The financial-engineering tag has no usage guidance.
0
votes
4answers
160 views
Determine the right order size with market making strategy
In a market market strategy https://web.stanford.edu/class/msande448/2017/Final/Reports/gr4.pdf, how can we determine the right order size? Assuming I use a market making strategy and on a specific ...
1
vote
1answer
64 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?
0
votes
0answers
33 views
Return / yield of an ATM-Call Option on a zero coupon bond
The zero-coupon bond with unit face value and maturity S for a call option with maturity T and strike K is given by:
The bond prices $P(t,T)$ and $P(t,S)$
$$\begin{aligned} ZBC(t,T,S,K) = & P(t,S) ...
1
vote
0answers
45 views
European Call Option Modelling under 2 factor Hull White interest rates
I have modelled the yield curve through the two factor Hull White Model. Now I want to implement in Matlab the price development of a ATM-Call-Option (European).
Has someone an idea how to combine ...
1
vote
2answers
306 views
Funded equity collars and margin loans
There is an article in the Financial Times today concerning equity funded collars [1]. The equity collar structure is used by a counterparty $A$ which wants to build up a position in a stock $S_t$. ...
-4
votes
1answer
70 views
What is martingle measure with risk free asset in numeraire or stock price in numeraire [closed]
What is martingle measure with risk free asset in numeraire or stock price in numeraire
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0answers
49 views
Reverse convertible note
When a bank sells a reverse convertible note, what does the bank do in order to generate the pay-off at maturity? Does the bank sell or buy put options? Thanks in advance.
1
vote
1answer
211 views
Modelling interest rate
Hi I want to model two stochastic integrals in Matlab, which is given by
$ x(t) = x(s) e^{-a(t-s)} + \sigma \int_s^t e^{-a(t-u)} dW_1(u)$
$y(t) = y(s) e^{-b(t-s)} + \eta \int_s^t e^{-b(t-u)} dW_2(...
2
votes
1answer
407 views
CAPM and factor modeling: Machine learning
Excuse my ignorance with this I am still trying to wrap my head around the interpretation of the Fama French 1992 factor paper.
I come from a computer science background but I am interested in ...
0
votes
0answers
40 views
Scenario Generation in GAMS
Suppose we have the dataset from https://finance.yahoo.com/quote/%5EIXIC/history?period1=1068652800&period2=1510502400&interval=1wk&filter=history&frequency=1wk which consists of ...
1
vote
1answer
127 views
eurodollar future
I just found out about eurdollar futures and I am confused.
A eurodollar future contract is defined as a cash settled future based on a Eurodollar Time Deposit having a principal value of USD $1,000,...
0
votes
0answers
68 views
Is there a mathematical way of showing the slowing down of economic markets?
I'm currently taking a introductory mathematical finance course in university and recently on the news (BBC, etc), it states that the economic markets are shown to be slowing down for the next few ...
2
votes
0answers
305 views
stochastic modeling and machine learning [closed]
For a little bit of background, I've been studying stochastic calc and a few of it's applications (currently I'm still at the early stages of learning applications) and have been curious as to whether ...
-4
votes
1answer
215 views
python: How use the S&P 500 index to predict japan stock,namely timezone issue
I want to use American stock index, such as S&P 500 index(open, close...) to predict japan stock daily close price or other with machine learning. I found that there is timezone between japan and ...
0
votes
0answers
29 views
How does a liquidity guarantee for Asset-Backed commercial paper used to finance a Conduit work?
A liquidity guarantee was what a lot of banks used to insure outside investors payments if an asset in a Conduit defaulted. The way they were doing it was not really dispersing the risk evenly ...
1
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0answers
70 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!
1
vote
0answers
96 views
Why is shorting (oil) futures a bit of a negative gamma trade?
From this article, http://www.zerohedge.com/news/2017-01-22/oil-speculators-have-never-been-long,
"I get what you're saying about the price risk which is always the danger of shorting crude oil it's ...
0
votes
1answer
249 views
How to price a quanto basket option?
EDIT:
Maybe there is no way to get explicit solutions for basket options (maybe the Black-Scholes differential equation can't be solved directly ??).
Q3: How do you price and hedge ( S1(T) + S2(T) - ...
1
vote
1answer
320 views
Step by Step Guide to Learn Quantitative Finance [closed]
Can some one help in creating step by step guide to learn Quantitative Finance?
The suggestions should be in the lines of
1- Which Maths topics needs to be learn 1st
2- Which Maths Books or ...
0
votes
1answer
47 views
For discrete models, the existence of strong arbitrage is equivalent to a particular self-financing strategy
Background Information:
This question is from Lectures on Financial Mathematics: Discrete Asset Pricing.
Question:
Prove that for discrete models, the existence of a strong arbitrage is also ...
1
vote
1answer
86 views
All martingale measures price the attainable claim equally
Background Information:
This question is from Lectures on Financial Mathematics: Discrete Asset Pricing.
Theorem 3.2 First Fundamental Theorem of Asset Pricing - Suppose $\nu$ is any measure such ...
2
votes
1answer
137 views
Where can I find ideas for strategies? [closed]
Every book I read refers me to many other books, there is practically no way I can read all this text in my life time. Once and for all, where is the best place to fish for ideas?
0
votes
1answer
132 views
Show that there exists a fully invested portfolio such that the covariance between their returns is zero
Background Information:
I came across this question in chapter 2 of Active portfolio Management by Grinold and Kahn. It pertains to the efficient frontier which is displayed below:
Question:
If $...
-3
votes
1answer
91 views
What is the value this “special” forward contract at maturity?
Background Information:
I am not sure this is relevant:
Terminal value pricing:
If the derivative $X$ equals $f(S_T)$, for some $f$ then in the value of the derivative at time $t$ is equal to $V_t(...
1
vote
1answer
127 views
Simple simulation model of bond plus cash returns
Is there a robust way to model 'bond plus cash' simulated returns, say in Excel, for an asset allocation problem between stocks vs bond plus cash?
For equity, ...
0
votes
1answer
54 views
If there is an inconsistent pricing strategy then by defintion we have strong arbitrage
Background Information:
An Inconsistent pricing strategy is a self financing strategy $\phi$ with $V_T(\phi)= 0$ and $V_0(\phi) \neq 0$
A strong arbitrage is a self-financing strategy $\phi$ with $...
3
votes
1answer
187 views
How to prove we have a $\mathbb{Q}$-Brownian motion?
Background Information:
This question comes from the book Financial Calculus by Baxter and Rennie. WE start with looking at the marginal of $W_T$ under $\mathbb{Q}$. We need to find the likelihood ...
0
votes
1answer
65 views
Do we have a Brownian motion
Background Information:
The process $W = (W_t:t\geq 0)$ is a $\mathbb{P}$-Brownian motion if and only if
i) $W_t$ is continuous, and $W_0 = 0$
ii) the value of $W_t$ is distributed, under $\mathbb{...
0
votes
1answer
111 views
Showing the discounted stock is a martingale
Background Information:
This question follows from here
It is tempting to write $$V_0(X) = \beta\left[\left(\frac{\beta^{-1}S_0 - S_1(d)}{S_1(u) - S_1(d)}\right)X(u) + \left(\frac{S_1(u) - \beta^{-1}...
2
votes
1answer
138 views
Law of One price and the Inconcistent pricing strategy
Background Information:
A market satisfies the Law of One Price if every two self-financing strategies that replicate the same claim have the same initial value.
An inconsistent pricing strategy is ...
1
vote
1answer
102 views
Formula for conditional expectation. Related to the Fundamental Theorems of Asset Pricing
Let $\lambda$ be a probability measure on $\Omega$ (finite), with filtration $\{\mathcal{F}_t\}$. Define $\nu(X) = \lambda\left(X\frac{d\nu}{d\lambda}\right)$, where $\frac{d\nu}{d\lambda}$ is a ...
0
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1answer
45 views
Verifying value of claim as an expectation
Background:
We have so far taken the bond B to be deterministic for simplicity, but some reflection shows that this is not in any way necessary. Everything works out the same way with a stochastic ...
3
votes
3answers
262 views
How to understand nonrandom/random process in Shreve book? [closed]
I have been reading Chapter 4 of Shreve's Stochastic Calculus for Finance II.
It is easy to understand the simple process, $\Delta(t)$, defined on Page 126, which is just a constant inside a given ...
2
votes
1answer
34 views
Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$, does this have to do with weights?
Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$ for each of the investment projects, where the returns $K_1, K_2$, and $K_3$ depend on the market scenario:
$$...
2
votes
1answer
272 views
Books on financial instruments?
Can you please tell me some good books to learn in detail about all financial instruments available in the market today ?
1
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0answers
86 views
Need help understanding basics of cash flow engineering
I'm studying Financial Engineering, a subject I'm completely new to.
I'm using Principles of Financial Engineering 3rd Edition and trying to solve the exercises ...
0
votes
1answer
105 views
What is some book that is complete and easy but hard enough to serve as prerequisite for asset pricing and portfolio choice theory?
What is some book that is complete and easy but hard enough to serve as prerequisite for asset pricing and portfolio choice theory by kerry back?
I wonder how come a beginning graduate textbook is so ...
2
votes
1answer
91 views
Why there are almost no book for revenue analytic?
Why there are almost no book for revenue analytic?
By revenue analytic, it is meant to be predicting the revenue of a firm in the future
1
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0answers
37 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 ...
1
vote
1answer
188 views
Financial Mathematics essay topic
I have a mathematics background and I am currently doing a Masters in Financial Mathematics. I am required to write an essay in a financial mathematics area but I have little knowledge about it since ...
1
vote
2answers
365 views
Feature Selection Effect on Deep Multi-Layer-Perceptron for Financial Applications
I am trying to build a machine learning system for financial price prediction.
I am using a 3 layer MLP (a deep network) with 3 outputs (buy,hold,sell).
I am using different features such as price ...
-1
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1answer
1k views
Difference between Total Long Term Debt and Net Total Long Term Debt
What is the difference between Total Long Term Debt and Net Total Long Term Debt?
Below you can see a picture revealing that they are not equal.
7
votes
1answer
458 views
Use of Girsanov's theorem in bond pricing
Assume that we want to calculate the time $t=0$ price of a bond:
$B(0,T) = E_P[\exp(-\int_0^T r_s ds)]$,
where $r$ is the interest rate following the SDE
$dr_t=k(\theta-r_t)dt+\sigma dB_t=b(r_t)dt+\...
5
votes
2answers
311 views
Itô diffusion processes in finance with unknown distribution at a terminal value
In several papers it is argued that for many Itô diffusion processes,
$$dX_t = a(t,X_t)dt+b(t,X_t)dB_t,$$
in mathematical finance the distribution of $X_T$ for fixed $T>0$ is unknown, which makes ...
12
votes
6answers
17k views
Why non-stationary data cannot be analyzed?
Searching online, i found out that non-stationary cannot be analyzed with traditional econometric techniques as in case of non-stationarity some basic model assupmtions are not met and correct ...
3
votes
0answers
653 views
Test for stationarity and make use of non-stationary points in financial market?
I have two questions to ask:
What are the best methods to determine stationarity in a financial market (such as stocks) using MATLAB?
What methods would you recommend to use in order to change from ...
4
votes
0answers
387 views
Rate Distortion Minimization in a Python Clustering Algorithm
I'm attempting to solve for $\hat{k}$ clusters, such that the rate distortion is minimized, as described here, however, the answers that I am getting from my algorithm are not following the "Jump" ...
3
votes
2answers
531 views
Where can I find exercises on building a project finance spreadsheet?
I'm looking for a set of exercises that teach how to build a project finance spreadsheet.
I accept there may be no typical project finance, but there are a lot of principles are shared in common ...
9
votes
1answer
633 views
Quantitative before/after or financial engineering studies of a bid or ask tax?
Has anyone in the quantitative finance or financial engineering community studied the effects of a bid or ask tax with actual or simulated data?
If so, what were the quantitative results or ...
11
votes
1answer
479 views
Fixed income modeling
I am currently working on my research paper and trying to explain a two-dimensional variable: volume and instrument of corporate debt financing.
Independent variables that I believe must be included ...
