Questions tagged [finance]

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0answers
97 views

Intensity Function of Stochastic Processes

I'm fitting some financial data to a model based on a stochastic process and evaluating the fit of it by looking at the compensator. However, I cannot understand well what does it mean to take the ...
0
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2answers
126 views

Infinite autocorrelation - Unit root?

I have a time series of gold prices, on which I want to build an ARIMA model. The series is autocorrelated and if I can difference as often as I want, it always is. First: data: d1gold Dickey-Fuller ...
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1answer
209 views

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
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1answer
165 views

Company rank within an industry

I'm looking at the list of companies in the S&P 500 Pure Value Index. For each firm, I want to obtain the dividend yield industry percentile rank and the PEG ratio industry percentile rank. I've ...
1
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2answers
428 views

Basis Risk for Futures/Options

I am just reading about basis risk. It is being described as risk of the price of the hedging instrument not fluctuating the same as the instrument itself. I was just wondering, if we bought a ...
1
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1answer
57 views

Which more topic should be covered in my undergraduate program? [closed]

Below is the topics covered in my undergraduate economics program. I want to know which course should I take to get a full overview of topics in finance today. Econometrics Micro, Macro Economics ...
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1answer
2k views

Directional/Non-Directional Risk

Can someone explain to me what is direction/non-directional risk? Went through few sites but couldn't understand much.
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3answers
1k views

Difference betweem martingale property and adapted filteration

What is the difference between a random process that is adapted to a filteration and one that had the martingale property. It seems the two notions are quite similar and would be helpful to construct ...
7
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3answers
1k views

Why are factor models so popular for risk analysis of portfolios?

As titled, my question consists on asking for why in the most of academic papers one almost always finds that when you try to model asset returns, one needs to adjust for risk factors before analyzing ...
1
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1answer
93 views

How to reason about leverage in terms of elasticity

Return of an investment for a given period is by definition: $$r = \frac{P}{W_0} - 1$$ where $P$ is the price of the investment at the end of the period, and $W_0$ is the initial investment. I want ...
3
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1answer
317 views

Valuation of Cox-Ross-Rubinstein Model

We have a Cox-Ross-Rubinstein model with parameters $u$ ("up"), $d$ ("down") , $r$ (interest rate) and $q$ (equivalent martingale probability) $(q=(1+r-d)(u-d)^{-1})$ . We have a contingent claim with ...
1
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1answer
4k views

What are DGTW adjusted returns?

Many papers, e.g. in The Journal of Finance, discuss DGTW adjusted returns (or DGTW abnormal returns) instead of just returns. What are these and how does one compute them?
4
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1answer
251 views

Linear-Boundary Crossing Problem for Brownian Motion

This is a question I came across while reading: $W = (W_t)_{t\geq{0}}$ is a standard BM. Let $\mu\in \mathbb{R}$, and let $\tau_{a}^{\mu}$ = $\inf(t>0;W_t = a + \mu{t})$ be the first passage time ...
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3answers
886 views

Given monthly returns of 10-Year Govt Bond, how to get monthly risk free rate of return

I have a list of monthly returns of a 10 year Govt Bond. I am not sure if this is a good proxy for the monthly risk free rate of return. Can somebody suggest how I can derive the monthly risk free ...
9
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2answers
3k views

What are the econometric assumptions in the Fama-Macbeth procedure (1973)?

Fama-Macbeth (1973) introduce a two stage cross-sectional regression method (http://en.wikipedia.org/wiki/Fama%E2%80%93MacBeth_regression). 1) If I was to regress stock prices (or returns) on a ...
4
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1answer
326 views

Evaluation volatility with Garch model

I want to forecast the volatility (with Garch) of a canadian stock in 5 months with daily returns. How many data do I have to collect ? Thanks.
1
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1answer
96 views

Get discount factors with limited knowledge?

I am facing the problem of just having this information: 6% coupon bond with 2.5 years to maturity, traded at a 100% clean price 4% coupon bond with 1.5 years to maturity, traded at a 98% clean price ...
2
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1answer
1k views

How to simulate stock prices with stochastic time change subordinated arithmetic Brownian Motion?

the idea is to simulate price returns thus to be normally distributed i 'am trying to use subordinated arithmetic brownian motion subordinated to time activity (volume) stock prices are following GBM ...
6
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2answers
326 views

Itô diffusion processes in finance with unknown distribution at a terminal value

In several papers it is argued that for many Itô diffusion processes, $$dX_t = a(t,X_t)dt+b(t,X_t)dB_t,$$ in mathematical finance the distribution of $X_T$ for fixed $T>0$ is unknown, which makes ...
0
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1answer
236 views

download intra day data [duplicate]

I am trying to download intra day stock data for some 7000 symbols using google url : https://www.google.com/finance/getprices?q=RELIANCE&x=NSE&i=60&p=5d&f=d,c,o,h,l&df=cpct&...
4
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1answer
135 views

Optimal Choice of exceeding time

Suppose you hold a share from company $Z$ whose vaue at time $t$ is $S_0+\sigma B_t$ where $B_t$ is Brownian Motion and $\sigma$ denotes some volatility. Now lets assume that company $Z$ may go ...
1
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1answer
62 views

Why is the discount function non increasing if pure cash holdings are feasible?

I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ...
1
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1answer
3k views

How to apply Ljung Box Test?

I am checking the closing prices(about 9000+ prices) of the stocks data to test for randomness. The test I am using is Ljung Box test, in MFE toolbox for MATLAB, I used 300 data of closing prices, ...
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0answers
298 views

Quadratic utility function

May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function $U$. This simply means that $\mathbb{E}...
0
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1answer
275 views

how to extract moments of GB from moment generating function?

I'm searching for the moments of geometric brownian motion using the gmm optimization program. the aim is to make the process y(t) of returns follows a normal distribution Are there any packages in ...
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1answer
777 views

A non parametric study of VaR with kernel density

I'm working in order to compare the calculation of the VaR between the methodology of copulas and kernel density, all this by using the software r. The process that I follow is: Obtain a sample (...
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3answers
3k views

Stochastic modeling of stock price process

Apart from the model of Geometric Brownian motion is there any other "widely accepted" stochastic model to characterize the dynamics of a stock price process?
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2answers
280 views

What's the first time-integral of price called?

In general I'm wondering about the names of time-derivatives of price. E.g. in physics the first few time-derivatives of position are: f(x) = displacement f'(x) = velocity f''(x) = acceleration And ...
5
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1answer
174 views

pricing of heat rate-linked derivative

It's a simplified model. Suppose $U_t$ is a random variables subject to Lognormal($x_1$, $z_1^2$)distribution. $V_t$ is a random variables subject to Lognormal($x_2$, $z_2^2$)distribution. Suppose ...
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0answers
1k views

Philips-Ouliaris test for cointegration

I'm trying to implement cointegration tests using the R urca package. I've figured out the Johansen test (ca.jo), but I'm having trouble with the Philips-Ouliaris test (ca.po). I have two questions: ...
2
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0answers
622 views

portfolio optimization with a loop

I am attempting to minimize the variance of a 3 stock portfolio using optimization within a loop. What I have done is calculated the stock returns and cov matrix from dates 1980-01-01 to 1989-12-31 ...
-1
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1answer
116 views

Regression extensions

I'm trying to find extensions for my regression and obviously would like to use PE, BV and CFO. But I've got monthly data, while all company's fundamentals are semi-annually... Can I deal with it ...
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2answers
2k views

How to detect structural breaks in variance?

I'm looking for a method to automatically detect structural breaks, I tried Chow test, It works good but it doens't work for breaks in variance. Do you know a test to check strucutural break in ...
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0answers
1k views

Asymmetric Volatility Modeling (Interpretation)

I am currently writing a paper on asymmetric volatility modeling of brent, gold, silver, wheat, soybean and corn from 1986-2012 and divided them into 4 sub-sample periods (i.e. 1986-1991, 1991-1997, ...
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1answer
1k views

Why is delta-hedging of ATM options near expiry difficult to do? [closed]

Can someone explain to me why the delta-hedging of ATM options near expiry is difficult?
2
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1answer
664 views

In Yahoo! Finance, what determines the number of decimals for a stock/index quote?

In Yahoo! Finance, we see the following quotes among others: ...
5
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2answers
257 views

Can money technically flow in and out of stocks or asset classes?

For every buyer, there is a seller. Money can't 'flow' in and out of a stock, only the price changes. Is this applicable in the context of asset classes, for example, money market funds versus stocks? ...
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1answer
14k views

How to annualize log returns? [closed]

I have daily log return from 01.01.2011 to 10.28.2011 and I'd like to compare the total return of that 10 months period (which is of -7.093%) to annual log returns of previous years. I know it's ...
11
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3answers
3k views

Maximization of CARA utility function: unique solution with an unbounded parameter?

An investor at time $t_0$ can invest his wealth $w_0$ in a risky asset $x$ for an amount $a$ and the remain part in the riskless asset $w_0-a$. At the end of the period $t_1$, the investor will ...
7
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2answers
918 views

What quantitative strategies were successful through the 2008 crisis?

Obviously, strategies like "short everything" did well during this period, but getting the future right is one thing and having a robust strategy is another. In particular, many quantitative ...
3
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1answer
2k views

How to get started in quant finance? [closed]

I am a programmer and I have no finance background. I am looking for advice as to how to get started in the quant finance industry. My goal would be to have solid understanding about the industry and ...
19
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3answers
5k views

At what point does someone using technical analysis become a Quant?

Sorry if the question sounds rough. It's not my intention to devaluate something I've not yet understood like Quantitative Finance. So to keep it simple: is Quantitative Finance a science, like Math ...
4
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0answers
667 views

signal processing + finance? [closed]

I am a postgrad student doing a master in Signal Processing and I have graduated from an engineering school I was wondering if there are any jobs in finance that are opened to people having this kind ...
2
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1answer
512 views

How does currency valuation depend on the cash reserve ratio for a country?

Currency valuation (with respect to other currencies) is an important parameter in finance, but how is it related to the cash reserve ratio?
2
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0answers
153 views

Keynesian Multiplier [closed]

I am taking a degree in macro economics, and am at a juncture where knowledge about the Keynesian Multiplier is imperative. Though I've been at the lectures, read the literature and scoured the web, I ...
2
votes
2answers
20k views

Wealth Management Vs Asset Management [closed]

What is the difference between the two? Today in the FT I see that UBS is the second biggest 'wealth manager' after BOA whilst I was always under the impression that Blackrock was the largest asset ...
2
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3answers
771 views

What are the best master programmes for someone interested in a career in quantitative finance? [closed]

Any recommendations on the best schools and overall education choices for quantitative finance?
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5answers
2k views

What blogs or articles online should I read to get started with quantitative finance? [closed]

I want to start learning quantitative finance, what articles or blogs should I look at to start? Also see the Related Question on Quantitative Finance Books
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8answers
4k views

What are some good technical and non-technical books for a math lover to get in to quantitative analysis? [closed]

To get the ball rolling... I will answer this question this evening For people aware & unaware I think it would be a great way to introduce the group, resources for fundamental knowledge & ...