# Questions tagged [finance]

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### 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(...
433 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 ...
429 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 ...
113 views

### Calculating historical Bond returns

How would you calculate historical bond returns using bond prices? Would you treat bonds just like shares ? Thanks
2k views

### Price of call/put is convex in $K$ (strike price)

Let $\lambda\in(0,1)$. Then $$C(T, \lambda K_1 + (1 - \lambda)K_2, S, t) \leq \lambda C(T, K_1, S, t) + (1 - \lambda)C(T, K_2, S, t)$$ $T$ - the maturity $K_1$,$K_2$ - Strike prices $S$ - stock ...
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### European option and American option are equivalent in this case?

This is Question No.11 from 2007 May MFE Exam. For a two-period binomial model for stock prices, you are given: (1) Each period is 6 months. (2) The current price for a nondividend paying ...
290 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 ...
38 views

### What is the difference between exercise and expiry date?

I know in American options you can exercise the options at any time before expiry date but in European options you can only exercise the options on expiry day. On National Stock Exchange of India the ...
51 views

### step by step calculation of the sharpe ratio

I am trying to calculate the Sharpe ratio. Suppose I have: $$x_t = \alpha + \beta y_{t} + \epsilon_{t}$$ $$E[x_{t}] = \alpha + \beta E[y_{t}]$$ $$var[x_{t}] = \beta^2var[y_t] + \sigma^2$$ The ...
89 views

### Is the european put option an increasing function?

My question is to show that the function $K \rightarrow p(T,K)$ is increasing. T being maturity time,K being any strike and $p(T,K)$ is a european put option. My only approach to this question has ...
92 views

### Finding todays price of a derivative

Today's market prices for European call options $c(T;K)$ and put options $p(T;K)$ with maturity T and any strike K. Let $B_t = e^{rt}$ be the price of the risk-free bond and St the price of the stock. ...
40 views

### How to deal with intermittent NA values in a price series when calculating returns

Let's say a have a price series for a share for the year 2000. On the 27th of July 2000, there is a missing value represented by NA. This was not a holiday or any other non trading day as other shares ...
44 views

### Why would a lower stock price leads to higher value of a call option?

Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $47,$ the author mentions the following. Higher interest rates decrease the present value of ...
25 views

### Do not understand 'If an option position includes short American-style options, then the payoff-diagram may be misleading'

Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $42,$ the author mentions the following. If an option position includes short American-style ...
46 views

### How do I calculate option payoff before its expiration date? [closed]

How do I calculate option payoff before its expiration date? For example, if I long a 6 month call with K = 11100, T = 0.5, p = 150, what would be the payoff of the option if I exercise it in 3 months ...
47 views

### When estimating P/L through greeks based on zero rate curves, does it contain time (theta) PNL?

Suppose on day 1 we calculate a delta wrt. a point on an interest curve of zero rates, we then let 1 day pass, recalculate the interest curve of zero rates with the same bonds (though now day 20 bond ...
76 views

### Studies utilizing Fama French factors

Are there any studies in reputed academic journals that have used the data library offered by Kenneth R. French regarding the Fama French 3 factor model? I wish to use this data in my master's ...
76 views

### Subset selection to identify independent variables that impact the market?

Given a lot of market-related features (~100 independent variables such as emerging market, developed market, s&p 500, tech sector returns, etc), I need to select a subset of them that are ideally ...
68 views

### World Stock Markets that went up in 2008

We all know that the US stock market(s) collapsed in price in 2008, see https://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%9309. I was wondering what countries' stock markets went ...
156 views

### Question on EBIT Calculation [closed]

I am trying to calculate the EBIT and a few other financial calculations from the following Income Statement. What numbers would I have to correspond in order to calculate EBIT or EBITDA here? ...
76 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, ...
110 views

### What does cash mean in the fixed income context?

In a job description, it lists the sub categories of fixed income products: cash, swap, futures and options. I understand what other three mean but what's "cash" in this context? In another occasion ...
593 views

### Corporate finance exercise book

I'm preparing a corporate finance exam and I need a book with illustrated exercises that make you really understand the subject, since the written exam is not much mechanical, but more similar to "...
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### Is it possible for two securities to have the same first 8 characters of a cusip, but differ in the check sum?

CUSIP is a 9 character long identifier. The last digit is a check sum checking the first 8 previous characters. This seems to me that it is not possible for two securities to have the same 8 ...
215 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?
137 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 ...
51 views

A $D=\$30mm$loan at$r_D = 6.5\%$and a tax rate of$\tau_c=40\%$yields an annual tax shield of $$TS=D*r_D*\tau_c=\0.78mm$$ If$\rho=5\%$of the loan remainder in the current year is to be payed ... 2answers 64 views ### calibration - negative call price [closed] Im trying to calibrate a stochastic volatility model to market. I end with an MSE of 2-3 with approximately 500 quotes. Some out of the money options with call-price under 1 dollar ends up being ... 1answer 35 views ### Security Analysis By Benjamin Graham Example Doubt [closed] So I was reading (trying to read) Security Analysis by Graham and I came across this example ("Example 1" in the image attached below) Being the noob at finance and quant that I am, I was unable to ... 1answer 58 views ### Clarification on certain finance terms surrounding bonds Whilst revising for my upcoming financial mathematics exam I've been struggling to get to grips with certain terms/ phrases used when studying Bonds. I am very new to Finance and get confused very ... 1answer 59 views ### Definition Of A Portfolio I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ... 1answer 62 views ### Can MACD be calculated for values other than 12 and 26? I am working on time-series classification problem using Convolutional Neural Networks in Python. The data-set used is financial stock market data (like yahoo finance). I am using some technical ... 1answer 50 views ### Estimating monthly GDP growth based on quarterly data Apologies for this newbie question. Given the following quarterly GDP growth: ... 4answers 99 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 ... 1answer 58 views ### Calculating Mutual Fund Returns [closed] Using Thomson Reuters Eikon I can extract the monthly NAV and Dividen Payments of a fund. I would like to calculate the monthly returns of a fund now. Would this be the right approach? Fund Date NAV ... 1answer 68 views ### How to Calculate Stock Return with Stock Bonuses and Rights? I would appreciate if you could let me know how to calculate stock return for a given company when the company issued bonus shares and rights. If company just paid dividends, stock return would be: ... 1answer 81 views ### performance attribution - security selection= wB*(Rp-RB) or wP*(Rp-RB)? Really confused. Finding various different ways of calculating security selection alpha. I believe it matters from whose perspective one is looking at. I am a portfolio manager and I want to know ... 1answer 44 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 ... 1answer 892 views ### optimal portfolio with different lending and borrowing rates I have 4 risky securities (have returns and var-cov matrix for monthly data), and I can lend at 1% per annum, but borrow at 5% per annum. If i wish to obtain the s.d. of 5%, what is the optimal ... 1answer 113 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! 1answer 431 views ### PortfolioAnalytics R package - Error with the function “create.EfficientFrontier” Issue The function create.EfficientFrontier from the PortfolioAnalytics package is outputting an error message that reads: <... 1answer 46 views ### How to determine how much a company can invest in M&A activity? I am an engineer who is increasingly interested in business-related things, and I am reading and learning a lot about what you can derive e.g. from financial statements. One question I was wondering ... 1answer 107 views ### How do I loop through all the stocks and find the 10 stocks with the highest Sharpe ratio using R program? I am recently doing a project, which I need to apply Sharpe ratio to all the stocks. How do I loop through all the stocks and find the 10 stocks with the highest Sharpe ratio using R program? Thanks a ... 2answers 52 views ### CAPM - Do I use start or end of period prices? If I use monthly price data in the standard CAPM, should I take the price at the beginning or the end of the month? What is the convention? Or does it not matter? Is there any literature that deals ... 1answer 146 views ### what % of stocks with +$1b market cap will double in 3 years on average historically?

If I'm looking to pick stocks that will double in 3 years, how do I figure out what is the likely universe that I'm choosing from? I just want a rough estimate of the universe given the market cap ...
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### 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 ...
277 views

### L1 norm regularization of Markowitz portfolio in matlab

Markowitz portfolio with L1 norm regularization added L1 norm regularization based on the original model. The constraint equation is as follows: The following code is the original Markowitz Mean-...
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### Strategies on steepen yield curve

Believe that the yield curve is going to steepen very soon. It may be fall in short-term rates, a rise in long-term rates, or some combination of these. What strategy should we pursue in the bond ...