Questions tagged [finance]

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0
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0answers
20 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
51 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 ...
95
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18answers
17k views

Video lectures and presentations on quantitative finance

What are your favourite video lectures, presentations and talks available online? A few rules: Must be related to quantitative finance. No Economics 101 courses, please. Try to avoid DIY lectures ...
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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
61 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
48 views

Estimating monthly GDP growth based on quarterly data

Apologies for this newbie question. Given the following quarterly GDP growth: ...
0
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1answer
70 views

How does one introdce originality in a master's thesis in quantitative finance?

I wish to write my thesis in quantitative finance, but as I understand it, a thesis needs to have some sort of originality to it. You can't just take some theory written by others and just rehash it ...
0
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1answer
100 views

Mean Variance Investment problem

I attach a part of a paper explaining how the weights of a market portfolio are derived. I do not understand how equation 5 has been derived and, in particular, where the zero beta portfolio's return ...
0
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0answers
32 views

Determine same issuer from a list of ISINs?

I have a list of ISINs for all the securities that make up a fixed-income fund. Is it possible to tell from this which securities are from the same issuer? I have securities of which I know they are ...
1
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1answer
93 views

Brownian Motions theorems

I know that if $W$ and $W′$ are two independent brownian motions, then $dWt \ dWt′$ = 0. How can I prove/demonstrate this theorem? Additionaly, how can we prove that if $W$ and $W′$ are dependent, ...
0
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0answers
44 views

What exactly does shifting a barrier in a barrier option mean and how does it hedge delta?

How exactly is shifting the barrier to hedge delta implemented in case of barrier options. Is it just changing the barrier, if so, how does it hedge delta or is it making the barrier a range like a ...
0
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0answers
47 views

API returning company tickers found in provided news article

I'm looking for a REST API (paid or free) that accepts a string containing a news article (example below) as payload and returns an array of company tickers (eg TSLA for Tesla) mentioned in the ...
1
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1answer
116 views

Reducing pricing errors (Alpha) in the CAPM with Bitcoin

I have been trying to examine, using the CAPM, if Bitcoin belongs in the market portfolio or not. With 10 industry portfolios from http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library....
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0answers
29 views

Expected Payoff of stock using risk neutral Valuation

I recently saw a calculation where the expected 10-state-payoff-diagram of a stock with mean 6% and variance 20% was calculated through the risk neutral measure. The method was as follow: ...
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2answers
89 views

Financial Statement Analysis [closed]

So i have just completed a beginners course on understanding financial statements. As part of the final assignment, we are supposed to pick a real company, study its financial statements and conclude ...
1
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2answers
69 views

Question on earning per share

For 2009, Flamingo Products had net income \$ 1,000,000. At 1 January 2009 there were 1,000,000 outstanding. On 1 July 2009,the company issued 100,000 new shares for \$ 20 per share. The company paid \...
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0answers
11 views

Estimate the off balance sheet exposures of a banking book, based on limited data

I am doing an analysis on Off Balance sheet items on a bank. Only data I have is authorized amount and outstanding balance for all the loans the bank currently has. Can I simply take the difference ...
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0answers
23 views

Error in Yahoo! adjusted prices - The case of AAPL [duplicate]

One of my students reported that return for AAPL between April 30, 2014 and June 30, 2014 was different than what was shown in my class notes which were prepared in early 2016. I investigated the ...
5
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1answer
123 views

Fama and French 1997 Cost of Equity

Dear Quantitative Finance Members, I was wondering if you can clarify me the following issue. I am trying to estimate the cost of equity following "Industry costs of equity" (Fama and French, 1997). ...
266
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29answers
197k views

What data sources are available online?

What sources of financial and economic data are available online? Which ones are free or cheap? What has your experience been like with these data sources?
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0answers
29 views

Using CFNAI index for identifying sample periods

I'm doing my Thesis on Asset pricing models and I would like to find out the effects of business cycles on the performance of asset pricing models for industry portfolios. My initial idea was to ...
3
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2answers
135 views

Verifying two properties of the Clayton Copula

So I'm trying to verify the first two properties of a copula for the Clayton model. The first two properties being: $C(u_1,…,u_d)$ is non-decreasing in each component, $u_i$ The $i^{th}$ marginal ...
1
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1answer
1k views

What if CAPM cost of equity is negative?

Dear Community members, I calculate 5 years trailing beta using capm. After that I calculate estimated cost of equity. However, what I have is that most of the observations have negative cost of ...
1
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1answer
37 views

How to compute the Net Leverage Ratio for a mortgage [closed]

In the introduction to the 4th video of lectures series Finance I on MIT Opencurseware (https://www.youtube.com/watch?time_continue=166&v=hyc8h5T76BE), Andrews Lo talks about the net leverage ...
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0answers
57 views

Credit default swap replication by corporative bonds

I want to get literature or information related with the topic of CDS replication for those counterparties that do not hold. But that have traded bonds (with different degree of liquidity). What could ...
2
votes
1answer
100 views

Data: Why is a firm stock delisted?

Shumway (1997) highlights that stock returns in cross-sectional portfolio analysis have to be adjusted for firm delistings. The CRSP database maintains a monthly delisting file (msedelist) with ...
1
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0answers
86 views

European Call Option Modelling under 2 factor Hull White interest rates

I have modelled the yield curve through the two factor Hull White Model. Now I want to implement in Matlab the price development of a ATM-Call-Option (European). Has someone an idea how to combine ...
-1
votes
1answer
31 views

Holding Period Return [closed]

Bought stock for $12.00$/share. Sold 3 years later at $20$/share. Paid $1$ dividend each year for 3 years. Stock's value at the end of the first year was $18$ and $15$ at the end of the second. Find ...
1
vote
3answers
261 views

What does Volatility Smile tell? [closed]

Could you please share your opinions about Volatility Smile? What does it tell us when it gets more convex or when its level changes over time or any other change on it. Any paper/work/blog ...
1
vote
1answer
50 views

Why is there inconsistency in WACC vs unlevered return?

To evaluate an enterprise we can discount free cash flow by either the unlevered required rate of return or the WACC. With Tax we have: $WACC=R_e \frac{E}{E+D}+R_f\frac{D}{E+D}(1-t)$ where $R_e$ is ...
3
votes
0answers
63 views

Why can the t-bill rate forecast stock returns?

The tbill rate is used as a predictor of the equity premium in a number of papers. Whilst there is not a general consensus about whether it is a significant predictor, it is still widely used. I ...
1
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1answer
118 views

Correlated stock prices and geometric Brownian motion

I have two uncorrelated stocks which follow geometric Brownian motion, as follows $$\begin{aligned} dS_a &= \mu_aS_adt + \sigma_aS_adW\\ dS_b &= \mu_bS_bdt + \sigma_bS_b dW \end{aligned}$$ ...
2
votes
1answer
75 views

Pricing an fx option in the same currency

Let imagine we have an option from EUR to USD priced in EUR, therefore the payoff for a call is: $$\frac{(S - K)^{+}}{S} = K (1/K - 1/S)^{+}$$ This is basically the payoff of a price of a put on 1/S ...
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0answers
16 views

Deriving sources of return (over.) extrapolation from surveys

I would like analyze what causes investors to extrapolate returns and there are several theories out there that aim to explain such behavior, such as for example the representativeness heuristic by ...
1
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0answers
32 views

estimate cost of equity (Re) / required rate of return using DCF [closed]

I'd like to estimate Amazon's after-tax cost of equity (Re) using both the DCF and CAPM approaches. Tons of info and resources on how to estimate Re using CAPM, but DCF, I see no relevant resources. ...
1
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0answers
49 views

Is it Possible to replicate SPAN?

I currently trade intraday Options on the nearest term expiry and futures. Both E-mini S&P. I am trying to replicate the SPAN margin calculation for the entire portfolio of options and futures. So ...
6
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0answers
120 views

Feller Condition (Cox-Ingersoll-Ross) source

For the Cox-Ingersoll-Ross model $$\text{d}r_t = a(b-r_t)\text{d}t+\sigma\sqrt{r_t}\text{d}W_t$$ the condition (referred to as "Feller condition") $$2ab\geq\sigma^2$$ ensures that the solution is ...
1
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1answer
259 views

Relationship between CML and SML

I am referring to the book Sharpe et al. (1998), Investments, 6th Edition. I am trying to wrap my head around some lines from the book, pertaining to Security Market Line. It reads: Earlier it was ...
1
vote
2answers
96 views

Distribution of data for GBM

I am running some Monte Carlo simulations with GBM on time series of commodity prices. First of all, the price data is annual between 1900-1950. I would firstly like to know if it is bad practice to ...
0
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4answers
94 views

How to test the linearity assumption of a model?

Let's say I want to have a model that projects income over a stressed period. I have a marked-to-market component that shows the P&L of trading book positions during this stressed period. Along ...
-1
votes
4answers
1k views

How to download bloomberg intraday data efficiently with API

so I would download a bunch of intraday data, for a bunch of securities, but we keep hitting our monthly cap limit. We don't want to upgrade to a more expensive package as this is simply a research ...
1
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1answer
182 views

Natural Gas Modelling

In job adverts for natural gas/power trading it states knowledge of supply and demands models for these commodities. Does anyone know of any good papers or primers on S&D modelling?
5
votes
1answer
299 views

Fama French (2000): Characteristics, Covariances and Average Returns - intuition behind sorting of the returns

I am in the middle of doing my graduate programme in Accounting and Finance. Right now, I am taking a ph.D level course in Asset Pricing, wherein our first assignment/task is to recreate some tables ...
4
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2answers
158 views

Relationship between diversification and standard deviation

Explain the relationship between diversification and standard deviation: There are two general principles that should govern investment behaviors in a world of efficient markets, where one has the ...
1
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1answer
50 views

What preprint repositories are available online?

Besides data sources, what preprint archives are available for academics and practitioners in the fields of Quantitative Finance and Economics? I have subscribed Google Scholar alerts and regularly ...
1
vote
1answer
249 views

How to calculate one-year forward one-year rate? [closed]

I'm just a little lost on how to calculate forward rates. I know this is an easy question, but, if we are given a one-year and two-year zero rate (let's say, for the sake of the argument, 2% and 3% ...
2
votes
2answers
62 views

Standardized numerical values for ratings

Is there a standardized way of transforming the ratings of any of the major ratings agencies (S&P, Moody's, Fitch) to a numerical value. Ideally, it might be possible to create a similar scale for ...
2
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0answers
79 views

Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?

Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?
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2answers
128 views

Getting a list of all trading days?

I have a large dataset (taken from Kaggle: https://www.kaggle.com/borismarjanovic/price-volume-data-for-all-us-stocks-etfs/), and I would like to fill in the missing data. To do that I can (1) ...
1
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0answers
186 views

Some definitions in the BARRA Predicted Beta model

I'm studying the BARRA Predicted Beta model, and the common factor covariance between portfolio $p$ and the return on the market $m$ is defined as the product of the transposed vector of the factor ...