Questions tagged [models]
The models tag has no usage guidance.
176
questions
1
vote
0
answers
61
views
Cheyette Model vs Markov Functional Model
Just like to understand more about the model difference between 1d-Cheyette Model vs 1d-Markov Functional Model.
Is there a model difference betweeen these 2?
0
votes
0
answers
52
views
Simple short rate model that generates ZCB skew
Which is the simplest short rate model that generates ZCB vol skew ?
I want to use it afterwards and do simple "on paper" qualitative development about its dynamic(I don't need a model I can ...
0
votes
0
answers
22
views
Estimating expectation from a Markov chain process with AR(1) framework and stochastic volatility
I have a stochastic volatility model of a commodity price as follows:
...
0
votes
0
answers
115
views
What is wrong with my HAR model - constantly increasing?
I am trying to code the HAR (and eventually the HARQ) from Bollerslev et al 2016 and Corsi 2009.
$$
RV_t = \beta_0 +\beta_1 RV^d_{t-1} + \beta_2 RV^W_{t-1}+\beta_3 RV^M_{t-1}+u_t
$$
Bollerslev ...
0
votes
0
answers
69
views
Derive the Probability of Default (PD) of private companies with Merton Model
Do you know a well used method how to calculate the PD of private companies using the Merton Model.
The main challenges I am facing is to get the appropriate volatility of the assets and the drift.
...
1
vote
1
answer
96
views
Identify upcoming stock price gaps in Implied Volatiltiy (quant / standardized approach)?
What you often obeserve in implied volatiltiy are higher levels of implied volatility for upcoming events like earnings or presentation of pharma data. For a human being which collects manual the ...
0
votes
0
answers
97
views
Validity of Bermudan Swaption's Price/Greeks
I'm implementing a lot of stochastic models on my own for fun and I'm quite puzzled about the usual procedure concerning the correctnes of Bermudan swaptions prices and greeks ? How can you tell that ...
0
votes
1
answer
80
views
Adequate model to payoff
Consider a payoff that pays a certain amount N of a vanilla Call (underlying: S, Maturity= T, strike:K). Every semester date Ts before T, if S>K(Ts), then N is increased by 1.
This product seems ...
0
votes
1
answer
113
views
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—...
9
votes
3
answers
942
views
A question about the Grossman-Miller Market Making Model
I don't have any solid background in finance, but I have a strong mathematics and physics background.
I am reading Algorithmic and high-frequency trading from A.Cartea, S.Jaimungal and J.Penalva, CUP (...
0
votes
0
answers
64
views
Italy Zero Coupon Yields
I am looking for historical data for Treasury bills and bond yields for Italy on a monthly or daily basis. Where can I get this data?
1
vote
1
answer
475
views
Expectation of the negative exponential utility function for a Grossman and Miller model
I have the standard $3$-period Grossman and Miller model with $2$ outside traders and $M$ market makers.
I'm told:
$W_t^{(1)}, W_t^{(2)}, W_t^{(m)}$ is the wealth of the first outside trader, second ...
6
votes
0
answers
122
views
What are the requirements for no arbitrage to exist in a chaotic/dynamical system?
Consider the continuous dynamical system
$$\alpha\ddot{S}+\dot{S}=\mathcal{F}(S,t),$$
such that $\alpha\in\mathbb{R}$ and $\mathcal{F}$ is real and analytic. We assume that if a solution for $S$ ...
8
votes
0
answers
270
views
Seeking criticism of model assumptions
I have been trying to publish a new calculus and options model for seven years. I have been consistently desk rejected, so what I am trying to do is get criticism of my assumptions because they ...
0
votes
1
answer
136
views
Heath Jarrow Morton Framework
Can someone please explain Heath Jarrow Morton framework ? Why do we use it ? I understand the logic between equilibrium models and no arbitrage models but i'm struggling to understand the added value ...
2
votes
1
answer
276
views
Put-call parity on SPY
I'm currently trying to model the IV curve for calls and puts on SPY using the Black-Scholes model with dividends. I'm able to calibrate the risk-free rate and dividends so that both ATM IVs match, ...
10
votes
2
answers
1k
views
Risk Model Validation
I have such a general question regarding risk model validation. Which tools are most often used for validation and how does the process work? Could you recommend any books that focus on this topic?
0
votes
1
answer
82
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 ...
0
votes
0
answers
58
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
votes
1
answer
391
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
votes
1
answer
314
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 ...
-2
votes
2
answers
295
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 ...
0
votes
1
answer
101
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.
8
votes
1
answer
1k
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 ...
1
vote
0
answers
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 ...
0
votes
0
answers
55
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
votes
2
answers
100
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 ...
0
votes
1
answer
91
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
votes
2
answers
273
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
1
vote
0
answers
149
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 ...
0
votes
0
answers
64
views
Quantitative Model classification
In the world of Quantitative model risk management, can you please tell me what is Model 1 type, ...
0
votes
1
answer
78
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
vote
1
answer
247
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
vote
1
answer
107
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
vote
1
answer
164
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
1
answer
100
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 ...
0
votes
0
answers
121
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
votes
0
answers
214
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 ...
2
votes
1
answer
600
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 $$\nu(x)=C\frac{e^{-Mx}}{x^{1+Y}}1_{x>0}+C\frac{e^{-G|x|}}{|x|^{1+Y}}1_{x<0} $$...
0
votes
0
answers
117
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 ...
4
votes
1
answer
637
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 "...
-1
votes
2
answers
86
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
votes
1
answer
216
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 $\...
3
votes
0
answers
577
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
vote
0
answers
45
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 ...
0
votes
0
answers
166
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 ...
1
vote
0
answers
59
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 ...
1
vote
1
answer
165
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 ...
1
vote
1
answer
104
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 ...
1
vote
0
answers
78
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++ ...