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Questions tagged [finance]

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1answer
123 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
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1answer
422 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
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1answer
183 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 ...
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1answer
121 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
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1answer
7k 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 ...
2
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1answer
904 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
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2answers
1k 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
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 ...
5
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3answers
977 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
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4answers
396 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
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2answers
257 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
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1answer
75 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
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1answer
89 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
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2answers
224 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
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2answers
224 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? ...
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0answers
76 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
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1answer
116 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
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0answers
90 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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2answers
1k 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
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1answer
88 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
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1answer
403 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
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1answer
53 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
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1answer
111 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!
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1answer
482 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
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1answer
116 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 ...
4
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2answers
624 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
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1answer
201 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
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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
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1answer
401 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
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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
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1answer
157 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
274 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)
7
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2answers
13k 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 ...
1
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1answer
122 views

How does buying back stock affect a company's credit spread?

How does buying back stock affect a company's credit spread? Would it cause it to get smaller? Any clarification would be appreciated.
1
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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!!
0
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2answers
103 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 ...
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0answers
159 views

Yahoo options chain pricing vs stock broker pricing

I am having hard time understanding the price difference of yahoo option chains. For example: Yahoo shows for TWTR FEB 17, 2017 CALL @16.50 option ...
0
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0answers
54 views

Simplest portfolio optmization under transaction costs

I've been studying portfolio optimization trying to go step by step. After seeing much of Markowitz and Merton's work (Although I still don't get all of it), I would like to have acquire more ...
1
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1answer
217 views

Monthly returns annualized vs annual returns [closed]

Lets say that I have a stock with annual returns, $a_i $ for year $i\in \left\{1,...n\right\}$ and monthly returns $m_{i,j}$ for month $j\in \left\{1,...12\right\}$. Lets define monthly returns to be ...
5
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7answers
1k views

Do quants need to know Accounting?

Do quants need to know Accounting? In my school's undergrad Quant program, we had Financial Accounting and Managerial Accounting, which were listed as prerequisites for our undergrad Finance subjects....
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1answer
789 views

Exponential Discounting of Cash Flows [closed]

I wonder for exponential discounting method to do the discount cash flow, may I doing it right as the following screenshot from Excel, assuming the discount rate is 4%? Thanks!
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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1answer
540 views

For any efficient portfolio, does there exist another efficient portfolio which has zero correlation with it?

For any portfolio on mean-variance efficient frontier, does there exist a portfolio on the frontier which has zero correlation with it? I tried to play around with the covariance, by setting ...
1
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0answers
91 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!
0
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0answers
36 views

Obama's lowering mortgage ins rates makes no fiscal sense, because the Fed just raised its rates for the first time last year. Right?

Background: This is a follow up from this question, regarding Obama's lowering of the mortgage insurance rates 11 days before Trump was inaugurated (not to go into effect until week after Trump became ...
3
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2answers
5k views

What is the difference between pull to par and roll down in both mathematics and conceptual?

I don't really understand the difference. Shouldn't roll down and pull to par be the same technically? If a bond is trading as a discount it "increases" in value because everyday gets closer to par, ...
1
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0answers
53 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
125 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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2answers
215 views

Using IRR to calculate future value of cashflow

Discounting a cashflow using given forward rates will result in the following present value: PV = 102.875 = ${5\over (1+3\%)}$ + ${5\over (1+3\%)(1+4\%)}$ + ${105\over (1+3\%)(1+4\%)(1+5\%)}$ where ...
5
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2answers
217 views

Why is $Y(t)V^h(t)$ a martingale?

Let $\lambda$ be the market price of risk: $\frac{a - r}{\sigma}$, and define $Y(t) = e^{-\lambda W(t) - (r + \frac{\lambda^2}{2})t}$. Let $V^h(t)$ be the value process of any self-financing portfolio....