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Questions tagged [finance]

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6
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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, ...
5
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0answers
72 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 ...
5
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0answers
70 views

Merton's portfolio problem with constraints

Suppose the investor can invest in a Black-Scholes market with one risky asset $S$ with drift $\alpha$ and volatility $\sigma$ and a riskless asset $B$ with a riskless rate of return $r$, and the ...
5
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0answers
194 views

Interpreting Fama-French factors for the German stock market

I calculated the Fama-French five factors myself for the German market. Most of my results align well with prior research, except one thing: When i do the calculations for the sub-period from 2011 to ...
5
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0answers
107 views

How do I calculate the present value of a credit default swap?

I am paid 20 million every time a bond drops to a new low over a 120 month period. I need to know how to find the present value of such an arrangement if there is a continuously compound interest of 5 ...
4
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0answers
1k views

Hasbrouck's information share

Given a cointegrated set of price series, I am trying to compute the Hasbrouck's information share, as described in page 12-13 of this article. page 7-8 of this article I have the vector error ...
3
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0answers
57 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 ...
3
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0answers
43 views

Headquarter Relocation and Stock Return - Influence of Universities

Scott Galloway states in chapter 8, The T Algorithm, in his book The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google, that a successful strategy to become a "trillion dollar company" must ...
3
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0answers
146 views

How to simulate stock price with support and resistance level

I couldn't find good resources on how to simulate a stock price data sequence including some basic effects. The basis might be a Brownian motion model; but in real stock prices, there are additional ...
3
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0answers
67 views

What are your list of concept or model in standard textbooks that are always reliable to used in working?

What are your list of concept or model in standard textbooks that are always reliable to used in working? As opposed back to this: What concepts are the most dangerous ones in quantitative finance ...
3
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0answers
156 views

A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

[I already posted this question on the math forum of stackexchange and I was advised that I should post this question here] In Evans and Jovanovic (1989) you will find a model for entrepreneurs with ...
3
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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
76 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?
2
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0answers
76 views

Does Academic Research Destroy Stock Return Predictability?

McLean/Pontiff (2016) give evidence that portfolio returns are 26% lower out-of-sample and 58% lower after publishing an academic paper on variables, which are likely to predict cross-sectional ...
2
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0answers
194 views

Long term equity repo

Let's assume I have various European stocks and would like to somehow estimate their long-term (5y+) forward prices. As for repo rate for each individual stock, is it reasonable to assume that its ...
2
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0answers
32 views

Is there a reliable International Currency Exchange rates provider in JSON format

I am looking for a currency exchange rate provider (preferrably) JSON format , that is free/open and also reliable. Anybody here have any experiences working with some solutions like this? Cheers!!
2
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0answers
68 views

Want to understand the links and relationship between all the risk metrics?

For Example : if Risk weighted asset (RWA) increased or decreased this month, which other risk metrics could have influenced RWA to increase or decrease. Also in different situations like, upward ...
2
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0answers
2k views

How can I convert Yahoo Ticker Symbols into ISIN Codes?

I have a list of all Yahoo Ticker Symbols and I want to convert them into ISIN Codes. I have been researching and found out that finance.yahoo in the US does not ...
2
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0answers
616 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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0answers
29 views

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

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. ...
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0answers
71 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 ...
1
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0answers
30 views

Is there a quantitative definition of a Quiet, Moderate or Accelerate market conditions?

i know the StdDev price technical indicator which is the standard deviation but this one has an absolute value. The market conditions are: Quiet: lower oscillation of price around a constant ...
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0answers
24 views

Which stock price to take for historical ratios in stock screener (EPS etc.)?

We are currently testing a stock screener that we built and want to implement historical ratios in there too - this is working already for all ratios that don't require stock prices (so all ...
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0answers
101 views

Barrier Shifts - necessary for up-and-out call / down-and-in put?

Recently I came across the topic of barrier shift for barrier/digital options. I found that most examples centred around down-and-in puts / up-and-in call / digitals. I am wondering if we need ...
1
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0answers
52 views

Pricing methods in the real world when there is more than one free arbitrage price

Perhaps this question sounds trivial and obvious, but I am starting to study this new field. When we are in a complete market without arbitrage opportunities there is only one risk-neutral martingale ...
1
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0answers
56 views

How to calculate Market Return based on an own sample?

I have read several papers and am more confused than clearer about my problem after the reading. I am trying to validate my sample. I use the Schmidt et al. paper (2015) as a guidance to construct ...
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0answers
25 views

Identifying primary share class of U.S. firms and deleting excess observations

I have a fairly large dataset of CRSP firms with their daily closing prices from 2006 till 2017. I need to filter the data so that I have one daily observation per unique firm. I've identified the ...
1
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0answers
66 views

Zipline issue with SPY data

I have written a strategy to backtest in zipline, and every time I ran the backtest, and error is showed with the line: IndexError: index 0 is out of bounds for axis 0 with size 0 After a bit of ...
1
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0answers
51 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
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0answers
78 views

Comparing two models using Wald Test

I would like to use a Wald test to compare two models. To give a basic example, let: $Y_{t}=\alpha+{\phi_1x}_{t-1}+{\beta}_{1}x_{t-1}+{\beta}_{2}x_{t-1}+{\beta}_{3}x_{t-1}+\epsilon_t (A)$ $Y_{t}=\...
1
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0answers
76 views

Idiosyncratic Volatility

I calculate monthly idiosyncratic volatility as the standard deviation of residuals of a Fama-French regression on daily returns. Now assume that within these daily returns there is a price hike due ...
1
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0answers
79 views

Valuation of a company

Alpha Corp purchases Beta Sub. Alpha Corp finances the purchase price of € 100 million by raising € 50 million in debt and € 50 million in equity issued by Alpha. The debt is risk free and the ...
1
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0answers
143 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,...
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0answers
65 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?
1
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0answers
86 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
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0answers
47 views

Financial instrument code crossreference

Is there some source to have a XREF of various instruments codes as used by different providers ( IE Reuters Bloomberg others ) as well as ISIN, are there some sources/strategies already in place?
1
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0answers
85 views

Can someone suggest some good reads on OAS and Spread Duration?

I have been through the CITI Yield book paper and the OAS by Barclays. Is there is anything else that tackles this topic? Any help would be much appreciated. Cheers!
1
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0answers
51 views

How to find the ideal options trade given certain return distribution?

Suppose I have a probability distribution for the return of a given stock from now until some expiration date. Is there any algorithm/process/software that will take that probability distribution and ...
1
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0answers
108 views

Self financing strategy : how to understand it in continuous + transaction cost model?

I'm having a hard time trying to understand a formula about self financing strategy trading. Let's suppose you have two assets, $\phi=(\phi_0,\phi_1)$ is the vector that represents the quantity you ...
1
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0answers
299 views

question about the market quote from bloomberg

I am a little bit new in finance. Perhaps it is not suitable to ask here, but still, I would like someone can help me. What I have now in hand are normal volatilities taken from Bloomberg for a ...
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0answers
379 views

EWMA in python using the arch 3.2 package and pandas

I have a hard time figuring out whether my EWMA calculation of variance is correct when using the python package ARCH 3.2. Currently, I am doing the following: ...
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0answers
115 views

How can we observe volatility smile from the market. Drawbacks of Heston Stochastic Volatility Model

Here are two questions related to implied volatilities. a) The set up here is for an European option. We can get its implied volatility smile from calibration, the question is why could we also ...
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0answers
942 views

How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: $$L=PMT \left[ PV(0.01,12,1) + \frac{1.075}{1.01^{12}}PV(0.01,12,1) + \frac{1....
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0answers
41 views

what do metrics and indicatives mean in the finance context? Like trading of MBS products

it's often heard in my daily work as a programmer in an investment bank, supporting mortgage backed securities desks (passthrough, agency cmo, cmbs, etc). My take is that the terms describe the ...
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0answers
54 views

What is the difference between a three month return and a quarterly return?

I am looking at VGENX, and this product has first-quarter and three-month returns of 7.8% and 20.3%, respectively, according to zacks.com. I take it as the three month return is calculated taking into ...
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0answers
915 views

How to backtest Value at Risk Models using Conditional and Unconditional tests?

I am trying to carry out backtesting on a number of Value at Risk figures i obtained using var/covar, historical, and monte carlo simulation. The two methods im using are the Kupiec test (...
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0answers
113 views

Generating financial data

I am trying to generate monthly stock data using a one-factor model: $$R_{a,t} = \alpha + BR_{b,t}+\epsilon_{t}$$ The description says: $R_{a,t}$ is the excess asset returns vector, $\alpha$ is the ...
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0answers
74 views

Calculate and compare IRR among products and companies

I am trying to calculate return on investment for a couple of companies and their respective products. I have two main products: credit card installment loan Owners would like to be able to compare ...
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0answers
68 views

Shrinkage Estimator giving unrealistic portfolio variances

I have a historical covariance matrix which is invertible for daily and monthly returns. I used the Ledoit,Wolf shrinkage estimator for the covariance matrix and now I get really small portfolio ...
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0answers
290 views

GARCH estimation does not work, error in my returns?

Hey everyone and I hope that there are some smarter people out here that can help me out with my problem...: I have trouble with my implementation of a GARCH(1,1) model and I do not know how to move ...