimate (equation (1) in the paper) is I am not sure about the period of the return reflected in the volatilty ...
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Hedging large single asset positions

I recently came across an article that described how big market participants like GS, JPM, etc. take off large equity positions (block trades) of their clients, and putting that risk on their own ...
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The option is "purer" in its risk---what is meant by this?

In the book "The Concepts and Practice of Mathematical Finance" author M. Joshi writes on page 12 the following: "From the point of view of risk, we can regard an option as an attempt ...
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What are common ways to realistically simulate the stock market using historical market data?

I am currently using the FinRL library to try to automate Trading using Reinforcement Learning. However, I wanted to understand how FinRL simulates the stock market using historical data. I read here ...
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Using the Fama-French 5 factor model in Panel Data

I have a question regarding the use of the FF5 Factors in an industry-fixed effects model. In order to clearify my question I'll post an example of my dataset Note that this is just an example, the ...
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Calculate a KPI based on multiple variables

I am trying to create a KPI based on the disbursement of loans by the sales team. I want to base this KPI on a formula that takes into account the size of the loan, the tenor or term of the loan and ...
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How to break down yield to maturity to different components?

Suppose we have the PV of a bond, as well as two separate streams of cash flows, say, $C_a$ and $C_b$ that make up the total annual cash flows $C$ (i.e. $C=C_a+C_b$). In other words, suppose we have, \...
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Does quantlib support Equity/Index Swap valuations?

Is there a way to create a Leg in quantlib in which the notional and reset amounts are calculated by how an index/equity performs?
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How to estimate the lambda parameter in EWMA in excel solver

So I have a simple enough assignment question. I was asked to find the EWMA for daily stock returns of a given firm. When I was answering the Garch problem, I had multiple variables- alpha, beta, ...
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Comparison between Effective Bid-Ask spreads

I understood that given two listed assets, the one with the lower effective spread is more liquid, and if one has effective spread lower than the quoted one, it means there has been a price ...
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Does a bond pay a coupon at maturity? [closed]

I know a bond pays an annuity cashflow of coupon payments and then at maturity it pays the face value. But, at maturity, does it pay an additional coupon payment on top of the face value or are we ...
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Filling in between data in finance

I'm trying to create a model on how different factors influence a particular asset. For some of these factors, like inflation, for example, I have monthly data, while for others, like exchange rates, ...
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Why we introduce correlations between Wiener processes? [closed]

Wiener processes are used to model various assets, and I wonder why we are introducing correlations between the Wiener processes and what is the interpretation? Because when the correlations between ...
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Copula Models for Asset Returns

I'm learning about copulas and their applications in finance. When used to assess the dependence structure between two indices for example, can the copula models be estimated directly on the log-...
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Replication of Break points on Ken French's website

I want to replicate the break points in 5th, 20th and 25th percentile. http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html#Breakpoints. Do you have any materials or any suggested ...
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How to trade a commodity in a contango market?

Let S be the spot price of corn. And let F1, F2, . . ., F5 be the first futures contract, the second month futures contract, ... and the fifth month futures contract on corn respectively. I've been ...
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Estimated Earnings from D/E Ratio, Accounts Receivable, and ROE

DW Industries has a D/E ratio of 0.5 and an ROE of 0.1. For every dollar it has in its assets, DW produces \$0.2 in sales. In 2019, DW made all of its sales on credit with an average of \$2 million in ...
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Modeling investment decisions with ML / Econometrics

I was given the task to decide whether it is a good time to invest into a certain stock index (e.g. S&P 500) or not given a 6 months Investment horizon. The goal is to get one of the following ...
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how to use bet_size_dynamic in mlfinlab package?

mlfinlab package implements algorithm in book advance in finance machine learning. There is a function bet_size_dynamic in https://github.com/hudson-and-thames/mlfinlab/blob/master/mlfinlab/bet_sizing/...
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How to find state prices?

I am trying to find out how to solve state prices, but I do not know what I am supposed to do, my professor has given a solution to this problem as being (0.060 0.417 0.476), but I can't figure out ...
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Calculating Changes in Net Working Capital: Balance Sheet vs Income Statement

CHG Net Working Capital = (Working Capital)|t -(Working Capital)|(t-1) ...
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Mechanism design in continuous time models

I am interested in mechanism design and information design. Is there any part of the literature in financial mathematics that is associated with them. I mean could we bring somehow these topics under ...
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Why Do I Need to Scale Options Vega w.r.t T (Time till Expiration)

In the book that I am using, it said that I need scale vega according time with this formula: $\sqrt{90/T}$ to get the weight of the vega w.r.t t. The reasoning it offered is as follows: "...
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Explanation of barrier option code

I'm wondering if anyone can explain the code behind the pricing of barrier options (in particular the def(up_and_out_call) part. I'm finding the loop inside of a loop concept quite confusing. Thanks. <...
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Why are there so many money market yield measurements? (MMY, BEY, BDY) Are all of them really used?

I have heard teachers online explain that since these measures do not account for compounding they are "naive" and are "rough estimates" since they have such a short maturity that ...
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4 answers
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Does IRR (and therefore YTM) assume that all cashflows are reinvested at the IRR (or YTM)? If so, how does IRR the formula show this?

There are many articles I have read recently that say the reinvestment of interim cashflow idea in the IRR is a fallacy though I am not sure who to believe since so many resources, for example ...
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How does this book (Financial Theory w/ Python) arrive at the solution at the bottom?

I am trying to work through understanding this but I do not know how they got to the solution at the bottom (b*). Any help?
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How is the ISM's Supplier Deliveries Index calculated?

I've been trying to look for it but I cant find the answer. What they considered a delayed good? +24h? 1 week? Just good that have not been delayed on time?
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1 vote
1 answer
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Using the risk neutral version of the First Fundamental Theorem of Asset Pricing to derive a partial differential equation

I have to use the risk neutral version of the First Fundamental Theorem of Asset Pricing to derive a partial differential equation (PDE) that the price/value process, $V_t = F(t,S_t)$, of a self-...
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Risk-neutral pricing to determine no-arbitrage price

We are asked to consider a derivative with payoff $C_t = S_{T}^{1/3}$ at maturity $T > 0$ and to use risk neutral pricing to derve the no-arbitrage price process $C_{t}$. Some context: Let $W$ be a ...
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If CAPM holds, should alpha be zero for all assets?

If CAPM holds, should alpha be zero for all assets?
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Is there a financial instrument that is exposed to the change in growth of an asset over time?

Is there a financial instrument that is exposed to the rate of change of the value of a specific asset? If I believe a stock price will continue to grow in the future, but grow more slowly than in the ...
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Help interpret an event study methodology used in a famous research paper

I wonder if someone out there familiar with reading research articles, especially finance research can help me interpret which event study methodology the author uses in her famous research article. ...
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Correlated Geometric Brownian Motion - Drift rate for different stocks from different countries

I am valuing a structured product where the payout function depends on the paths of two assets. The key in my valuation is to use Monte Carlo simulations of a payout function tied to a geometric ...
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How do you do a geometric average if the numbers are unequally weighted?

If you have an investment of 54 months with the following returns, year 1 = 15% year 2 = -12% year 3 = 14% year 4 = 21% last 6 months / year 4.5 = 8%, what is the ...
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Forward Looking vs Backward Looking Returns for Forecasting

I have a general question about the best way to setup returns for a forecasting problem. Most of the time I see issue of studying returns carried out with the following formula: $ r_{t, k} = \frac{r_{...
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Difference between number of stocks and number of bonds: Predictable vs adapted

Let $\nu_k$ and $\eta_k$ denote the number of stocks and number of bonds in the portfolio. According to Schweizer, we need $\nu_k$ to be predictable and $\eta_k$ to be adapted. In the text, the ...
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Change of Numeraire technique (Cross-currency models)

Hey I have problem with understanding change of numeraire technique. For example we have $dr^d(t)=\kappa_1(\theta_1(t)-r^d(t))dt+\sigma_1 dW_1$ (under measure $Q^1$ associated with domestic bank ...
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Instantaneous correlations in multi-currency G2++ model

Hey in "Interest Rate Models - Theory and Practice With Smile, Inflation and Credit" by Damiano Brigo, Fabio Mercurio we have dynamics for two interest rates and FX rate between them: $$r_1(...
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How to calculate increases in equity of a valuing asset

I would like to know how to calculate equity of an owned asset. My problem specifically is that I own a BTC wallet and have some family members contributing to that wallet as well. Having person A B ...
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Intuition behind reasoning around interests-in-advance

I quote Life Insurance Mathematics (Gerber, 1997). Let $i$ be an annual effective interest rate and $d$ an annual effective discount rate. In case of interests-in-advance, a person investing an ...
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1 answer
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Game theory and stochastic calculus

Does anybody know any details of game theory literature combined with stochastic calculus in finance? If yes, please recommend some papers of any authors who are doing exceptional work on the filed. ...
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Why we should use log(1+Age) rather than log(Age)?

Normally, when calculating the firms age in finance, I saw that people usually use firm age= log(1+age). Apart from the reason documented by Loderer, 2009 that we avoid the age of zero that log(0) ...
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How can I calculate the annual Standard Deviation for Sharpe Ratio of Daily Portfolio Returns?

I'm somewhat confused with regards to calculating the annual standard deviation and Sharpe ratio for my portfolio of daily returns. I have daily data ranging from 1960-2020 and use Excel to make some ...
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How to calculate the BHAR (Buy-and-Hold Abnormal Returns)?

I am doing my research related to IPOs long term performance. For the BHAR formula, I just want to clarify the formula is that always compare with the first trading day price, or is compared with last ...
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LIBOR Rate in Short-Rate Models

Hey I have problem with understanding the relation between short rate $r$ and LIBOR rates (which we need to calculate payoff from FRA, Caps, Swaption etc.). We know that Zero-Coupon Bond price is $$P(...
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1 vote
2 answers
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Validation of XVA models

Hey what is the validation of XVA models (CVA, FVA etc)? As we know XVA calculation is rather complex problem (simulation, Valuation, aggregation) so what steps should be taken to check if the model ...
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