Skip to main content

Questions tagged [financial-engineering]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
0 votes
0 answers
32 views

Example of a simple transparent indexed annuity?

I am working on a University project where I need to provide a 2-page overview of An indexed annuity, which uses zero coupon bonds and options; the underlying of the options are a broad market index. ...
Peanutlex's user avatar
  • 153
0 votes
1 answer
59 views

For a trade to occur, should the ask price EXACTLY match the bid price, down to the last decimal point? [closed]

I had a doubt when going across the ways in which a trade happens. I have read that fora trade to happen, the buy order's price (bid) must match the sell order's price (ask). Now, what happens, if ...
PhotonicSauce's user avatar
2 votes
0 answers
171 views

How to apply a funded equity collar to illiquid stocks?

I investigate a specific case of the funded equity collar [1]. Let's assume that counterparty $A$ already has a stake in share $XYZ$ and wants to get funding out of it from a bank $B$, which does not ...
Acapulco's user avatar
1 vote
0 answers
53 views

Can I extend the private information model of Kyle in in a continuous analogue, e.g. the Ornstein–Uhlenbeck process?

Taking into account an old post of maths.stackexchange, I recall the following: On the one hand, we know that the Ornstein–Uhlenbeck process can also be considered as the continuous-time analogue of ...
Oliver Queen's user avatar
1 vote
0 answers
116 views

Speeding up Cutting Edge Quantitative Models on GPUs? [closed]

I have a very strong interest in the use of GPUs in quantitative finance, and am in search of algorithms/simulations/models that can have their runtime heavily reduced by GPU computation. What models, ...
GPUMan's user avatar
  • 11
1 vote
1 answer
124 views

Martingales and Arbitrage in Multiperiod Securities Markets

I have been reading the paper "Martingales and Arbitrage in Multiperiod Securities Markets". The paper works in the probability space $(\Omega, F, \mathbf{P})$. $X$ is defined as the set of ...
Ramesh Kadambi's user avatar
1 vote
0 answers
165 views

Questions on the calculation of time series momentum

I read Moskowitz, Ooi, Pedersen's Time series momentum (2012). The ex-ante volatility estimate (equation (1) in the paper) is I am not sure about the period of the return reflected in the volatilty ...
Yoosang  Lee's user avatar
1 vote
0 answers
90 views

Mechanism design in continuous time models

I am interested in mechanism design and information design. Is there any part of the literature in financial mathematics that is associated with them. I mean could we bring somehow these topics under ...
Nav89's user avatar
  • 173
0 votes
0 answers
68 views

Is there a financial instrument that is exposed to the change in growth of an asset over time?

Is there a financial instrument that is exposed to the rate of change of the value of a specific asset? If I believe a stock price will continue to grow in the future, but grow more slowly than in the ...
CountOfTuscany's user avatar
0 votes
0 answers
122 views

Brownian Bridge from timestep 1 to timestep @ expiration, proper mathematical way to generate

When I was learning finance, we didn't cover the subject of Brownian Bridges. So I am trying to learn the proper way of generating paths when you have an arithmetic Asian option which has an ...
Matt's user avatar
  • 137
0 votes
1 answer
59 views

Evaluating principal and interest at different points in time [closed]

Consider simple interest and suppose we have a certain principal and interest at t=7 months, we want to find the value of that amount of money when t=3 months. I would like to do it in two different ...
Gabriele Privitera's user avatar
0 votes
1 answer
228 views

Can you use the Svensson model to fit a smoothed curve for yields on coupon paying bonds rather than spot rates?

i've been struggling to find an answer to this question online, I know most applications of the model are used on zero (aka spot) rates. But could you use yields from a sovereign yield curve (i.e ...
Guest 123's user avatar
1 vote
0 answers
128 views

using moment matching to price spread options (multi asset)

this is my very first question in this forum, after having been a greed follower since a few years, feeling that I need your help in a topic. I need to price a multi asset option that has the ...
TraderBruceWayne's user avatar
1 vote
1 answer
774 views

What's the interpretation of the probability of default implied from CDS spreads?

What's the time horizon of the probability of default implied from a CDS spread? Given CDS = PD*(1-R), if I use a 5yr CDS spread in the formula, is the implied PD the probability that that name ...
Student's user avatar
  • 361
1 vote
0 answers
187 views

How to Show an Arbitrage Opportunity Exist From a Market-Linked CD?

A bank issues a market-linked CD that guarantees the original principal with an interest at an effective annual rate of 2%, plus 70% of the percentage gain on the ABC Inc. non-dividend-paying stock ...
Matthew Farant's user avatar
5 votes
1 answer
2k views

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?
Qwerty's user avatar
  • 179
0 votes
0 answers
157 views

Hedging costs and BS-price

I'm looking at the chapter, "The Greek Letters" in Hull's book (Options and derivatives...) and in particular the paragraph "Dynamic Aspects of Delta Hedging". He demonstrates two ...
noob-mathematician's user avatar
0 votes
1 answer
415 views

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. ...
Bryant's user avatar
  • 11
3 votes
5 answers
941 views

bank issuing structured products

"The investment banks supplying structured products were effectively buying options from investors" How to understand this quote from this source? I would think the investors are usually had (long) ...
tennisboy's user avatar
  • 331
0 votes
1 answer
221 views

What is the R code for estimating copula parameters of BB1 with dim=2? And what's the code for gof test of BB1?

Kindly assist with R code for BB1 copula. Text books and research articles provide codes for clayton, gumbel, frank, normal and t copulas. However, I can't find code for BB1, the copula family ...
user44687's user avatar
-1 votes
1 answer
132 views

What model to price interest rate option if we have views on trend of forward interest rate?

Apart from classical Black-Scholes model which assumes that forward interest rate is (log) normally distributed, what kind of pricing tools can we use as a buy side? We have good estimation on how ...
Shong Rico's user avatar
0 votes
1 answer
2k views

Forward Contract Price on Zero Coupon Bond

I'm trying to calculate the forward contract on a zero coupon bond where the forward contract matures at t=4. The zero coupon bond matures at t=10 and has a face value of 100. The price of that bond ...
jwedmore's user avatar
2 votes
0 answers
65 views

Information asymmetry models

I am searching for some textbook in financial mathematics that presents information asymmetry models (maybe more advanced models), so as to make some practice. Does anbody know such a book?
Nav89's user avatar
  • 173
1 vote
1 answer
70 views

Asset prices Boom,Bust and Recovery cycles

Is there any systematic way to detect the Boom, bust and Recovery cycles in Asset Prices ? Are there any good references about the Topic ? Thanks in advance.
Neemo's user avatar
  • 11
4 votes
1 answer
156 views

Exposure/Factor Analysis on a loan portfolio?

I am working on performing factor analysis on a loan portfolio. This is my understanding so far, and I was hoping that some of the smart folks here might be able to chime and guide me through this ...
Rob's user avatar
  • 141
3 votes
3 answers
208 views

Can an individual hedge inflation that exceeds CPI-U?

Is there a way for an individual (i.e., excluding institutional tools and using only consumer products) in the U.S. to hedge inflation over the long term greater than that measured by CPI-U? ...
RCafe's user avatar
  • 49
1 vote
0 answers
386 views

Credit default swap replication by corporative bonds

I want to get literature or information related with the topic of CDS replication for those counterparties that do not hold. But that have traded bonds (with different degree of liquidity). What could ...
Rodolfo González Alves's user avatar
2 votes
0 answers
163 views

Pre-requisites for Finance Mathematics

I would like to pursue research in the areas of Financial Mathematics. Hoping to look into Operations Research, Risk Management and Stochastic Modeling. Anyone got some suggestions on useful resources ...
DestructiveStudent19's user avatar
1 vote
2 answers
145 views

Paper recommendation with examples

Could you please advise me some papers/working documents with applications mainly focused on Fixed Income/Financial Engineering (Numerical Methods) as the one in the link below? Preferably on Matlab, ...
TryingtobeQuant's user avatar
3 votes
1 answer
307 views

To what extent are Lévy processes used in financial engineering?

I know that (time changed) Lévy processes are actively researched in the academic world, including tools such as minimal entropy martingale pricing measures and fast Fourier transforms. To what extent ...
Rodolfo Oviedo's user avatar
3 votes
1 answer
790 views

condition of risk neutral pricing

The theorem says if $U$ is a numeraire and let $\mathbb{Q}^U$ be the corresponding measure. Then for every tradable asset $S$, the relative price $S_t/U_t$ is a martingale under $\mathbb{Q}^U$. But I ...
Lookout's user avatar
  • 257
3 votes
1 answer
8k views

continuously compound forward rate formula

I want to derive the continuously compound forward rate formula according to FRA. fixed rate is $K$ and notional is $N$, $\delta=T_1-T_0$. $t<T_0<T_1$, the FRA holder at time $T_1$ need to pay ...
Lookout's user avatar
  • 257
2 votes
2 answers
349 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 ...
Ivan's user avatar
  • 123
1 vote
0 answers
75 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 ...
Ivan's user avatar
  • 123
0 votes
1 answer
256 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: ...
ebrahimi's user avatar
  • 115
5 votes
4 answers
2k 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 ...
user1050421's user avatar
1 vote
1 answer
657 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?
SinusK's user avatar
  • 33
1 vote
0 answers
181 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 ...
SinusK's user avatar
  • 33
3 votes
3 answers
13k 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 $S_t$. ...
Daneel Olivaw's user avatar
-3 votes
1 answer
344 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
MSR's user avatar
  • 3
1 vote
1 answer
252 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(...
SinusK's user avatar
  • 33
4 votes
1 answer
1k 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 ...
user113156's user avatar
2 votes
1 answer
293 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,...
peter5's user avatar
  • 45
0 votes
0 answers
72 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 ...
Stoner's user avatar
  • 205
2 votes
0 answers
726 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 ...
aalberti333's user avatar
-4 votes
1 answer
379 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 ...
tktktk0711's user avatar
1 vote
0 answers
142 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!
Cryptex's user avatar
  • 11
1 vote
0 answers
203 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 ...
Trajan's user avatar
  • 2,532
0 votes
1 answer
618 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) - ...
user25844's user avatar
  • 365
3 votes
1 answer
843 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 ...
Deb's user avatar
  • 353