# Questions tagged [finance]

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28 views

### Use AM-GM inequality to generalize price process

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 ...
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 ...
45 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 ...
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### 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 ...
9 views

### Fama French 5 Factor Model - Indian Stocks [duplicate]

I'm looking to perform a Fama-French 5 factor model analysis for Indian stocks. Specifically, I'm looking for individual stock data which has information about month end prices, market capitalisation, ...
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### Future wealth calculation with investment

Task: The student is 25 years old now. He say, that next year his salary will be 15000€ per year. His salary will grow +5% each year until his pension (when he will be 65 years old). Calculate how ...
26 views

### Evaluating financial plans [closed]

I am solving the following problem: 30 y.o. Jack is working a manual job, earning only 8000USD yearly and he isn't expecting any wage increase till his retirement at age 63. However, he is ...
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### Interest rate calculation [closed]

The task: With what interest rate given 2000 Euros after 2 years and 3000 Euros after 4 years, the actual value will be equal 4000 Euros. This task sounds confusing for me, I tried to calculate, but ...
42 views

### Error in optimize.portfolio with transaction costs constraint

I am experimenting with the PortfolioAnalytics package to optimize portfolio with dollar neutral and transaction costs as constraints to the quadratic utility objective function. A sample R snippet is ...
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### Accounting profitability [closed]

Can anyone please help me how to solve this problem? Grocery Freshly want to open a new store. They expect an initial cost of 30,000 to buy the property in which the store will be. After ...
66 views

### Adjusting your delta hedge when the stock crashes and were originally delta hedged

You are long a call option on a stock and you are delta hedged. The stock crashes in price. How do you adjust your delta, do you buy or sell stock? Could answers please be quantitative (i am getting ...
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### return volatility calculation with respect to different time period

in the BS model, if an option has 3 year expiration periods, and if the time of maturity of that option is calculated( periods between the grant period 2011-9-15 and exercise periods 2014-9-15 ), and ...
33 views

### Where could I get European non-dividend option data

I am pretty new to option pricing. I got a task asking me to price a stock option, which should be an European non-dividend option, and compare my price to its quote. I used to use TSLA data ...
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### calibration - negative call price [closed]

Im trying to calibrate a stochastic volatility model to market. I end with an MSE of 2-3 with approximately 500 quotes. Some out of the money options with call-price under 1 dollar ends up being ...
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### What is the difference between exercise and expiry date?

I know in American options you can exercise the options at any time before expiry date but in European options you can only exercise the options on expiry day. On National Stock Exchange of India the ...
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### Which finance models have enjoyed particular success in recent years?

I am looking for a list of recent developments of models in mathematical finance. By recent, I mean this last decade. Which models have been developed and introduced during this period, being met ...
139 views

### how to calculate implied volatility

I have some options prices I found using the Heston Model. How do I calculate the implied volatility? In Matlab there exist a blsimpv function, but is this the right tool for me since I'm working with ...
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### How can I use both Stochastic and RSI in technical analysis?

Stochastic and RSI both are momentum indicator but they both show momentum in different way. It leading me to confusion how to use them in trading.
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### What is the difference between volatility and dispersion in finance?

I am confuse whether the volatility and dispersion is same or not because are use to measure the risk associated with asset. Even if they are different than what is the relationship between, if exist.
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### Question about CAPM Betas - Causes of Beta Movement Query

CAPM betas are measures of systematic risks, which include things like the exchange rate, inflation, interest rates, etc. What I'm confused about is described below: E.g. suppose I'm looking at one ...
126 views

For week's I've been searching for an interesting undergrad Thesis in finance. I have some things in mind, but I don't want to leave outany opportunity for inspiration, so: Is there an interesting ...
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### Justify a backward differential equation

Regards of 4.5.1, how we get 4.5.5?
50 views

### step by step calculation of the sharpe ratio

I am trying to calculate the Sharpe ratio. Suppose I have: $$x_t = \alpha + \beta y_{t} + \epsilon_{t}$$ $$E[x_{t}] = \alpha + \beta E[y_{t}]$$ $$var[x_{t}] = \beta^2var[y_t] + \sigma^2$$ The ...
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### How to build an optimal long-short portfolio?

Assume I have α and β, How to build an optimal long-short portfolio? Can you please give me an example After building that portfolio, what's the expected return?
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### Security Analysis By Benjamin Graham Example Doubt [closed]

So I was reading (trying to read) Security Analysis by Graham and I came across this example ("Example 1" in the image attached below) Being the noob at finance and quant that I am, I was unable to ...
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### How do weights of a Mean-Variance optimized portfolio change as the Covariance matrix of the risky assets change?

I am learning a bit more about CAPM, and wanted to know if there was a specific way that weightings of assets in the optimal mean-variance portfolio changed (for constant risk aversion, expected ...
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### IRR for multiple series of cash flows

I have a question on how to calculate a single IRR for a group of projects that have different start dates, but have been sold on the same date. This causes the aggregate cash flows to go from ...
20 views

### How do you find a company average quality of income ratio?

Do you divide the weight average number of shares outstanding basic and diluted/by the net income? Or just add the current year and prior year quality of income ratio divide by two?
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### Instantaneous change in value of portfolio

I am trying to figure out an intuitive explanation for the instantaneous change for the value of a portfolio (essentially I'm creating a self-financing portfolio to replicate a derivative payoff). ...
79 views

### Some interpretation on some plots / statistics

I have been playing with a model just for learning purposes (I don't expect to make any money from the model) but I wanted to get some opinions on what you think are "good" values and some opinions on ...
49 views

### 0.0006 r-squared after trying to test whether the intercepts differ significantly. Did I do it wrong?

I am trying to test if the intercepts of two linear regression (CAPM) differ significantly or not. I have 2 fund's monthly return in the same period and regress them on the same market variable (MKT = ...
114 views

### Problem of stochastic differential equation (SDE)

144 views

I'm searching for an undergrad thesis in finance. I already have some ideas, but still wanted to ask: Is there a an interesting topic that jumps to your mind, when you think about implied volatility (...
Currently I am preparing for quant interview and I encounter the following question in Heard on the street. Question: If the standard deviation of continuously compounded annual stock returns is $... 1answer 103 views ### Interpretation of Fama French portfolio I have two portfolios, one "bad" and the other "good". I construct the portfolios by taking the average monthly returns based on some criteria each year. In any given portfolio there could be between ... 1answer 83 views ### Are the Ito's Lemma given in Mark Joshi's Concept and Practice in Mathematical Finance same as what I learn? In Joshi's Concepts and Practice in Mathematical Finance, page$110,$he stated the Ito's Lemma: Theorem$5.1$(Ito's Lemma) Let$X_tbe an Ito process satisfying dX_t = \mu(X_t,t)dt + \sigma(... 1answer 79 views ### Why Joshi defined option value to be discounted payoff using risk neutral expectation? Currently I am reading Mark Joshi's The Concepts and Practice of Mathematical Finance. At page 59, the author mentioned the following. Instead of requiring that every portfolio should have ... 1answer 169 views ### Calculate the price at time t=0 Assume the risk-free bond Bt and the stock St follow the dynamics of the Black & Scholes model (with interest rate r, stock drift \mu and volatility \sigma). Calculate the price at time t = ... 3answers 306 views ### Compute the price of a derivative Consider the payoff function \begin{align*} f(x)=\begin{cases} 3 & \text{if }x\leq 30, \\ 33-x & \text{if }30<x<35, \\ -2 & \text{if } x\geq35. \end{cases} \end{align*} How would I ... 1answer 89 views ### Is the european put option an increasing function? My question is to show that the function K \rightarrow p(T,K) is increasing. T being maturity time,K being any strike and p(T,K) is a european put option. My only approach to this question has ... 1answer 92 views ### Finding todays price of a derivative Today's market prices for European call options c(T;K) and put options p(T;K) with maturity T and any strike K. Let B_t = e^{rt} be the price of the risk-free bond and St the price of the stock. ... 1answer 39 views ### How to deal with intermittent NA values in a price series when calculating returns Let's say a have a price series for a share for the year 2000. On the 27th of July 2000, there is a missing value represented by NA. This was not a holiday or any other non trading day as other shares ... 1answer 78 views ### Show that \frac{\partial c(t))}{\partial \sigma^2 }>0 \text{ if and only if } S(t)<Xe^{-r(r+\frac{1}{2} \sigma^2 )(T-t)}. Statement: if c(t) is the price of the digital cash-or-nothing call option, then direct calculation (under Black-Scholes assumptions) shows that\frac{\partial c(t))}{\partial \sigma^2 }>0 ... 1answer 42 views ### Do not understand 'The gain (loss) on the stock position would then tend to offset the loss (gain) on the option position' [closed] Currently, I am reading John Hull's Options, Futures and Other Derivatives. On page 401, the author mentions the following: Suppose that the delta of a call option on a stock is0.6$, stock price ... 1answer 67 views ### If the volatility is zero (i.e. σ=0), what is the call worth? After valuing the call, how to hedge the call (assuming you sold it) Question: All Black-Scholes assumptions hold. Assume no dividends. The stock price is$100. The riskless interest rate is 5% per annum. Consider a one-year European call option struck at-the-money (i....
Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $47,$ the author mentions the following. Higher interest rates decrease the present value of ...