Questions tagged [finance]
Finance describes the management, creation, and study of money, banking, credit, investments, assets and liabilities as well as the systems to handle these instruments.
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Interpretation of Value at Risk
Let $X$ be a Loss random variable (Positive values of X represents Losses) and let $p \in (0,1)$. I know that the Value at Risk at level $p$ of $X$ is defined as:
$$VaR_p(X) = inf{\{x \in \mathbb{R} : ...
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Why a probability distribution can be viewed as a price?
in this paper :
at page 111, left part, we pass from the distribution p to price p. But I don't see why it's the case. I've searched, and it seems like we can see the LMSR as a n Arrow-Debreu ...
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Portfolio Risk Contribution
I came across a paper that shows calculations for two types of portfolio risk contribution. The first shows "Asset risk contributions" and the second shows "Correlation-weighted asset ...
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MATLAB or Python as starting language? [closed]
I have a fairly rigorous background in mathematics (last year of my undergrad in Pure Maths), and I have been exploring the world of Quantitative Finance as I explore what I might be able to do with ...
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Calibration Hull-White
This is more a conceptual question around calibration. My objective is to calibrate a 1-factor Hull White model, and my question relates to calibrating a and sigma (both constants) to swaptions.
Let's ...
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Calculate VaR using method of historical simulation
A bank invests € $1.000.000$ in a hedge fund. The last 500 daily returns can be taken from a database. The worst 20 returns are
-4.58 -2.95 -2.95 -2.93 -2.17 -2.08 -2.06 -1.98 -1.94 -...
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Do I break any law/agreement by answering/asking question on how vendors (Murex,Sophis,etc) do pricing? [closed]
I doubt it is legal, as I never saw any open access information about any vendor. But, maybe somebody can pinpoint me to some clear answer. Thanks!
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Derivative Pricing of an Asset
The Stochastic Differential Equation that models the change in an asset price is
$$
dS = (12S-sin(S))dt+\frac{\sigma S}{S^2+1}dX
$$
where dX's are random variables drawn from standard normal ...
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Reinforcement learning in finance
In brief, what are some mainstream and recent applications of reinforcement learning in finance that fall outside of the usual scope of agent-based modeling?
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Please help me understand this dataset regarding stock prices
I am supposed to predict column E but I cannot figure out what any of these columns mean. The information provided with the dataset is as follows:
column A: past 28 week slope value
column B: past 48 ...
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Should the sharpe ratio always change with number of assets?
I am trying to understand if the Sharpe ratio of a portfolio change if we increase or decrease the number of assets in the portfolio. It would be helpful if you could provide an explanation with ...
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Should I calculate a spread using stock prices or the ratio?
So I am creating a trading algorithm thats uses cointegration, for a pairs trading strategy. Imagine there is stock A for 100 dollars and stock B for 25 dollars. My questions is when caulcating the ...
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Is there any relationship between General Electric's after-tax charge and their reserve deficit?
I posted a question last year trying to understand what a "Charge" is:
What exactly does after tax "charge" mean?
But I came back to this GE story and realized I still don't quite ...
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I’m trying to construct a binomial model that uses 2 risky model - number of steps varied
So with this question I am unsure how to even do a binomial model with 2 risky assets never mind having n-steps. All the examples I’ve found are either not containing any risky assets or only have one....
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How can you interpret one of the parameters of optimal consumption at the Merton portfolio problem?
Statement: Let the dynamics of wealth of the agent satisfy
$$dX_{t} =
\pi_tX_t\Big(\mu dt+\sigma dB_{t}\Big)- c_t X_t dt, \qquad \textrm{with}\quad X_0=x_0 \in \mathbb{R},$$
where $(\pi,c)$ is an ...
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Swap curve is unsmooth at front end with naive interpolation
I am looking at swap curve building at front end and find it difficult to get a smooth forward curve with a fast generic algorithm. For example, EUR 6m curve has 6m deposit, and then a series of FRAs (...
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Quantlib Yield Curve given spot and forward rate
Is it possible to create a yield curve, given the spot rate and the forward rate?
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Inverse Covariance Matrix Transformation from CAPM
Beginning with the CAPM model we have (with a risk free rate of 0%):
$r_i=\beta_i (r_m)+\varepsilon_i$
with $\varepsilon_i$ the diversifiable risks per assets
The variance matrix:
$\Omega = \beta'\...
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Portfolio Weight Constraints
Hi,
So I was asked to calculate the maximum sharpe ratio using solver in excel but it gave me really big numbers for the portfolio weights. So I was wondering what is a good constraint to add and why ...
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EONIA 3 MONTHS or LIBOR 3 MONTHS
due to a calculation I have to make I need the OIS 3 MONTHS for the ECB. I tried searching for data for 3 months EONIA but I could not find anything.
Can someone help me with this? if not can I use ...
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Option percentage quotation for structured products
I am having some trouble to understand how option premium can be a percentage for structured products.
For example, in an Equity Linked Note, let's say the bond part cost 80% of notional we have 20% ...
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Why different compounding in interest rates
This is more a philosophicalquestion than a financial question, let me explain.
There exist different types of interest rate (Annual Interest rate, Semi-annual interest rate, monthly interest rate, ...
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What are good machine learning projects for a senior student? [closed]
I'm a senior year student, I study software engineering, I recently started with a machine learning tutorial, I want a machine learning projects that are not hard to make and at the same time good for ...
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Linear programming optimization problems in finance
I'd like to know what are, if any, the applications of linear/non linear programming optimization techniques for financial markets.
I'm a business major, and I want to find an argument for my thesis ...
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What is "signal" in quant investing?
Can somebody explain (and give examples) of "signals" in quant investing? What are those? What does this word mean?
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garch(1,1) Annualised Volitility with python
I am trying to calculate the annualized Volatility of given returns for a stock with Garch(1,1) on python using a code I found online. The value I should be getting is around 27, but the value I am ...
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Is a company's exact debt structure publicly available to investors?
I am relatively new to investing and would like to look into some of the details of a few companies. As one example, we can use DAL.
To assess the financial future of the company, it would be ...
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Reason to hedge a European call option
Assume I write a call option on one share of the stock that I have. After selling the option I have an obligation to sell one share of the stock at some future time. I already have the stock, why ...
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Equilibrium in the Kyle (1985) model
In his 1985 paper, Kyle presents 3 versions of the same model: a single period model, a multiple period model and the continuous time limit of the multiple period model.
When he formalizes the ...
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What currencies has LIBOR historically been offered in?
The Wikipedia article on LIBOR says:
In 1986, the Libor initially fixed rates for three currencies. These
were the US dollar, British pound sterling and the Deutsche Mark. Over
time this grew to ...
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Is it possible to match talib's RSI results down to machine precision using just python?
I want to match talib's RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar.
...
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The distribution of mean reversion time from the OU process
I was reading the paper Statistical Arbitrage in the US Equity Market and I couldn't understand the figure that plots the histogram of the empirical distribution of characteristic time to mean ...
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Learning and applying Quantitative Finance successfully as an individual instead of a team
In the past few months, I became really interested in using machine learning techniques in the realm of quantitative finance and trading. I made a few rudimentary models and I immediately realized how ...
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How to compute portfolio returns when constructing a dollar-neutral portfolio
I am trying to wrap my head around this statement:
dollar-neutral portfolios are built: dollar amounts of both long and short positions are equal. Furthermore, it is also true at the stock level: ...
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Entry points to finance for Applied Mathematics (Numerical Analysis/High Performance Scientific Computing) PhD Student [duplicate]
I'm looking to go into quantitative finance after my phd in around 2 years. With a background in pdes/numerics/heterogenous and distributed computing, I think my skill set is applicable in this area, ...
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How do I calculate the real taxes paid from 10-K forms
I guess we are familiar with the discussion, whether companies especially tech companies are paying their due in taxes. There was the huge discussion of Amazon paying nearly no taxes, using loopholes ...
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Can we think of Overnight Index Swaps as short-term IRS?
OIS are a series of fixed-rate cashflows discounted at the overnight rate, swapped for overnight (floating) rate.
IRS are similarly discounted fixed-rate cashflows, swapped on an IBOR-floating rate.
...
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Correcting high AR(1) coefficients in dynamic Gordon model
I have just finished my thesis on a heterogeneous dividend expectations model applied to the COVID-19 crisis. However after receiving some feedback there is one last issue I want to resolve. I'm using ...
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Mutual fund performance over time
I am a little bit stuck with my dissertation thesis, so help will be greatly appreciated. I am trying to analyze the performance of different mutual funds, which I have classified according to ...
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Looking for a Book which can summaries last 20 years of economics [closed]
What I would like to read is how the economic spectrum have changed over the period ( Central banks policy decisions , QE 1/2/3 , ECB TLTRO, BOJ unlimited stimulus ). How the central bank dealt with ...
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What are the advantages and limitations of predicting future stock prices using stochastic differential equations?
Recently I came across the following stochastic differential equation that "predicts" the value of a given stock:
\begin{equation}
dS_t = \mu S_t dt + \sigma S_tdW_t \\
S_t(0) =S_0
\end{...
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Arbitrage strategy from Arrow Securities
I had this exercise and I calculated the prices of the Arrow Securities, π1 = 0.5 and π2 = -0.2. I know that π2 is not arbitrage-free because -0.2 < 0, but I do not understand that how to interpret ...
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How to calculate basis swap fair spread Using Quantlib 'floatfloatswap'?
I am trying to calculate a single currency basis swap by using the Quantlib floatfloatswap function.
Please advice if I am doing wrongly.
...
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May someone please explain the intuition behind the Black-Scholes Equation?
Consider the Black-Scholes equation for a European Call Option,
\begin{equation}
\begin{cases}\frac{\partial V}{\partial t} + \frac{1}{2}\sigma^2 S^2 \frac{\partial^2 V}{\partial S^2} + r\frac{\...
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List of finance firms
Is there a definite list of finance firms that I can download or scrape? I tried using python to scrape from US News but I couldn't access the server.
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Spread determinants
Knowing that bond A is more liquid that bond B, i.e higher volumes are traded on bond A, does this information have any impact on the spread? Can we say that the large volumes traded on A will ...
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Expected return rate greater than required return rate [closed]
I am a beginner to finance, today I found a question looks very simple that I am not quite sure about it.
Question: Given I am paid \$50,000 now, growing at $6\%$ per year for a total of 10 years, ...
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How does negative performance of a portfolio constituent affect its weight?
This is an easy question, I hope.
Suppose we have a swap A with a long position, which, originally, has a weight of 30%. Over time, it has a positive performance of 3%, meaning we have a multiplier ...
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How can I find the payout ratio for this company?
I am doing this question that I couldn't find the payout ratio.
For you, company equity beta is unknown, it has a target i.e. current debt to book equity ratio: 0.5 and target debt to market ...
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How to calculate 5 EMA
I am trying to understand the basics of finance indicators. I have made 15 minute ohlc candles for the past 50 days.
Now if I try to calculate 5EMA, my doubt is ...
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