Questions tagged [finance]

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2
votes
3answers
779 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?
2
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4answers
14k views

Are PX_BID and PX_ASK on Bloomberg closing bid/ask? or are they daily averaged?

Bloomberg provides PX_BID and PX_ASK on a daily basis, but it's not clear exactly where these numbers come from. Are they closing bid and ask prices, or are they averaged over the entire day? For ...
2
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2answers
2k views

Risk-Neutral Probabilities, Trinomial Model

My professor has many grammatical mistakes and errors in his questions, so apologies ahead of time. I am just trying to understand what he wants for this question, In trinomial model, let $S_0 = 1$, ...
2
votes
1answer
81 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 ...
2
votes
2answers
821 views

Why does the short rate in the Hull White model follow a normal distribution?

Consider Hull White model $dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$ when we solve the SDE above we have $r(t)=e^{-\alpha t}r(0)+\frac{\theta}{\alpha}(1-e^{-\alpha t})+\sigma e^{-\alpha t}\...
2
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1answer
755 views

CAPM and factor modeling: Machine learning

Excuse my ignorance with this I am still trying to wrap my head around the interpretation of the Fama French 1992 factor paper. I come from a computer science background but I am interested in ...
2
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1answer
306 views

CAPM Calculations

Im trying to calculate Alpha using CAPM & I have data on everything necessary. $$R_t-R_f={\alpha}+{\beta}\times(R_m-R_f)$$ i.e. $${\alpha}=R_t-R_t-{\beta}\times(R_m-R_f)$$ In more detail, I ...
2
votes
2answers
143 views

American call and put prices, increasing in maturity

Show that American call and put prices are increasing in maturity $T$. Does this mean I need to show that as $T$ increases than the American call and put prices increase as well? If so, how do I go ...
2
votes
3answers
12k 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!!
2
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2answers
66 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
votes
2answers
147 views

Utility functions, are they used in the real world by hedge funds, banks, etc?

I am starting to study mathematical finance. When I studied microeconomics and macroeconomics I studied utility functions, but I never saw how they are in the real world. I do not see how they can be ...
2
votes
1answer
352 views

Exclusion of Utilites and Financials in Magic Formula

In Joel Greenblatt's magic formula, see https://en.wikipedia.org/wiki/Magic_formula_investing, why are utilities and financials excluded? What is the reasoning behind this?
2
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1answer
655 views

What discount rate to use when valuing binomial option with real probabilities

We all know that we can use the argument of risk-neutrality and the law of one price, to get the option value without the real world probability. However, suppose if we use the real world probability ...
2
votes
2answers
70 views

Low-Cost Historical Corporate Financials Data?

For my finance textbook, I would like to recommend data sources that students can afford. Obviously, Compustat is not affordable. Are there any low-cost or free data bases that offer basic ...
2
votes
1answer
899 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 ...
2
votes
1answer
177 views

Where can I find ideas for strategies? [closed]

Every book I read refers me to many other books, there is practically no way I can read all this text in my life time. Once and for all, where is the best place to fish for ideas?
2
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2answers
844 views

what data sources are useful for obtaining financial statement data of listed companies NYSE and NASDAQ?

Exactly, I need balance sheet, income statement, cash flow statement, stock market, bankruptcy situation, fraud situation and corporate governance data of companies in USA. Thanks beforehand,
2
votes
1answer
158 views

Coupon bond pricing problem with reinvestment

The three year bond has face value USD 100, and pays USD 5 coupons annually, the last one at maturity. Assume that the continuously compounding rate is 7%. (a) Find the price of this bond. (b) ...
2
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1answer
81 views

Which methods are there to determine the price of futures contracts?

Which method apart from the cost of carry model exists, and which works best in real life? How does the market expectations impact on the futures price?
2
votes
1answer
100 views

How to Parameterize a Bond Yield Curve?

Suppose I have a Bond Yield Curve (assume Semi-Annual Compounding), at term 1M, 3M... 1Y, 2Y... 10Y, 15Y ...30Y (x-axis is maturity / term). How should I parameterize this yield curve? Any ...
2
votes
1answer
113 views

Explaining an Option product: SIX Discount Certificates

So I have the option with the important info above. I am trying to generate a portfolio that represents the option. However I am stuck on the first hurdle as I believe it is a call option as the ...
2
votes
1answer
70 views

Objective measure of highly leveraged firms using Debt-to-EBITDA ratio

I am looking for some kind of guidance what is generally considered a high or low ratio of Debt-to-Earnings before interest, tax, depreciations and amortisations (EBITDA). In a recent article by The ...
2
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1answer
145 views

Price of European calls in Merton's Model

The stock price is modeled by $$S_t = S_0 e^{bt +\sigma B_t + \sum_{k=1}^{N_t} Y_k}$$ with $B_t$ Brownian motion, $Y_k$ iid $N(\mu,\delta^2)$, $N_t$ a Poisson process independent of $(B_t)$ and $Y_k$ ...
2
votes
1answer
421 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 (...
2
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2answers
223 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 ...
2
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1answer
155 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 ...
2
votes
1answer
450 views

How do I calculate Market Dividend Yield from this data?

Thanks for reading, I am trying to calculate the market dividend yield for this set of data. The authors define it as 'The market dividend yield (MDY) is the one-year dividend from the CRSP value-...
2
votes
1answer
83 views

Use no dominance to show that the price of the call option satisfies the inequality

Assumption 2.1 - If the payoff $P$ of a financial instrument is non negative, then the price $p$ of the financial instrument is non negative. Assume $C$ is just the price of the call option, and $C^...
2
votes
2answers
655 views

Is it possible to download stock-data countrywise with quantmod package for R?

Is it possible to download stock-data countrywise with quantmod package for R ? Hi, I'm wondering if it's possible to download equities countrywise. Let's say i want all data from the Finnish market....
2
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2answers
955 views

Portfolio Management in R

I’ve been looking around for a R-package that will allow me to track my stock portfolio - basically I would like to enter stocks that I own, track the trades I make, calculate my open position & ...
2
votes
1answer
256 views

Difference between stochastic calculus and newton calculus

As I am not a student of hard core mathematics,I just want to know how stochastic calculus is different from newton calculus. What make stochastic calculus different from simple newton calculus ?
2
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2answers
116 views

What interest rate should I use for testing the covered interest parity?

I am doing an empirical test of the CIP from the recent financial crisis between Canada and the United States. I am using 1,2,3,6,12 month forwards (monthly data). What interest rates should I use? I ...
2
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1answer
711 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: ...
2
votes
1answer
101 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 ...
2
votes
1answer
324 views

Fama French sorting

I am trying to calculate my own monthly fama french factors SMB and HML and I have a general question about a final screening act. I understand that to sort companies in june of year $t$ they need to ...
2
votes
1answer
795 views

Why is Overnight LIBOR lower than BoE Base Rate?

According to this site, the current overnight GBP LIBOR is 0.45638%, and the Bank of England base rate is 0.5%. My understanding is that the overnight LIBOR should always be higher than the base rate,...
2
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1answer
211 views

Sovereign bond CDS data

Does anyone know where I can download from historical data for sovereign bond CDS (credit default swaps) rates? preferebly free?
2
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1answer
112 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 ...
2
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1answer
81 views

Firm Stock market

Let's say that I live in my own world, with 20 inhabitants. I own a firm called mc Donald's. ( my people purchase food there of course). Each income to mc Donald's gets into the firm bank. McDonald'...
2
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1answer
2k views

Computing Buy-and-hold abnormal returns (BHARs) $= \prod_{t=\tau_1}^{\tau_2}(1+R_{i,t}) - \prod_{t=\tau_1}^{\tau_2}(1+R_{m,t})$

I am doing an event study and wanted to know if was going about this correctly$$ \text{BHAR}_{i(\tau_1,\tau_2)}\quad=\quad\prod_{t=\tau_1}^{\tau_2}(1+R_{i,t})~-~\prod_{t=\tau_1}^{\tau_2}(1+R_{m,t}) $$ ...
2
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3answers
2k views

accuracy of Yahoo Finance stock data (Python module)

I am using the yahoo finance python module: https://pypi.python.org/pypi/yahoo-finance I am using it for a project and would like to see if anybody else uses data from this source and can vouch for ...
2
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1answer
36 views

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$, does this have to do with weights?

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$ for each of the investment projects, where the returns $K_1, K_2$, and $K_3$ depend on the market scenario: $$...
2
votes
1answer
128 views

Modeling Financial Assets

Let $\tilde{W}_t := (1+R)^{-t}W_t$ and $\tilde{S}_t := (1+R)^{-t}S_t$ be respectively discounted wealth process and discounted asset price. Then, show that $$\tilde{W}_t = w_0 + \sum_{i=1}^{t}\Delta_i(...
2
votes
1answer
93 views

Why there are almost no book for revenue analytic?

Why there are almost no book for revenue analytic? By revenue analytic, it is meant to be predicting the revenue of a firm in the future
2
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1answer
77 views

$\frac{1}{p(T_{i-1},T_i)}(A-p(T_{i-1},T_i))^+$ at time $T_i$ is equivalent to a payment of $(A-p(T_{i-1},T_i))^+$ at time $T_{i-1}$

How can I show that payment of $\frac{1}{p(T_{i-1},T_i)}(A-p(T_{i-1},T_i))^+$ at time $T_i$ is equivalent to a payment of $(A-p(T_{i-1},T_i))^+$ at time $T_{i-1}$ ? Where A is a deterministic constant....
2
votes
1answer
151 views

PEGY Ratio: Does it make sense?

PEGY ratio is calculated as PE ratio/(Earnings Growth Rate + Dividend Yield). Putting aside the discussion of whether forward or trailing P/E ratio should be used, isn't adding dividend yield over ...
2
votes
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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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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0answers
46 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 ...
2
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0answers
33 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 ...