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1answer
42 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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0answers
49 views

Black-Scholes equation Variational / Weak form

I am having difficulty deriving the weak formulation of the Black-Scholes Equation. I have multiplied it with a test function phi and integrated over Omega. But results on the internet suggest ...
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0answers
41 views

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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1answer
35 views

Security Analysis By Benjamin Graham Example Doubt [on hold]

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 ...
1
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1answer
51 views

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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1answer
54 views

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 ...
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0answers
16 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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2answers
88 views

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). ...
0
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1answer
58 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 ...
1
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1answer
47 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 = ...
2
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1answer
110 views

Problem of stochastic differential equation (SDE)

Please help to answer this stochastic differential equation (SDE). Thank you very much.
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2answers
136 views

Interesting Undergrad Thesis [closed]

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 (...
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3answers
139 views

How to calculate standard deviation of continuously compounded four-year stock returns?

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 $...
3
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1answer
86 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 ...
1
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1answer
77 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 $X_t$ be an Ito process satisfying $$dX_t = \mu(X_t,t)dt + \sigma(...
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1answer
52 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 ...
1
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1answer
154 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 = ...
4
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3answers
298 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 ...
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1answer
88 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 ...
0
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1answer
91 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. ...
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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 ...
4
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1answer
40 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 ...
1
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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 is $0.6$, stock price ...
1
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1answer
57 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....
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1answer
43 views

Why would a lower stock price leads to higher value of a call option?

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 ...
0
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1answer
22 views

Do not understand 'If an option position includes short American-style options, then the payoff-diagram may be misleading'

Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $42,$ the author mentions the following. If an option position includes short American-style ...
5
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1answer
145 views

When would open interest equal trading volume?

I know the difference between open interest and trading volume. Open interest is the number of contracts, long or short, outstanding. Trading volume is the number of contracts traded in a day. ...
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0answers
56 views

Different definitions of volatility (simple question)

I have a basic question on volatility that I wanted some clarification on. In finance books (such as Hull), there's a few different ways volatility is defined. One of them is the standard deviation ...
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0answers
110 views

Using ISIN to identify stock at yahoo finance

I'm collecting stock data for private analysis. I found a very excessive list of stock at https://www.xetra.com/xetra-de/instrumente/alle-handelbaren-instrumente/boersefrankfurt but the problem is ...
2
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0answers
36 views

How to conduct an event-study for a single index (i.e the DJIA) with multiple events

I am a postgraduate student writing my thesis. I am somewhat a novice in the field I have chosen to study, however this has undoubtedly broadened my horizons. I am attempting to evaluate the impact of ...
1
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1answer
54 views

How I can calculate index bond market

I know that some of the bonds on the market have been manipulated by investment funds. I could identify these bonds. I have classified similar bonds in terms of risk, maturity and Duration. I have ...
1
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0answers
37 views

How should I interpret the (insignificant) coefficients of Fama-French 3-factor model?

I am writing a mid-term thesis on the Fama-French factor model. I have built 5 portfolios sorted by the Book-to-Market ratio. The first portfolio is the lowest-BM group and the last portfolio is the ...
1
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1answer
63 views

How does buying a CDX and then taking a short CDS position generates alpha? [closed]

Can someone please explain to me how buying a CDX and then taking a short CDS position generates alpha? I am so confused.
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0answers
34 views

International Baccalaureate - Balance Sheet Format [closed]

I would like to transform Tesla's balance sheet (https://www.nasdaq.com/symbol/tsla/financials?query=balance-sheet) into the IB-balance sheet format (see below). In the current assets section, is it,...
0
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1answer
57 views

Clarification on certain finance terms surrounding bonds

Whilst revising for my upcoming financial mathematics exam I've been struggling to get to grips with certain terms/ phrases used when studying Bonds. I am very new to Finance and get confused very ...
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1answer
45 views

How do I calculate option payoff before its expiration date? [closed]

How do I calculate option payoff before its expiration date? For example, if I long a 6 month call with K = 11100, T = 0.5, p = 150, what would be the payoff of the option if I exercise it in 3 months ...
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1answer
58 views

Definition Of A Portfolio

I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ...
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2answers
48 views

List of European banks by assets and/or deposits

Does anyone know where I can find a list of European commercial banks that includes assets and/or deposits? I found this link on ECB's website: https://www.ecb.europa.eu/stats/financial_corporations/...
0
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1answer
56 views

Can MACD be calculated for values other than 12 and 26?

I am working on time-series classification problem using Convolutional Neural Networks in Python. The data-set used is financial stock market data (like yahoo finance). I am using some technical ...
1
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1answer
35 views

How to calculate a weighted payback rate and period?

I have a client who borrows and repays money at different times. Assume the following example What is the correct way to calculate the repayment rate and more importantly, the time until repayment (i....
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0answers
39 views

How to measure synchrony in financial time series

I have a multivariate time of series of monthly capital flows, the data is stationary and after plotting the all series together in one graph, the oscillatory was very clear in trends of the variables....
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0answers
18 views

Nasdaq price index, dividend yields and dividend

In a paper that I'm reading it says: We collect monthly observations on the Nasdaq composite price index (without dividends) and the Nasdaq composite dividend yields, and compute the Nasdaq ...
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0answers
20 views

Operational Risk Loss Distribution with Insurance

** Referring to part (c) First is 5000. Am I supposed to replace the 8000 with 5000 while maintaining its probability? For the second part, which includes the cost of insurance, do I add it to the ...
1
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2answers
114 views

Why is Delta Hedging a Hedge Against Short Position? [closed]

Consider the usual one-period binomial model. The delta-hedging formula, following Shreve's convention, is: $$\Delta_0=\frac{V_1(H)-V_1(T)}{S_1(H)-S_1(T)}$$ Shreve states: "The agent has ...
0
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1answer
59 views

intro book to learn trading desk basics like beta, gmv, Sharpe, etc [duplicate]

Are there any recommendations regarding these basic topics one might find on a systematic trading desk? Also basic hedging theory and basis trading would be appreciated as well.
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0answers
34 views

How Free Of Payment (FOP) trade works? How it impacts NAV and P&L?

I want to understand how the Free of Payment(FOP) trades work from accounting point of view. My questions are: What data we collect while capturing FOP trade? How it impacts NAV and P&L? e.g. say ...
1
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2answers
86 views

Find arbitrage opportunity in the given market model

Consider the following 3-period-market-model: The discounted price of the risky asset $S$: How can I find an arbitrage opportunity in this model? I know that there would be no arbitrage if we ...
1
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0answers
21 views

Calculating management fees paid during the last 12 months [closed]

I'm looking for a way to calculate the total management fees paid by a customer during the last 12-months. I'm taking the following assumptions: The total accumulation as of today is A The monthly ...
1
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1answer
81 views

Modeling mortgage loan defaults

I have a machine learning model trained with a list of mortgage features that include macro variables where the field to predict (the label) is "Mortgage Defaulted" = 1 or 0 (Yes or No). Now, I need ...
0
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1answer
50 views

Estimating monthly GDP growth based on quarterly data

Apologies for this newbie question. Given the following quarterly GDP growth: ...