Questions tagged [finance]

The tag has no usage guidance.

1
vote
1answer
76 views

What is arbitraging without moving assets called?

I am currently trying to arbitrage across two markets A and B. My trading strategy is as follows: if the price between A and B differs by more than X%, then go long on the lower priced market, and ...
2
votes
1answer
228 views

Feynman Kac Terminal value problem two variables

So, I need some help to move forward with this problem. $$ \begin{cases} \frac{\partial F(t,x,y)}{\partial t}+\frac{1}{2}\frac{\partial^2 F(t,x,y)}{\partial x^2}+\frac{9}{2}\frac{\partial^2 F(t,x,y)}...
5
votes
1answer
916 views

Financial economics vs finance [closed]

What is the difference between financial economics and finance? How does affect career options as well as academic opportunities?
1
vote
2answers
215 views

Log-periodic power law model: is it a continuous or discrete-time process?

Are the log-periodic power law models used to predict financial market crashes continuous or discrete-time processes?
0
votes
1answer
260 views

Estimate an AR(1) model from returns [closed]

I am studying share price log returns and AR(1) model. I downloaded data from $FTSE100$ and I used the Adj.close column to find the Ln returns: Now I am trying to understand how can I estimate an AR(...
1
vote
3answers
2k views

How to convert weekly data to monthly in r (or in Julia)

I have weekly series on financial risk index data as follows: DATE NFCIRISK 1/8/1971 0.58 1/15/1971 0.61 ......through 10/6/2017 -0.88 10/13/2017 -0.89 10/20/2017 -0.89 ...
2
votes
1answer
387 views

Types of programming languages used for optimization in finance

I'm currently taking graduate finance courses, and wish to pursue a career in finance - in particular $\textbf{optimization in finance}$. To date, I've only been taught the GAMS programming language (...
1
vote
3answers
11k views

where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
0
votes
1answer
299 views

When does the CBOE Put Protection Index (PPUT) make profit?

In my question, as stated in the title, I aim to understand when the strategy of the CBOE Put Protection Index (PPUT) makes profit; particularly during which market conditions. Given the description ...
3
votes
1answer
549 views

Finding arbitrage opportunity

Find an arbitrage opportunity in this market. Can anyone explain how to mathematically solve this exercise with for example solving a system of linear equations?
5
votes
2answers
694 views

What is model-free finance?

I have run across the term "model-free finance" (e.g. there was a Thalesian talk in London recently), yet haven't found any real definition of it nor anything really substantial. Could you point me ...
-2
votes
1answer
53 views

market Beta in fama french (1992) [closed]

i want to ask about the variable "market beta" which exist in the Fama and French article "the cross-section of expected returns (1992) . beta it does mean the measure of risk which we know it in the ...
1
vote
0answers
156 views

What is a “monetary non-event” for a corporation?

Not "non-monetary event" because that would make too much sense. I've never really seen this kind of a question before, but someone asked me that question because they didn't know what it meant either,...
3
votes
3answers
2k views

Step By Step method to calculating VaR using MonteCarlo Simulations

In trying to find VaR for 5 financial assets with prices over a long period of time(2000 days worth of data) how would I do the following: Carry out monte-carlo simulation in order to find a VaR ...
1
vote
1answer
148 views

Day count convention Actual/Actual AFB; Factor for Date1 = 2004-02-28 and Date2 = 2008-02-28

The Actual/Actual AFB day count convention is explained on Wikipedia here. I'll condense the rules here the way I understood them. Factor = Days(Date1,Date2)/DiY If 29th february is in date ...
1
vote
1answer
549 views

The R-squared of the four factor model.

Why does papers such as Fama and French (2010) and Barras et al. (2010) construct equal weighted portfolio of all funds when they analyse the aggregate performance of mutual funds? They both report ...
0
votes
1answer
40 views

Should the valuation decision of the following question be undervalued or overvalued?

The official solution to this question is B, but I don't understand that if the recommendation is given by the CAPM model, then the CAPM estimated return should be regarded as "fair" and benchmark for ...
0
votes
1answer
111 views

short selling with collateral accounting

I don't know how the accounting works for short selling with collateral: For example if a stock is \$10 a share and turn out to be $15 a share a week later. At time 0, you borrow and sell 10 shares ...
-1
votes
1answer
400 views

Carhart (1997) momentum factor loading

I am evaluating the performance of a sample of 1000 mutual funds over the period 2000 to 2017 using Carhart (1997) four factor model. As a way to test for robustness, I use two benchmarks. The CRSP ...
2
votes
1answer
175 views

Projecting a Thiele differential equation with Black Scholes returns

I am trying to solve the equation $\frac{d}{dt}V(t)=r(t)V(t)+\pi-\mu(x+t)(b_d-V(t))$ numerically using the R function 'ode'. This is a Thiele differential equation for a life insurance reserve with ...
1
vote
1answer
119 views

Online trading platform

Does anyone know a good online trading platform for simulation (no to make real money, but just to simulate a P&L) ? I would like to test myself as a bank trader (so sell side and not buy side) ...
0
votes
1answer
6k views

Discount Curve Vs Forward Curve

This could be a trivial question, but would I like to clear the concepts. Our firm started sourcing the Murex Trades which has all the variety of Derivative products. I noticed that the Curve ...
1
vote
1answer
831 views

Can tobin's Q value for a firm be negative?

Can Tobin's Q value for a firm be negative? I am calculating Tobin's Q value using Compustat data for firm i and year t. I am using the formula presented in Chung and Pruitt(1994) - Q = (Market ...
3
votes
2answers
954 views

Choosing the right statistical test for Mutual Fund Performance Evaluation

How do you suggest I do this? I would like to perform a statistical test to check if: the aggregate alpha of all funds equals 0. the aggregate beta of all funds equals 1. Data Sample of 1000 ...
2
votes
1answer
111 views

minimum variance hedge with stochastic processes

Problem set up: asset S: $$\frac{dS}{S} = \mu dt+\sigma dz$$ Hedged using a forward contract: $F = F(S,t).$ Hedge portfolio: $$P = S+nF$$ I want to find the variance of $dP$, and then minimize that ...
4
votes
3answers
954 views

Resources for finding quantitative finance examples using excel, VBA and access

I am seeking to increase my knowledge in the quantitative finance field. I would be grateful if someone could point me to useful resource online, where I can find working examples of they types of ...
6
votes
4answers
385 views

Why James Simons trades it only if it is liquid?

On the website https://25iq.com/2014/07/09/a-dozen-things-ive-learned-from-jim-simons/ (mirror), James Simons cited “We have three criteria. If it’s publicly traded, liquid and amenable to modeling, ...
3
votes
2answers
240 views

Fama and French (market premium) factor

Currently I am using the Fama and French 3 factor model to explain the performance of mutual funds using monthly returns from 2000 to 2017. I use two market proxies: (1) RM-RF, obtained directly ...
0
votes
1answer
73 views

R-squared increase dramatically when including “time dummy” (STATA)

Currently running a fixed effect panel using STATA. First, I declare data set as panel: Code: xtset id obs Where id = 350 firms and obs = 125 Then I run a fixed effect regression: Code: xtreg y x, ...
1
vote
1answer
87 views

Towards a standard day count convention in Finance, what the standard should be?

I recently found out about the multitude of day count conventions in Finance (e.g.wikipedia and stackexchange). As far as I understand the reason for this variety is a long history of diverse usage. ...
2
votes
2answers
222 views

Common misconceptions in Quantitative Finance? [duplicate]

This question is motivated by my experience of meeting some markets professionals who claimed certain things about Black Scholes and option pricing. So I am wondering what are some of the common ...
1
vote
2answers
212 views

A definition of quantitative finance [closed]

I would ask a sort of "philosophical" question. Is there any author who gave a scientific definition of this subject? Is it considered a branch of mathematics or does it primarily concern economics? ...
1
vote
0answers
68 views

Forward exchange rate historical data?

I found that the historical data of forward exchange rate is really hard to find, I'm looking for historical data of JPY/USD forward exchange rate, does anyone have experience in this?
-3
votes
1answer
111 views

Put Call Parity confusion [closed]

My question concerns an ambiguity in the wikipedia article about Put Call Parity. In the first sentence: "In financial mathematics, put–call parity defines a relationship between the price of a ...
1
vote
0answers
89 views

Stock returns: Determining the window size

I am looking for a rigorous way to determine a suitable rolling window size for my stock data. Factors that will influence the window size are how fine my data is (minutely, daily, weekly etc.) and ...
1
vote
2answers
952 views

Test statistical significance of a trading strategy

I have created a trading strategy which operate every single day on the DAX 30, for the last 1700 trading sessions (some years). I have the daily returns of my strategy and also the daily returns of ...
-1
votes
1answer
85 views

why swap rate not dependent on valuation date?

When I review my course on swaps, I read the following sentence: the value of the swap rate is independent of the valuation date(even though the PV's of the individual legs of the swap are clearly ...
0
votes
1answer
383 views

How do I calculate levered equity beta without unlevered equity beta? [closed]

I'm doing an assignment where I have liabilities including market and book values of long-term debt. I also have capital including common stock, paid in capital, and accumulated earnings. I've been ...
1
vote
1answer
52 views

Are some stock prices not ARIMA(0,1,0) processes?

I am studying stock prices. Let Pt be price of stock at time t. While Pt is non stationary, the return, rt=log(Pt/Pt-1) is stationary. However, when I study on rt, I decide on an ARMA(0,1) without ...
0
votes
1answer
108 views

Trading book estimation

Do you have any idea/hints how could I estimate the size of the trading book of a particular bank relying solely on its annual financial report? Any help would be much appreciated!
-1
votes
1answer
425 views

Delta Hedging: Clarification example of the book “Hull, Options, Futures, and Other Derivatives” [closed]

By "Hull, Options, Futures, and Other Derivatives": Suppose that, in figure,the stock price is \$100 and the option price is \$10. Imagine an investor who has sold 20 call option ...
1
vote
1answer
111 views

What is the best trading simulation platform for futures, swaps, options, etc.?

I've just started studying derivatives from the "Options, futures, and other derivatives - J.C. Hull" and I'd like to see how to do hedging and trading transactions through a simulation platform or a ...
3
votes
2answers
578 views

Convergence of Spot and Futures prices

Any explanation I've found explaining why future and spot prices converge over time seem to only focus the explanation on why the spot and future price must be equal at maturity. I understand that if ...
1
vote
1answer
147 views

if you short sell? And Right issue has taken place, so Does Right issue has negative positions in Portfolio or not?

I am searching for exact accounting example of Stock right position in Portfolio when someone is short sell. Searched a lot over Google, contacted local Brokers as well..Didn't get any response. ...
1
vote
2answers
6k views

A libor curve VS A 3-month or 6-month libor curve

I'm very confused about the terms regarding libor curves in general. When people talk about libor curve, I picture it as a curve with different libor maturities (i.e. 1 week, 1 month, 3-month and 6-...
0
votes
1answer
362 views

Dividend yield under Black 1976 formula for futures options?

I have a question regarding the BS 1976 formula for futures options. https://www.glynholton.com/notes/black_1976/ How do I deal with dividends under this model, assuming that the dividend yield is ...
1
vote
0answers
2k views

Improvement of Alpha Expression [closed]

I'm newbie user of Websim (websim), given Alpha Expression : (est_eps * (cashflow/sharesout) * (est_sales/sharesout))/est_dividend_ps Settings-Region:USA, Universe:TOP3000, delay:1,MAX stock weight :...
2
votes
1answer
148 views

When a particular bond is delivered, why there is the need to define a conversion factor? What is its utility?

Where, the conversion factor for a bond (by John C. Hull) is set equal to the quoted price the bond would have per dollar of principal on the first day of the delivery month on the assumption that the ...
6
votes
2answers
247 views

What are the books in which to study the basics of the derivative financial instruments?

Books similar to Options, Futures, and Other Derivatives by John C. Hull. I need another academic book that explains the basics of quantitative finance derivatives (forward, futures, options)
6
votes
2answers
12k views

What is the price pressure?

What is the definition of price pressure and what does it imply? In a number of paper I read that the price pressure can influence the portfolio returns; can you explain why and in which way it can ...