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Questions tagged [quantitative]

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2
votes
2answers
91 views

Carry vs Roll-Down on a zero-coupon IRS

I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap. Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
11
votes
5answers
933 views

Free or Relatively Less Pricey Quant Finance courses online

I am trying to figure out what all online Quant Finance courses are out there which are free or relatively less pricey? CQF is not less pricey Financial Engineering course on Coursera - Not so great ...
0
votes
1answer
58 views

Definition Of A Portfolio

I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ...
3
votes
1answer
90 views

Is there such a thing as resonance in economic underliers?

In physics the occurence of resonance is explained and widely understood in its linear form and subject to research in nonlinear resonance. Example for instance are resonant frequencies of objects. ...
1
vote
0answers
35 views

How should I interpret the (insignificant) coefficients of Fama-French 3-factor model?

I am writing a mid-term thesis on the Fama-French factor model. I have built 5 portfolios sorted by the Book-to-Market ratio. The first portfolio is the lowest-BM group and the last portfolio is the ...
0
votes
0answers
31 views

Negative drift when calibrating GBM parameters

Setup for question: Consider a basket of $N$ stocks $\{S^1, S^2, \dots, S^N\}$. For fixed strike $K$, each stock in the basket, $S^i$, follows the SDE $$dS_t^i = \mu^i(t) S_t^i dt + \sigma^i(K, t) ...
0
votes
0answers
30 views

Good benchmark for european Flexible asset allocation funds?

Flexible allocation funds usually do not state any benchmark. Because flexible funds allocations are dynamic and less constrained, determining an appropriate benchmark for the funds is challenging. I ...
0
votes
1answer
44 views

How do I calculate option payoff before its expiration date? [closed]

How do I calculate option payoff before its expiration date? For example, if I long a 6 month call with K = 11100, T = 0.5, p = 150, what would be the payoff of the option if I exercise it in 3 months ...
1
vote
3answers
925 views

Historical data resources for Indian market

What is the best source for historical EOD data for Indian stock market? The data from Yahoo finance for some companies is not up-to-date and Google finance doesn't provide adjusted close prices. What ...
1
vote
1answer
43 views

How is hypothesis testing work in population sampiling? [closed]

I am learning the basics of quant trading from quantconnect's tutorial Confidence Interval and Hypothesis Testing. I understood the first part of the article but I dont understand "Hypothesis Testing"...
4
votes
0answers
148 views

How to price the american options using local volatility

I have given with a surface of american option prices $C_{am}(T, K)$. From these american option prices the implied volatility surface is deduced. Now I want to find the local volatility $\sigma(s,t)$...
0
votes
2answers
143 views

Factor-Based Equity Investing [closed]

What is the simplest way (process) to develop a factor-based investing strategy with STOCKS? ...
1
vote
2answers
197 views

Are there any quant strategies which do not involve simultaneous buying and selling of two or more assets?

Whenever I read about quant strategies it leads me to stratergies which involve simultaneous buying and selling of two or more assets. Pairs trading, arbitrage, market neurtal or headging all these ...
1
vote
1answer
119 views

Longstaff Schwartz algorithm

I am new in finance, I have implemented the Longstaff Schwartz algorithm for pricing american otion - one asset (dimension = 1). My questions : Does this algorithm still efficient for a high ...
1
vote
0answers
73 views

Jacobs and Levy: Enhanced Active Equity Strategies

Hello to everyone I am writing because I am having a bit of tough time figuring out how to replicate the constraints for a Portfolio Optimization using the set up from Jacobs & Levy 2006 - '...
9
votes
2answers
1k views

What are the main market anomalies/inefficiencies detected in quantitative finance?

I wondered about the existence of a complete list of the anomalies detected in quantitative finance. Generally, a market anomaly or inefficiency is a asset price and/or rate of return distortion on a ...
0
votes
3answers
168 views

Combining Quantitative data with fundamental data

These day, there is relatively new phenomena of combining quantitative data and fundamental data called 'Quantamentals'. In this regards, I was wondering how to combine Four Essential Types of ...
1
vote
0answers
54 views

Quantitative model for investing in ETFs [closed]

I want to build a model for asset allocation of my own personal pension in ETFs across four main asset classes: equity, bonds, commodity and property. I am familiar with Python and the basics of risk ...
1
vote
0answers
347 views

FIX engines comparison

Need help, looking for some comparison between c++ FIX engines, like onixs, antenna and some fpga solutions. If anyone has experienced some of the named engines also would like to hear the ...
4
votes
3answers
239 views

Who trades exchange options in practice (Margrabe's formula)?

I'm currently studying the pricing of the exchange option. https://en.wikipedia.org/wiki/Margrabe%27s_formula While I can appreciate the theory, who actually buys these options in practice? Are ...
3
votes
1answer
370 views

Monte Carlo model with multiple assets step by step

Here are the following steps to calculate Monte Carlo VaR. I am learning how to proceed with each steps and I would need somebody who can explain. Do I have to create only 1 vector in step 4 (even if ...
1
vote
1answer
62 views

How to modify binomial tree to incorporate one more asset?

I wonder, what would happen if we use the binomial tree to price exchange option, an option to exchange one asset for another at the expiry date. Payoff is $\max(S_1-S_2,0)$ For instance, I have two ...
4
votes
1answer
88 views

Barrier Option from binomial tree

What is the smallest information structure that is required for using the binomial tree to calculate the price of a barrier (up-and-in) option? My gut feeling is any node below the node that reaches ...
1
vote
1answer
72 views

Why the spread is calculated on raw prices instead on the price changes?

I'm reading Quantitative Trading With R written by Harry Georgakopoulos. In chapter 6 he exposes a basic quantitative strategy based on setting up a stock spread and buy when it is below a lower ...
-2
votes
1answer
298 views

Is R suited for a Quantitative Finance executable application

I wonder if a R-Shiny application works well for a production environment or the only option is C++. I make this question taking in account that R and C++ have a widely set of quant libraries that ...
0
votes
2answers
288 views

question on XIRR (excel)

Let's say we have an initial investment of -10 on 1/1/2000, and from 1/1/2001 to 1/1/2018 (with annual payments on Jan-1 of each year for 18 years) we get a CF of +2 each year with a final payment of ...
1
vote
1answer
119 views

Cash Flow News and Discount Rate News + Return

I will appreciate If someone help me to understand how the final expansion is made. Specifically, how CF & DR are drived. This model is introduced by Chen et. al. (2013).What Drives Stock Price ...
-2
votes
1answer
373 views

How do I calculate the spot rate?

How can I calculate the rates to construct the curve? I was thinking to use the formula converting par yield to spot rate, but I am not confident about it. Please give some hints or working on how to ...
0
votes
1answer
39 views

Kenneth Frenches Data library return data to price data?

I have downloaded the industry portfolios from Kenneth Frenches data library, I am wondering if anyone knows where I can find the price data? Can I convert it even if I don't have a starting value? ...
2
votes
1answer
340 views

Fama French sorting

I am trying to calculate my own monthly fama french factors SMB and HML and I have a general question about a final screening act. I understand that to sort companies in june of year $t$ they need to ...
1
vote
0answers
64 views

How to calculate Market Return based on an own sample?

I have read several papers and am more confused than clearer about my problem after the reading. I am trying to validate my sample. I use the Schmidt et al. paper (2015) as a guidance to construct ...
2
votes
1answer
155 views

Why Arent There Long Rate Models?

You have short rate models, https://en.wikipedia.org/wiki/Short-rate_model, but there doesnt seem to be any long rate models. I find this weird as in options modelling you model the whole smile, not ...
2
votes
1answer
35 views

Deriving the long-horizon predictive regression and hypothesis testing

I am working on the long-horizon regression, $$y_{t,K}=\mu+\beta_1x_{1,t-1}+...+\beta_nx_{n,t-1}+e_{t} $$, where $$y_{t,K}=y_{t}+y_{t+1}+...+y_{t+K-1}$$ and there can be multiple x's. So I am ...
1
vote
0answers
193 views

Magnitude of the Diversification Ratio

How would I interpret the magnitude of the Diversification ratio? I know that the higher the number, the better, but is 1.1 massively different that 1.2? For example a sharpe ratio of 0.25 is ...
1
vote
1answer
68 views

How can I reproduce the experimental verification of the “False Strategy” theorem plot?

I recently came across the following blog post talking about the importance of back-testing overfitting, and a plot claiming to be an experimental verification of the False Strategy theorem. The ...
1
vote
1answer
91 views

Questions related to Sharpe's return-based style analysis

I have been reading about Sharpe's return-based style analysis, which tries to determine the manager's exposure/effective asset mix to changes in the values of the asset classes. It does so by using ...
1
vote
0answers
101 views

Zipline issue with SPY data

I have written a strategy to backtest in zipline, and every time I ran the backtest, and error is showed with the line: IndexError: index 0 is out of bounds for axis 0 with size 0 After a bit of ...
7
votes
2answers
443 views

Quant teams predicting the World Cup

It is a good tradition of the quant teams of the major banks to predict the World Cup. As an example see this new paper from Goldman Sachs: The World Cup and Economics 2014 (Brazil will win by the ...
2
votes
1answer
87 views

Sigma moves - annualize return or no?

This might be a very simple dumb question. But when you look at a security's annualized volatility over a 3 year period, assuming the security has an annualized vol of 5% and the drawdown over three ...
0
votes
1answer
108 views

Using Normal Distribution to forecast active return

I wanted advice on how to go about forecasting active return via a standard normal distribution, The asset is a security with annual volatility of 6%. The benchmark is a 5% annual return with 0% ...
4
votes
2answers
905 views

What is time-varying risk premium? Forecasting stock returns

I am trying to understand the concept 'Time-varying aggregate risk premium'. Here is an extract from a Forecasting book, written by Rapach and Zhou, "However, rational asset pricing theory posits ...
0
votes
1answer
78 views

performance attribution - security selection= wB*(Rp-RB) or wP*(Rp-RB)?

Really confused. Finding various different ways of calculating security selection alpha. I believe it matters from whose perspective one is looking at. I am a portfolio manager and I want to know ...
5
votes
0answers
232 views

Bayesian strategy selection

I have N strategies/signals that I would like to allocate to. I want to estimate an estimate of future performance based off of recent realized performance (momentum of strategies per se - e.g. ...
1
vote
0answers
108 views

Explanation and Application of Quantile Regression of Value-At-Risk

Self-learner here. Please, excuse me if I am asking a Question already answered, but the explanations that I find online, just seem to be a bit hard for me. I am currently trying to apply the Basel ...
3
votes
0answers
107 views

How can we price an option taking into account the “issuer risk”?

I'm trying to take a closer look to option pricing in a risky environment. Let's say a firm $A$ sells me an (European) option on an underlying $S$ (which of course can be any other financial product ...
8
votes
1answer
718 views

Theoretical limits for contango and backwardation

What do you think would be the theoretical limit for contango? What about backwardation? This was asked in an interview. I am still not so sure about the answer.
2
votes
1answer
381 views

Method to combine trading signals to achieve higher sharpe

There are a few thread with the question of methods to combine different trading signals/strategies. But is there any method that can ensure that by combining two signals, we can achieve a better ...
2
votes
1answer
757 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 ...
-1
votes
1answer
67 views

Multi-Factor Beta Help

I'm supposed to find a risk factor that could explain a stock (I chose Netflix) returns. Then, I am to calculate the beta with respect to the factor I suggested as part of a multi-factor model with ...
5
votes
1answer
421 views

The Heston Solution For European Option - Jim Gatheral

I have this equation (Eq. (2.4) "The Volatility Surface - A Practitioner's Guide" by Jim Gatheral (Ed. 2006)): $$-\frac{\partial C(v, x, \tau)}{\partial \tau}+\frac{1}{2}v \frac{\partial^2 C(v,x,\tau)}...