Questions tagged [models]
The models tag has no usage guidance.
163
questions
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61 views
Why are implied parameters preferred over expectations of future implied parameters?
For example, when we price options on assets under the Heston model, we often compute the volatility of the volatility of the price of those assets implied by the market at time $t=0$ using the market ...
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33 views
Algortihm for distributing volume for 1min candle
Context: I have historical 1min prices for stocks, including premarket. However, when importing real-time data, the standard practice in the financial data industry is to give only OHLC (open, high, ...
0
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1answer
85 views
Geometric brownian motion small timesteps high volatility
I'm trying to generate some sample geometric brownian motion paths for an asset which is traded 24/7 without interruption and is highly volatile (upwards to 150% implied volatility on options markets)....
3
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1answer
92 views
Non-constant Volatility of the Volatility in Stochastic Volatility Models
In pricing financial derivatives, we often first assume that the volatility of the stock price is constant.
$$\mathrm{d}S(t) = \alpha S(t) \mathrm{d}t + \sigma S(t) \mathrm{d}W(t)\text{.}$$
The ...
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10 views
Calculate core deposit bucket percentages
I need to forecast core deposits in a commercial bank. One technique that I saw consists in dividing the amounts in buckets and applying a percentage to each bucket to obtain the core deposit.
For ...
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2answers
223 views
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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1answer
37 views
Margin Requirement model for CCP and non-central cleared OTC derivatives
What the models for computing margin requirement for central counterparty (CCP) and non-central cleared OTC derivatives.
7
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1answer
221 views
Bermudan Swaptions - Payer vs. Receiver (LGM)
There is abundant literature discussing the pricing of Bermudan swaptions and the relevance of single-factor Markov-functional models (e.g. LGM) versus multi-factor market models (e.g. LMM).
From a ...
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22 views
How to decide which sentiment analyzer is the better model?
Assume one has trained different sentiment analysis models that assigns sentiment scores to the financial news or documents. How would one should approach testing the different models and decide which ...
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0answers
43 views
Model Documentation role [closed]
first timer here,I received an 'inmail' on linkedin from a recruiter regarding a role in model documentation team as part of the quantitative modeling and analytics department of a 'global bank'. The ...
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51 views
Career Advice Model Documentation Role (What is it exactly? and transition to wider quant role in future, can't find info online) [duplicate]
first timer here,I received an 'inmail' on linkedin from a recruiter regarding a role in model documentation team as part of the quantitative modeling and analytics department of a 'global bank'. The ...
0
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1answer
43 views
References on cashflow modelling for private equity
I would like to build a model to predict capital calls and distributions of a private equity fund.
The first question is: does any of you can address me towards the state of art for it? also machine ...
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78 views
Which interest rate model is the most popular
Hey on wikpedia (https://en.wikipedia.org/wiki/Short-rate_model) there are quite a few short rate models listed, but which models are the most commonly used now? Because such simple models as Vasicek ...
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1answer
46 views
Approach for studying price gaps in US equities
A price gap is defined as any day when the high / low / close price bar for that day does not overlap the previous day’s high / low / close price bar. I am interested in studying stock price gaps ...
4
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2answers
223 views
what does the cover page of Guyon and Labordere's Nonlinear Option Pricing represent?
It could be a bit offtopic, but I don't see the link between the contents of the book and the cover page.
Thanks
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0answers
45 views
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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60 views
Quantitative Model classification
In the world of Quantitative model risk management, can you please tell me what is Model 1 type, ...
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1answer
43 views
Can I dynamically change hyper-parameters of a model?
Question
Can I apply different hyper-parameters for different training sets?
I can see the point of using the shared parameters but I cannot see the point of using shared hyper-parameters. The ...
1
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1answer
173 views
Stochastic volatility Levy models
Hey I have some questions about stochastic volatility for Levy processes. If I understand correctly, if we change the time in Levy's process by CIR process, the newly received process is not Levy's ...
1
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1answer
79 views
modelling FX with crosses: USD conversion on entry and exit, or just exit?
I am backtesting a model that trades currency crosses (i.e. EurGbp) at a fixed $1 mln per trade and was curious if I need to a) account for my currency exposure to GBP on both ends of the trade or b) ...
1
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1answer
65 views
Loan level model to understand drivers of mortgage prepayments
I am following up from my question here. As described there, I'm trying to assess the drivers of CPRs for a type of MBS. However, I want to understand, how a loan-level model of such a relationship ...
1
vote
1answer
74 views
How to set up data for understanding drivers of prepayments
I would like to understand the drivers of prepayment of a certain sector of MBS. I have some explanatory variables that I think would explain the actual CPR's and want to model the prepayments through ...
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0answers
112 views
Is there a framework to study quantitative model robustness/uncertainty?
Can you point me to any resources about a possible framework to analyse and possibly quantify model uncertainty and -robustness associated with quantitative investment models?
As an example, there ...
3
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0answers
114 views
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 ...
1
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1answer
174 views
Interpretation of parameters in the CGMY model
I would like to understand role of parameters $C,G,M,Y$ in CGMY model, especially $G$ and $M$. The Lévy measure is $$\nu(x)=C\frac{e^{-Mx}}{x^{1+Y}}1_{x>0}+C\frac{e^{-G|x|}}{|x|^{1+Y}}1_{x<0} $$...
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108 views
Inter-temporal structural stability of stock markets
For my bachelor thesis I am trying to determine structural stability of some stock market in the following way:
Identify an ARMA model for the whole sample
Split the sample in two parts, and estimate ...
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0answers
233 views
Calibration and comparison of the Vasicek model and Ho-Lee model
I would like to calibrate the Hoo-Lee model and the Vasicek model to a historical interest rate series and compare the interest rate development of both models with the historical interest rate series....
4
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1answer
416 views
What does it mean that model can reflect the ”volatility smile”
I know that implied volatility is the value for which the Black Scholes model returns the correct option price. I also know that if we plot the volatility on the strike price chart, we will see "...
0
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2answers
70 views
I just got Matlab, what are some options that I should model in a jump diffusion
Don't worry I understand mathematics: ito's calc, martingales, etc. I am just curious what options I should test, and from what indices. Is there stuff I can test from the 2008 crash to measure their ...
2
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1answer
179 views
Is it always better to use the entire distribution of a financial returns series, not just $\mu$ and $\sigma$?
In finance models that use historical returns for inputs, including option pricing models, forecasting and portfolio optimization, only the statistical moments of the returns distribution, $\mu$ and $\...
2
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0answers
203 views
Market Making Formulation
I'm developing a deep reinforcement learning based approach to market-making. In order to implement this, I need to define the appropriate actions and define environmental steps. While doing some ...
1
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0answers
31 views
What's the industry standard/typical way to model contango or futures spreads?
If you want to include futures spread either as a response or predictor, I would imagine you also need to include time to expiration somewhere in your model.
What is the industry standard way to ...
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0answers
89 views
Does anyone have codes that would solve the multi-period Kyle model?
Whenever I begin working on something new, I like to find existing examples of how things are done so that I can double check at least the basics before moving on to more complicated problems.
I am ...
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0answers
56 views
Why are cashflows “modelled backwards in time”?
A am currently reading a manual on how to use some actuarial modelling software to project the expected liability payments made under an annuity contract. In this guide, the following statement is ...
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1answer
99 views
Overview of frequentist, likelihood and Bayesian approaches to finance problems
In quantitative finance tasks (asset pricing, portfolio optimization, option pricing, volatility forecasting, etc), there are frequentist, likelihoodist and Bayesian approaches or interpretations to ...
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0answers
47 views
Modelling considerations for a jump model
The Problem:
Suppose I have a simple jump model for an asset price
$$ dS = S(t-)[\mu dt + YdN(t)] $$
where $N(t)$ is a Poisson process and $Y_i$ are the jump sizes (assume independece of $N(t)$ and ...
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0answers
66 views
Anyone got references where we can find examples of codes for agent-based simulations of financial markets?
I'm looking for references with codes for trying out simple agent-based simulations for modeling financial markets. I mostly worked with MATLAB and R, but I know a bit of python and I am learning C++ ...
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2answers
77 views
Closing prices are predicted very well but returns are predicted poorly
I'm learning some time series analysis and forecasting techniques, I've tried to predict stock prices for Netflix but I'm very confused.
At first I've tried Auto ARIMA which gave me a straight line, ...
0
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2answers
83 views
Is it possible to build a computer model to simulate a market to prove whether efficient theory is true or not?
I know this may sound stupid. But I had this idea and wanted to try it out for a college project.
Has this been done before?
If and what's wrong with this idea?
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2answers
790 views
Hedge backtesting: ex-ante Beta vs observed Beta (is this even possible?)
A global equity portfolio has for objective to outperform a benchmark (MSCI World). I hedge the sensitivity of the portfolio to MSCI World (the beta) so that only the alpha remains unhedged.
The ex-...
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0answers
29 views
How to model the different returns of agents with different information information
For a seminar, I would like to graphically represent the returns made by agents of different information standpoints. In other words, say I have a market tuple $(\Omega, \mathbb{F}, P,S)$ where $S$ is ...
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0answers
61 views
How does modeling provide an edge to banks in the derivatives space?
I was thinking about the actual need for creating quantitative financial models, especially for derivative products. Consider simple calls and puts for different strikes and expiries on stocks and ...
4
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4answers
220 views
Does the non-causal nature of quant models limit their applicability?
I understand that to describe financial data, we build stochastic models and calibrate their parameters to past data. When coming up with new algorithms, we rely on rigorous backtesting to convince ...
3
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1answer
85 views
Are Lévy processes absolutely continuous?
If $X_t$ is a Lévy process, is it absolutely continuous? Meaning, does it have a density?
1
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1answer
51 views
Which models have non-smooth densities?
By smooth, I mean a density $f$ that lies in the space $C^\infty$, infinitely differentiable.
Are there, in the literature, some known models where the underlying density of the state process is non-...
1
vote
1answer
124 views
CEV Model Primer
Could someone please point out to a good primer on CEV model?
I am trying to get a basic grasp of the model: The dynamics, advantages & disadvantages, for which payoff it is usually used (Hybrid ...
0
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2answers
80 views
How and why is there a restriction on short sales?
I'm taking a course on the fundamentals of financial mathematics. This is my first quantitative finance course, so I'm still getting acquainted with a lot of the ideas.
We covered the notion of a ...
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2answers
162 views
Are densities used in finance square integrable?
Let $f$ be the density of the stock asset under some model (Heston, SABR, Black Scholes, Variance-Gamma, etc).
Is $f$ square-integrable in these models?
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1answer
547 views
Vasicek Model Parameters Estimation
I'm currently trying to estimate the market price of risk (lambda) in the Vasicek Model, and am running into difficulties.
Using the Excel Solver tool and the Maximum Likelihood Estimation method ...
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0answers
197 views
Which finance models have enjoyed particular success in recent years?
I am looking for a list of recent developments of models in mathematical finance. By recent, I mean this last decade.
Which models have been developed and introduced during this period, being met ...
