Questions tagged [modeling]
The modeling tag has no usage guidance.
227
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Model/Formula for normalized trades per day over long term growth?
Trying to do a project to best model trades per day of a given stock (MSFT) but the exponential model using Log and sklearn linearregression() is giving poor results. I want to use this to predict the ...
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Climate Models in Banking - what modeling are banks currently doing?
I'm mostly interested in knowing what banks are doing in Ireland and other Western European countries.
I know, from Google searches, that banks are currently doing climate risk stress-testing, but I'm ...
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Modelling support and resistance using sde
This initiative was sparked by the identification of cointegrated pairs, fitting them to an OU process, and devising an optimal strategy based on the OU process—areas that have already been well ...
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Models for tick-by-tick / high-frequency data
I've spoken to one or two persons at some market making shops, and I'm under the impression that for modelling tick data, aside from the rise of ML, a pure jump process such as the variance gamma ...
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Loan modelling using Opensource risk engine (ORE)
The problem is to calculate the cash flow schedule for a simple fixed rate loan where principal amortization periodicity is not equal to interest payment periodicity. For example, amortization is ...
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Pricing non-vanilla options on EuroStoxx50 dividend futures
Liquid vanilla EuroStoxx50 dividend futures options quoted on Eurex are calls or puts whose expiries are the same as the expiry of the underlying futures contract.
Is there any "simple" ...
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Is there a common way that level 2 and time & sales data are analyzed together?
Let's say that for a single asset, we have a data stream from which we receive both level 2 order book updates (price level/quantity updates) as well as time & sales updates (grouped recent trades)...
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Target variables in high frequency trading [closed]
Given that we are a market taker (removing liquidity from the limit order book through market orders), what should we be trying to forecast?
It seems like the most pertinent thing for us to forecast ...
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178
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How are order book and trade data consolidated/distilled into a more(?) tractable form for modeling?
Let's say that there's some asset traded on an exchange and that, for this asset, I have access to a snapshot of the limit order book (price level and quantity for bids and offers) and subsequent ...
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Is there daily SPX level data going back to 1927?
While attempting to model the SPX index over time, I found a source here that purportedly has historical daily SPX data going back to 1789 which very likely seems to be backcasted since the ~500 stock ...
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References/Direction on what functional of wealth to optimize for a given goal?
I seem to have gotten stuck trying to approach trading strategy development from a financial mathematics(?) perspective.
To start, let:
$T \gt 0.$
$\mathcal{T}$ be a closed non-empty set of $\mathbb{...
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How to calibrate an O-U process based on historical data?
Background: I have been working on my master thesis project for the last few months and gave the final presentation on the 2023-06-01. As a part of the master thesis project, I did a complete ...
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Is there a general approach to predicting future (vanilla) option prices in practice?
I realize that this question may be verging on asking for the proprietary/"secret", so if suggestion of a general approach that doesn't divulge details isn't really possible, I understand.
...
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Term Structure Modelling - Why model the state prices and not an asset or rate
When modelling stocks we specify the model in terms of the dynamics of the stock itself (e.g. in Black-Scholes, Heston and SABR - often denoted $S$).
However, as I am reading about Term Structure ...
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how to estimate Geometric Brownian Motion parameters on long timeseries [closed]
I'm working on a 50-years financial timeseries and I would like to simulate GBM paths from it.
The first thing I'm supposed to do is to estimate the drift $\mu$ and the volatility $\sigma$ parameters.
...
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Is there any utility to being able to predict an assets current price?
I was playing around with some models, and I'm able to predict a stock's current price based on the current prices of other stocks. This model is extremely accurate, although I can't see any use of ...
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Fitting model between security price and intraday volatility
I'm trying to construct a model which shows how much the closing price of a security ($P_t$) differs from the VWAP of that security on that day ($VWAP_t$). I'm calling this measure the "VWAP ...
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Applying the Gordon stock model when there is one change in the dividend growth rate [closed]
Below is a problem I did. I am hoping somebody can confirm I did it correctly, or tell me where I went wrong.
Problem:
ABC Corp. has just paid a dividend of \$3 per share. You—an experienced analyst—...
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149
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Separating jumps and diffusion
I want to model energy prices. I have two markets, lets say market 1 and 2.
Market 1 is continuously traded, and I will assume it follows brownian motion. So the value of the asset could be defined ...
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Methods of predicting liquidity consumption
Let's consider limit order book for a certain stock. By liquidity consumers i mean traders that buy/sell shares using market orders.
What are the known methods/models for predicting total amount of ...
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Replication of results shown in 'Empirical Asset Pricing: The Cross Section of Returns' by Bali, Engle, and Murray
I'm currently trying to reproduce some results shown in the book 'Empirical Asset Pricing: The Cross Section of Returns' by Bali, Engle, and Murray. More precisely, I try to compute Table 7.3 and 9.1. ...
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141
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What are the most common methods to model fat tails in the changes of asset prices?
I was wondering what the most common, or most popular, ways - in both academia, and industry - there were to model the fat tails of volatility in asset prices changes.
I am presuming a basic Brownian ...
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Why would exchange rates follow a geometric brownian motion?
I'm reading Shreve's Stochastic Calculus for Finance.
On page 382, he begins talking about exchange rates:
Finally, there is an exchange rate $Q(t)$, which gives units of domestic currency per unit ...
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Out of Sample Results Decay Rapidly With Prediction Window or Embargo
So I am beginning to dabble my toe into quantitative finance and am trying to validate some model results and am having difficulty thinking about what they tell me.
Here's my situation: I'm trying to ...
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Understanding out-of-sample performance metrics for Realized Volatility
I fitted several models on a realized volatility process and then proceeded to obtain out-of-sample results. I'm struggling to interpret these results apart from to tell model A seems better than ...
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Does anyone have all of Paul Wilmott's "Spreadsheets and VBA" files?
I couldn't find it on his website and the only ones I have are the files contained in the Introduction to Quantitative Finance's CD.
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Can an IRS have a different payment calendar by leg?
I have to model IRS in an IT system and I have a question related to this modeling.
Can an IRS have a different payment calendar by leg ?
Thanks and regards
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How to estimate lambda from NAGARCH submodel in R
I am trying to estimate the model="fGARCH", submodel="NAGARCH" from the rugarch package in R.
However, when I am estimating the parameters, only omega, alpha, beta and gamma are ...
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Is it a problem that there are so few stocks in the generalized Black Scholes market? [duplicate]
In the standard Black Scholes market there is only one stock. In the generealized market there can be a finite amount, but my impression is that there are few stocks in the market. The real world ...
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Reconciling Two Claims About Volatility Under Fat Tails
I have read the Wikipedia article on volatility, and Nassim N. Taleb's Incerto, and found two statements attributed to Mandelbrot's views, which appear to be in contradiction.
Taleb (who was mentored ...
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Generalized Linear Mixed Model (GLMM) for the probability of default of corporates
I work in the financial industry and we want to implement an internal rating model for our clients (think corporates large or mid , banks etc. some listed on an exchange some others not).
We want to ...
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106
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Non-fixed stationary "conversion"
Dear users of StackExchange,
I was wondering why the log returns of a fixed period of time is such a common use in "transforming" a time series into a more stationary one?
I thought that ...
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Do we model stock prices using non-Markovian processes in continuous setting?
In a continuous setting, is it common to model stock prices using non-Markovian processes ? If so, do you have some examples of models ? Or is Markovianity something "embedded" in the ...
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How do I deal with nonexistant data in a time series with an irregular frequency?
I am trying to do some time series analysis on the margin resulting from three specific commodity futures contracts and ultimately forecast the margin. The margin is calculated as M = F1 + F2 - F3. I ...
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In Lopez de Prado's Advances in Financial Machine Learning, what is meant by "unnecessary labels"?
In Lopez de Prado's Advances in Financial Machine Learning, Chapter 3, Prof. Lopez de Padro talks about dropping rare labels:
...
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Kalman Filtering theory and application in Finance models under asymmetric or incomplete information
Why do we need Kalman Filtering theory in dynamic models in finance when we consider an environment of asymmetric or incomplete information? I understand that this has to do with the update of the ...
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Which exact interest rate should I use for valuing equity index futures (ie. SPX, MXEA)?
I'm trying to build a model that values futures for equity indicies like SPX. For example, this product link here. I know that the model is simple (please correct me if I'm wrong):
$$
S_{T} =S_{0}e^{(...
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Other statistical financial modeling textbooks like Risk and asset allocation by Attilio Meucci
I recently read about the book (Risk and asset allocation) written by Attilio Meucci and I found those statistical modeling and inference methods quite robust in my point of view, although there are ...
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Should stock return series be modeled with a parametric distribution, or an autoregressive function? [closed]
If I have prior knowledg that a stock return series follows a parametric distribution, such as a Student t-distribution with 4 degrees of freedom, without actively looking for prior knowledge of ...
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Mean Reverting Heston Model?
Is there a name for a variation on the Heston Stochastic Process Model where not only the underlying volatility but the asset price itself is mean-reverting? I'm looking to model long term equity ...
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What are different types of response variable we can consider while developing quant model
I was trying to understand the response variables used in the quantitative trading/investing model development. This question may not look good but I searched on google and could not find results. ...
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Why do we not use copula for forward starting options?
Why do we use copulas for spread options but do not use them to correlate random variables across time, such as in the forward starting option?
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Quantifying Mortgage Refinance Incentive: Why define the Refi Incentive as the log of Mortgage Rate/Market Rate
I'm reading this research article, where they are using survival analysis to study mortgage prepayments. In this article they define the mortgage holder's incentive to refinance as: $Refi = log(Mr_t$ $...
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PnL due to model recalibration and its relationship with hedging error
Consider the case where at t=0, I calibrate my model to the market, but at t=1 my model is no longer able to recover the price in the market, so it needs recalibration. Say I have delta hedged my ...
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In your experience, when trying to predict something that occurs, do you model with a fixed time period?
Let's say you are building a simple model (like the classroom examples) of trying to predict, given past information, if the stock goes up or down in the future. One could, like in classroom examples, ...
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Do different prices under different models admit arbitrage?
There are many models for interest rate. If two people use two different models to price the same interest rate derivative, and come to two different prices, doesn't that admit an arbitrage? How ...
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How are Autocallables modelled?
What models are used to price autocallables ? Should we talk about Heston/SABR models which talking about this topic ? Any reference link is welcome.
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Is there a good book/blog on applying statistical methods in finance? [closed]
I am learning a lot of tools in statistics, but I am having a hard time figuring out where I could apply these methods in finance, especially in relation to investment and trading.
Is there a good ...
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Searching for two papers of H.Leland with regards to capital structure
I am searching for two papers of H. Leland which I assume previously were online, as many published papers have cited them.
The first work (Lecture notes) extends the Leland(1994a) model by ...
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Calibrate a model parameter with an error function
Suppose I want to find the implied volatility using an option model from market prices. Surely I can find the implied volatility for each strike price ($k$ different strike prices) for a given ...
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