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Questions tagged [finance]

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0answers
130 views

Programming language to compliment Finance degree [closed]

I've read a few questions regarding this, but want some new (more recent) opinions. I'm in the process of pursuing a degree in Finance, complimented with some Math and a sprinkle of Computer Systems. ...
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0answers
129 views

How can we observe volatility smile from the market. Drawbacks of Heston Stochastic Volatility Model

Here are two questions related to implied volatilities. a) The set up here is for an European option. We can get its implied volatility smile from calibration, the question is why could we also ...
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1answer
209 views

Time-Value of money exercise problem. Any advice on how to solve?

Problem An investor will receive $365 at the end of each year for thirteen years. The first payment will be received four years from now. Given that the interest rate is 3%, the present value of this ...
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0answers
45 views

Calculation of IRR [closed]

How do we calculate IRR if I have an investment that allows me to buy into 10% of a company @1m and the first year is a negative cash flow of 200,000 but the subsequent years till year 10 is a ...
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0answers
1k views

How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: $$L=PMT \left[ PV(0.01,12,1) + \frac{1.075}{1.01^{12}}PV(0.01,12,1) + \frac{1....
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0answers
44 views

what do metrics and indicatives mean in the finance context? Like trading of MBS products

it's often heard in my daily work as a programmer in an investment bank, supporting mortgage backed securities desks (passthrough, agency cmo, cmbs, etc). My take is that the terms describe the ...
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0answers
57 views

What is the difference between a three month return and a quarterly return?

I am looking at VGENX, and this product has first-quarter and three-month returns of 7.8% and 20.3%, respectively, according to zacks.com. I take it as the three month return is calculated taking into ...
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0answers
73 views

A question about spot rate forward rate and swap rate [closed]

A term structure is given as follows. The market convention is compound interest, that is, the present value of one unit at time T is...
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1answer
138 views

Potential Arbitrage profit or proof problem

So the question asks: Consider 4 following European call and put options with the same maturity time: Call option with strike price $100$ sell for $45$ Call option with strike price $110$ sell for $...
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1answer
39 views

YOY Comparison?

I have 2 numbers: Average monthly sales volume for 2015 (Jan to Dec): 1,000 Average monthly sales volume for 2016 YTD (Jan and Feb): 1,200 If I want to compare these 2 numbers with a % change, is ...
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0answers
1k views

How to backtest Value at Risk Models using Conditional and Unconditional tests?

I am trying to carry out backtesting on a number of Value at Risk figures i obtained using var/covar, historical, and monte carlo simulation. The two methods im using are the Kupiec test (...
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0answers
117 views

Generating financial data

I am trying to generate monthly stock data using a one-factor model: $$R_{a,t} = \alpha + BR_{b,t}+\epsilon_{t}$$ The description says: $R_{a,t}$ is the excess asset returns vector, $\alpha$ is the ...
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1answer
1k views

Cost of revenue vs SG&A [closed]

How do cost of revenue and SG&A compare (across industries)? For cost of revenue, one definition is "the cost of manufacturing and delivering a product or service". Assuming my product is beer, ...
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0answers
81 views

Calculate and compare IRR among products and companies

I am trying to calculate return on investment for a couple of companies and their respective products. I have two main products: credit card installment loan Owners would like to be able to compare ...
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0answers
81 views

Shrinkage Estimator giving unrealistic portfolio variances

I have a historical covariance matrix which is invertible for daily and monthly returns. I used the Ledoit,Wolf shrinkage estimator for the covariance matrix and now I get really small portfolio ...
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0answers
314 views

GARCH estimation does not work, error in my returns?

Hey everyone and I hope that there are some smarter people out here that can help me out with my problem...: I have trouble with my implementation of a GARCH(1,1) model and I do not know how to move ...
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0answers
145 views

where can I get the intraday data for S&P 500

I am trying to analysis the price of S&P 500 during the flash crash in 2010. Where can I get the data?
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2answers
145 views

Compound Interest Calculation (Years + Months)

My question is with regards to the calculation of "Compound Interest". I have the formula below where I would get an answer to the total value of the investment over a period of "years". $A$ = Future ...
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0answers
42 views

Annuities problem

First problem is like this: loan amount: 20,000,000.00 First six months: There is no payment but there are interest (grace period) Next six months: payment of 600,000.00 Since 13 month: payment of ...
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0answers
123 views

Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned 9%...
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1answer
208 views

Question regarding sinking fund

I am currently studying about financial mathematics for my Exam FM to become an actuary. There is one thing that really bothers me so I would like to have some answers. Whenever I solve a problem ...
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0answers
97 views

How to calculate the growth rate of a growing annuity? [closed]

I have a question that seems basic but has given me fits. If I have the following known variables, how do I solve for the growth rate? Known variables: initial payment outstanding balance number of ...
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0answers
63 views

What is the future value of a growing annuity with different periods for payment growth and monthly payments?

How can I modify the formula in this answer so that the frequency of payment growth is also a variable? For example, instead of payments growing by 2% each year I would like them to grow 2% every two ...
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0answers
79 views

how to find CVaR/AVaR for triangular fuzzy no

While going through different methods of risk measure i came across AVaR/CVaR, while i was calculating AVaR/CVaR in credibilistic environment using VaR, i got stuck in the calculations eg. For ...
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0answers
102 views

Intensity Function of Stochastic Processes

I'm fitting some financial data to a model based on a stochastic process and evaluating the fit of it by looking at the compensator. However, I cannot understand well what does it mean to take the ...
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1answer
58 views

Which more topic should be covered in my undergraduate program? [closed]

Below is the topics covered in my undergraduate economics program. I want to know which course should I take to get a full overview of topics in finance today. Econometrics Micro, Macro Economics ...
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2answers
469 views

Basis Risk for Futures/Options

I am just reading about basis risk. It is being described as risk of the price of the hedging instrument not fluctuating the same as the instrument itself. I was just wondering, if we bought a ...
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0answers
306 views

Quadratic utility function

May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function $U$. This simply means that $\mathbb{E}...
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1answer
143 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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1answer
629 views

How to calculate break-even point of merged plant/company?

The question goes like this : ...
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1answer
237 views

What is a “monetary non-event” for a corporation?

Not "non-monetary event" because that would make too much sense. I've never really seen this kind of a question before, but someone asked me that question because they didn't know what it meant either,...
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1answer
97 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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2answers
254 views

Duration vs. Convexity Contradiction

A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM. A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
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1answer
326 views

how to extract moments of GB from moment generating function?

I'm searching for the moments of geometric brownian motion using the gmm optimization program. the aim is to make the process y(t) of returns follows a normal distribution Are there any packages in ...
0
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1answer
128 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
312 views

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(...
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1answer
387 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 ...
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1answer
409 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 ...
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1answer
111 views

Calculating historical Bond returns

How would you calculate historical bond returns using bond prices? Would you treat bonds just like shares ? Thanks
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1answer
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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1answer
55 views

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 ...
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2answers
288 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 ...
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1answer
48 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 ...
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1answer
88 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 ...
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1answer
91 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. ...
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1answer
39 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 ...
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1answer
43 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 ...
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1answer
45 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 ...
0
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1answer
46 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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1answer
74 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 ...