Questions tagged [finance]

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39 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
36 views

Monthly Discount Rate in NPV Calculation [closed]

I have been offered 2 payment methods as I was buying some tools for a company I work for. I need your help to assess the best method. Here it goes, Total cost is $100 and I don't want to pay it all ...
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1answer
93 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?
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0answers
59 views

Arbitrage argument and Market Quotes [closed]

Good day, I wanted to ask for help with a question from one of my exercise sheets. For a share S the market quotes a given strike K in both european and american styles. Use an arbitrage ...
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1answer
52 views

Equal Weight better sharpe than Tangency portfolio

Could you explain to me what it means to have better Sharpe Ratio in Equal Weight portfolio than tangency portfolio (max sharpe). Thank you.
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1answer
430 views

Portfolio Variance - Explanation for equation : Investments by Zvi Bodie

Source: Investments 10th Edition by Bodie, Zvi. Page 227 Chapter 7 In Equation 7.17, the book breaks the variance into two parts. I can't seem to understand why the 1/n is represented outside the ...
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1answer
174 views

Mean Variance Investment problem

I attach a part of a paper explaining how the weights of a market portfolio are derived. I do not understand how equation 5 has been derived and, in particular, where the zero beta portfolio's return ...
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1answer
408 views

Is R suited for a Quantitative Finance executable application

I wonder if a R-Shiny application works well for a production environment or the only option is C++. I make this question taking in account that R and C++ have a widely set of quant libraries that ...
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0answers
205 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 ...
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1answer
102 views

why bridgewater filing only shows 10 billion in AUM

bridgewater supposed to manage 200 billion, but it 13F filling only shows 10 billion in AUM https://fintel.io/i13f/bridgewater-associates-lp/2018-09-30-0 why is it?
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1answer
143 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 ...
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1answer
43 views

can a country replace its debt with a low interest loan?

Recently in my country, someone started a buzz in which he had plans to replace current debt of the country with low interest loans from other countries such as Japan. May I know if this is possible ...
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2answers
680 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 ...
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1answer
254 views

Natural Gas Modelling

In job adverts for natural gas/power trading it states knowledge of supply and demands models for these commodities. Does anyone know of any good papers or primers on S&D modelling?
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1answer
3k views

Fama MacBeth cross-sectional Regression

I am deeply confused right now and hope someone can help me out a bit. I want to replicate part of a paper from Fama/French (2008), Dissecting anomalies, specifically, Table IV "Average Slopes and t-...
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1answer
266 views

Limit order book cancellations

Is there any practical and academic interest in predicting which orders in a limit order book will be canceled? From a policy point of view are people interested in detecting potential spoofing ...
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1answer
49 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 ...
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0answers
28 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
108 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 ...
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1answer
4k views

What if CAPM cost of equity is negative?

Dear Community members, I calculate 5 years trailing beta using capm. After that I calculate estimated cost of equity. However, what I have is that most of the observations have negative cost of ...
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0answers
47 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 ...
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0answers
320 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 ...
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1answer
173 views

Replicating portfolios [closed]

Prices of a stock are modeled using a two-period binomial tree, with each period being six months. The continuously compounded risk free interest rate is 7 % The stock pays 2 % continuous dividend. ...
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2answers
157 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 ...
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0answers
59 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 ...
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0answers
88 views

Why do we require a continuous volatility calibration while pricing Options [closed]

On pricing Options the volatility surface is represented by a mathematical model (with parameters). What does it mean to calibrate the volatility surface How often has the volatility surface to be ...
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1answer
123 views

Cost of equity proper way of calculation

Dear Community members, I need to calculate cost of equity following the following description: (Please, correct me if I misinterpret the meaning) "The annualized cost of equity, re(t), is ...
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1answer
618 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 ...
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0answers
79 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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1answer
60 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 ...
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1answer
78 views

Using interest rate as a discount factor in dividend discount model

In this paper, Galí and Gambetti calculate the fundamental value of asset price by using policy interest rate as a discount factor. I was wondering if the policy rate can be used in this kind of ...
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1answer
35 views

How to measure the impact of regulation on fund fees?

I want to measure the impact of mandatory disclosure on inducements on fees. I thought about doing a difference-in-differences analysis around the date of the new regulation with mutual funds as the ...
0
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1answer
89 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: ...
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2answers
119 views

Distribution of data for GBM

I am running some Monte Carlo simulations with GBM on time series of commodity prices. First of all, the price data is annual between 1900-1950. I would firstly like to know if it is bad practice to ...
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0answers
20 views

Definition of Arbitrage [duplicate]

Definition. An arbitrage is a portfolio $H$ ∈ $R^n$ such that • $H · P_0 ≤ 0 ≤ H · P_1$ almost surely, and • $P(H · P_0 = 0 = H · P_1) < 1$. where $P_0$ and $P_1$ $\in R^n$ represent the prices ...
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1answer
795 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?
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1answer
147 views

Market, Limit and Cancellation orders

From the paper https://web.stanford.edu/class/msande448/2017/Final/Reports/gr4.pdf page 8, I need at least the limit and market order. I can easily find the full depth from dxfeed or algoseek, but I ...
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1answer
124 views

Separate market and limit orders from market depth/tick data

From the website https://www.algoseek.com/equities/, we can get a sample of the full depth market/tick data. From the paper https://arxiv.org/pdf/1710.03870.pdf page 8, I would like to extract the ...
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1answer
149 views

Cash Flow News and Discount Rate News + Return

I will appreciate If someone help me to understand how the final expansion is made. Specifically, how CF & DR are drived. This model is introduced by Chen et. al. (2013).What Drives Stock Price ...
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1answer
63 views

QQQ fillings history

I'm trying to find Invesco QQQ Trust fillings for 2001-2018 time period, at least top 10 by year, do you know where I should search?
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0answers
31 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 ...
3
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1answer
1k 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,...
4
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1answer
700 views

Struggling with tau in Black-Litterman

According to the omega formula in B-L tau is used in the Omega estimation to determine the degree of uncertainty given to views of the investor: So, if tau is given a low value then the inverse of ...
0
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1answer
81 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 ...
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1answer
173 views

CCAR Shocks Scenario

I was going through CCAR-2018-severely adverse market shocks file and under the tab: Equity by Geography, I found these shocks. I have two questions: 1) Whether the shocks to Vol points are in % ...
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1answer
136 views

Fama and French 1997 Cost of Equity

Dear Quantitative Finance Members, I was wondering if you can clarify me the following issue. I am trying to estimate the cost of equity following "Industry costs of equity" (Fama and French, 1997). ...
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1answer
64 views

What is considered the risk free rate? [closed]

I see some place reference the S&P 500 index (SPY) as the risk-free rate and other place reference the 10-year Treasury yield as the risk-free rate. Which one is the correct one?
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1answer
270 views

Negative VaR equivalent Volatility (VEV) and its meaning?

Can a VaR equivalent Volatility (VEV) as defined by KID/PRIIPS law be negative and what does it mean if it has a negative value?
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1answer
84 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 ...
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1answer
131 views

Questions related to Sharpe's return-based style analysis

I have been reading about Sharpe's return-based style analysis, which tries to determine the manager's exposure/effective asset mix to changes in the values of the asset classes. It does so by using ...

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