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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What is the loss function or scoring function of mean-CVaR (not just CVaR which is conditionally elicitable on VaR)? [closed]

I am using mean-CVaR as a risk measure (which is a convex combination of mean and conditional value at risk). In this regard, what is the scoring function of this statistical mapping (mean-CVaR)? I am ...
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If "Extreme CVaR" is elicitable or conditionally elicitable, what is its loss function or scoring function? [closed]

I am not able to find loss function (scoring function) extreme CVaR (CVaR from extreme value theory) which is a conditionally elicitable statistical mapping (conditioned on VaR). In this regard, can ...
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Mid-curve Interest Rate Futures Option Pricing - Methods and References

CME has products like mid-curve interest rate futures options. For example, we have a call option where the underlying is a Eurodollar 90-day futures contract. The mid-curve type basically means the ...
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Is "extreme CVaR" (CVaR from extreme value theory) elicitable or conditionally elicitable with some other statistical mapping (like VaR)? [closed]

I am not able to find loss function (scoring function) extreme CVaR (CVaR from extreme value theory) which is a conditionally elicitable statistical mapping (conditioned on VaR). In this regard, can ...
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Explain the example of using a good "instrumental variable"(IV) by addressing one published prestigious journal [closed]

Explain the example of using a good "instrumental variable"(IV) by addressing one published prestigious journal.
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How to compute bid and ask price for bonds using TRACE data?

I am wondering whether there is a standard way in the academic literature on how to compute bid and ask prices for corporate bonds using the TRACE database. Even though TRACE is very popular dataset ...
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What does structured estimator mean?

I'm reading Ledoit&Wolf's paper "Honey, I shrunk the sample covariance matrix" and it is mentioned a lot of time, but I don't understand what it means. I thought that probably referred ...
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Is there any way to get cashflow amount including cashflow date in QuantLib?

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Volatility Modelling negative GJR-GARCH-X coefficient

I have estimated GARCH and GJR-GARCH with several exogenous variables. Some of the exogenous variables have negative coefficients that are statistically significant. For instance, I can write my GJR-...
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Vol binomial tree

Suppose that we have a stock $X_t$ valued at 100 euros per share. At each time step the price can go up or down 1 euro with prob $1/2$. Assuming that interest rates are $0$ and the volatility of the ...
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How to calculate the portfolio risk and return if daily share prices, volume held on that day is given for all assets?

The problem is with the changing volume of assets which changes the weights. I want to use the formula for portfolio risk but cannot figure out the weights. Should taking average weight of an asset ...
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2 answers
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How should we interpret r_c in continuously compounded interest? [closed]

I'm just curious there is any useful "meaning" or interpretation we can assign directly to $r_c$. Of course one can directly calculate the non-continuously compounded interest from $r_c$, ...
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Balance sheet offset to a Prepaid expense amortization

The generally accepted accounting equation is Assets = Liabilities + Equity, or, put simply, stuff owned = stuff owed. I can see how Prepaid expenses are zero-sum assets initially because the credit ...
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Correlation with Differ Units of Measurement [closed]

I was wondering how to accurately get the correlation between a variable of percent change return and a variable of dollar change or basis points. Should I standardize both variables or will that lose ...
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How do you find the corresponding market index of a stock?

If I have a stock, we say MSFT, and I want to find its corresponding market index - how do I do this? I thought I needed to start by finding out which index the stock, in this case MSFT, is included ...
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How to calculate Share Price based on Outstanding Shares of $ATVI?

I am looking at the latest 10-Q SEC Filing of ATVI stock (March 31, 2022). (RefLink: https://investor.activision.com/sec-filings/sec-filing/10-q/0001628280-22-011987) The Balance Sheet states the ...
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How to measure the difference between the trend of two curves

I'm looking for a way to measure the trend of two curves. For example, the figure below is my forecast for the S&P 500. It can be seen that although I haven't predicted the exact index price, the ...
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1 answer
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Vasicek interest rate of T-forward measure [closed]

I know dr of risk-neutrual measure is There is a price of a pure-discount bond can be derived by computing the expectation, I get: where A and B are: why dr becomes to: under T-forward measure?
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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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1 answer
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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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1 answer
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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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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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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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