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Questions tagged [quants]

For questions *about* being a quant, akin to questions on programmers.SE vs. SO. Includes soft questions, career-related questions, questions about best practices, etc.

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Do we need a risk premium for the assets in the binomial option pricing model?

Section 1.4 of Mark Joshi's book illustrates with a simple example, the idea that "the market will only compensate investors for [systemic risks]", which are not diversifiable (or) hedgeable....
Doubting Bird's user avatar
1 vote
0 answers
41 views

Issues with Calibrating Intensity Functions in Illiquid and High-Volatility Markets for Market Making

I am calibrating intensity functions for bid and ask spreads using the Guéant–Lehalle–Fernandez-Tapia model from Olivier Guéant's "Optimal Market Making" paper. However, I'm facing issues ...
Mel Sel's user avatar
  • 11
0 votes
0 answers
61 views

Stochastic optimization for day trading

Suppose we have a forecast of price changes for a set of assets and we want to day trade based on it. I'm guessing this would involve some kind of stochastic optimization - with presumably a decision ...
Opt's user avatar
  • 101
0 votes
1 answer
60 views

Maximze Sharpe ratio from matlab to python [closed]

I know there matlab library funtion for Optimzing Sharpe ratio estimateMaxSharpeRatio, it mentioned it use direct method How can i do the same thing in python Is there any python libraries Or need ...
andy's user avatar
  • 1
1 vote
0 answers
74 views

First Post | Resources to learn Algo Trading/ Quant Development [closed]

I have been working as a full stack dev for the past 3 years and I am looking to learn Algo Trading and Quant Dev. Can someone help me with the resources, books, articles and what tech/languages ...
Shubham A's user avatar
0 votes
1 answer
136 views

What journals on SSRN are relevant for quants?

According to ... What are the best Journals & Conferences in Quantitative Finance? ... SSRN is a good place to keep track of latest developments in quantitative finance. However, SSRN has a lot ...
JakcieJnr's user avatar
  • 131
0 votes
1 answer
225 views

Breaking down gamma PnL by time

Let's say in one day time, underlying price S goes up by $2.4. Then the gamma PnL should be $\frac{1}{2}\gamma_0 (2.4)^2$. Let's assume that in every hour the underlying goes up by $0.1. Then how do ...
crr1210's user avatar
2 votes
1 answer
259 views

Colosseum Fight - A probability problem

Problem Statement : Alice and Bob are in Roman times and have 4 gladiators each. The strengths of each of Alice's gladiators are 1−4, while Bob's gladiators have strengths 4,5,9, and 12. The ...
Harsh's user avatar
  • 123
0 votes
0 answers
38 views

Standard practice to round values in ARM loans

I have an application that calculates payments schedule of ARM (Adjustable Rate Mortgage) loans, where these loans are in the books of commercial banks. It seems to work fine, with the exception of ...
ps0604's user avatar
  • 50
0 votes
0 answers
72 views

Machine learning techniques for small datasets

I am dealing with financial data which is available on a Monthly basis. I am planning to apply machine learning techniques like LSTM but issue here is that overall I have very limited training dataset ...
Add's user avatar
  • 1,397
0 votes
0 answers
177 views

Creating a Bloomberg bquant portfolio

As an ex-investment banker (salesperson to be specific) and amateur programmer, I’d like to move into quant work. I’d like to create a coding portfolio using Bloomberg’s bquant, but as I’ve left the ...
Joe's user avatar
  • 1
0 votes
0 answers
41 views

spectral entropy as stock volatility

There are many way to capture to stock volatility and most common is Beta. But problem with beta this is difficult to select ...
user69406's user avatar
1 vote
2 answers
637 views

TBA - what is and isn't a TBA? (help please)

this is probably a naming issue - but i am totally confused as the documentation is never clear. I understand well what a generic TBA is, what is a "STIP"? is it also a form of TBA? One doc ...
user67825's user avatar
0 votes
0 answers
80 views

OLS estimation for ornstein uhlenbeck process

I am reading the following paper. In particular, in section 4 - numerical determination of OTRs, it mentions applying Ordinary Least Square on Eq(5). However, what I don't know is whether ${P_{0,0}, ...
user1769197's user avatar
2 votes
1 answer
140 views

Recommended books/resources for IRRBB risk metrics calculation

Any recommendations for books/resources/videos/on-demand courses for in-depth IRRBB-related risk metrics calculation etc? Yield Curve Risk, Basis Risk, Repricing Risk, Optionality Risk, Value at Risk, ...
Pat's user avatar
  • 21
0 votes
0 answers
95 views

Replication of a payoff with vanilla products

A lot of research has been done in the direction of replication techniques, and most of them consider the max function. I was wondering if we have an interest rate benchmark $R$, a cap $C$, a floor $F$...
Samantha Smith's user avatar
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
1 vote
1 answer
568 views

Finding the trading intensity - Avellaneda Market Making

Where does the K term come from in Avellaneda's description of finding the probability an order gets filled. Please see the image below
Oscar Morales's user avatar
0 votes
1 answer
132 views

Using LGD (Loss Given Default) in the trading of bonds

Do you use the LGD as a risk management tool when trading credit cash bonds? Or it's more for trading the loan product.
risknewbie's user avatar
2 votes
2 answers
798 views

W-shaped Event Vol and Butterfly Arbitrage

I came across the Vola Dynamics page about the W-shaped vol before an event: https://voladynamics.com/marketEquityUS_AMZN.html I'm a bit confused by "this term does not have any butterfly ...
Michael's user avatar
  • 301
0 votes
1 answer
139 views

Vol binomial tree

Suppose that we have a stock $X_t$ valued at 100 euros per share. At each time step the price can go up or down 1 euro with prob $1/2$. Assuming that interest rates are $0$ and the volatility of the ...
Samantha Smith's user avatar
0 votes
1 answer
137 views

How to backtest a strategy with irregular in-out signal?

Hi I'm currently backtesting an event-driven strategies. Unlike factor strategy which has a regular rebalancing interval, event-driven strategy is conducted whenever there is an event. Since we do not ...
geonhwa's user avatar
  • 57
2 votes
1 answer
262 views

Why does changing the step size in my Binomial Tree changes the final stock prices so much?

I am trying to price a convertible bond by using a binomial tree. For this, I wrote a binomial tree for the stock price. I noticed that changing the step size (timesteps), changes the final value of ...
Daan Commandeur'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
2 votes
0 answers
64 views

How to train mental math for trading? [duplicate]

I have a mental math test coming up for a quantitative trading firm. Anyone knows good websites to practice?
Quant In Spe's user avatar
0 votes
0 answers
211 views

Bet sizing to actual orders

At chapter 10.2 in Advances in Financial Machine Learning it says: Suppose that one strategy produced a sequence of bet sizes $[m_{1,1}, m_{1,2}, m_{1,3}] = [.5, 1, 0]$, as the market price followed ...
amilkov's user avatar
0 votes
2 answers
156 views

seek clarification about PFE

I'm a software developer want to know a little about quant basics. My undserstanding of PFE is that a PFE of a trade at a future time point is commonly defined by taking the average of the highest (or ...
techie11's user avatar
  • 213
1 vote
1 answer
276 views

How do I estimate the factor sensitivity in a Vasicek Single Factor Model?

I understand the formula of an asset return for an obligor i is given by the following: $$A_i = \sqrt{w_i}*Z + \sqrt{1-w_i}*\epsilon_i $$ My question is - How do I calculate $w_i$? I have the PD, LGD ...
user avatar
2 votes
1 answer
144 views

Operating Leverage Interpretation

Operating Leverage is the ratio of Contribution margin and operating income(proxy of profit). So, Operating Leverage = [Sales-Variable Cost]/[Profit] = Quantity*(Price-AVC)/Profit Many literature ...
Stannis John's user avatar
4 votes
2 answers
826 views

Where can I find detailed information of famous quant companies such as Renaissance Technologies?

I am doing a report about famous quant companies such as Renaissance Technologies. Where can I find information such as ranking of these companies and their fund's rate of return.
Mengyang Cao's user avatar
0 votes
0 answers
415 views

How to implement a factor model from scratch?

Imagine we have price-volume data set and fundamental data set which gives us all the info we need (e.g,. OHLC, earnings, dividends etc.) for stocks listed in a market for long time period. I.e., you ...
Validus Oculus's user avatar
1 vote
4 answers
2k views

Multi-Period Contribution

I've read multiple research papers but can't find a good answer as to why multi-period contributions don't add up to the returns of a portfolio. I understand that arithmetic sums miss the compounding ...
QFqs's user avatar
  • 125
13 votes
2 answers
2k views

Mark Joshi's book - quant interview questions

I am currently doing the question on pricing the option with payoff: $$\max (S(S-K),0).$$ On the relevant question section, it's asked why would a bank be reluctant to sell such option? I can't really ...
Quan Nguyen's user avatar
1 vote
0 answers
47 views

What is "level" and "term" in Derman figures?

Im doing my final thesis about implied volatility. In the last section I am talking (not too much deep) about volatility surface. Im using the figure below to show the differences between the real ...
Marc's user avatar
  • 11
1 vote
0 answers
314 views

DV01 on IRS giving error in Quantlib for ZAR curve "1st iteration: failed at 14th alive instrument"

I am at my wits end to calcualte the DV01 of a swap but keep getting the error "RuntimeError: 1st iteration: failed at 14th alive instrument, pillar May 28th, 2024, maturity May 28th, 2024, ...
Pratikgcet's user avatar
1 vote
1 answer
979 views

Making a beeline to statistical arbitrage

This question is somewhat related to my previous question here but has not been addressed in any other thread. The answer in that thread hit the nail right on the head with that one line "...
TryingHardToBecomeAGoodPrSlvr's user avatar
0 votes
0 answers
102 views

Expected value of P&L based on option prices

How can we compute the expected value of P&L assuming the option price is given? Do we need to have more information to calculate P&L?
Ken's user avatar
  • 101
1 vote
1 answer
179 views

Correlated Wiener Process

I am in trouble with a task: I have a portfolio of 5 assets, and I Have the correlation among them, with a 5x5 matrix. Since each asset follows the BS formula: , I need to perform a montecarlo ...
John_maddon's user avatar
0 votes
1 answer
893 views

Coupon Adjusted Spread vs Z-Spread

Hi so I'm trying to figure out how to adjust for the coupon value in the Z-Spread of a given bond. For example we can take UKRAIN 9.75 11/28. The coupon is 9.75 which is quite a bit higher than the ...
AlanTuring's user avatar
0 votes
0 answers
60 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 ...
ADAMS zequi's user avatar
2 votes
0 answers
370 views

Random Walk Theory vs. Quant Trading

I am quite new to random walk theory so please excuse my rather simply put question but I am wondering how can quant trading desks and other algorithmic trading firms exist if there is the random walk ...
Thomas's user avatar
  • 21
0 votes
0 answers
596 views

How do I calculate inflation adjusted CAGR?

I'm running backtests with monthly data going back to the 1920's and I'd like to compare different strategies using inflation adjusted CAGR. But I don't know how to calculate it. Would any of these ...
Brett Elliot's user avatar
-2 votes
2 answers
177 views

What happens if my risk factor caught by statistical risk model using PCA turns out to be totally different from other PM's risk factor? [closed]

In order to explain systematic risk we use risk factors and I've learned that since they try to explain 'systematic' risk, risk factors are relatively well-known. However, what happens if the risk ...
geonhwa's user avatar
  • 57
1 vote
0 answers
72 views

How many principal components to use for statistical risk model?

If I use every principal component to explain total variance of my portfolio, does it still make sense in portfolio optimization? Because since alpha factors try to find out and explain unexplained ...
geonhwa's user avatar
  • 57
4 votes
1 answer
453 views

Factor alignment problem in portfolio optimization

I'm taking a course 'AI for trading' in udacity, and there is a part I really want to make sure. The lecture keeps teaching me that there are alpha factors (driver of return) and risk factors (driver ...
geonhwa's user avatar
  • 57
0 votes
1 answer
202 views

Someone help me understand why for portfolio variance or Parametric Value at Risk we have to compute the covariance matrix?

I understand that portfolio variance is computed through $w'Cw$, where w is the vector of weights, $C$ being the covariance matrix. However, what I don't get is this: why can't this portfolio variance ...
myndelsg's user avatar
0 votes
1 answer
51 views

Comprehending Corr heatmap from multiple trials of investment strategy (Paper)

Can someone please explain the heatmap of Corr from backtests in this research paper ? A Data Science Solution to the Multiple-Testing Crisis in Financial Research - Lopez De Prado (2019) - (Exhibit #...
Jimboi's user avatar
  • 23
1 vote
1 answer
2k views

Quantlib: How do I price a ZC bond using the Hull White model?

I am trying to use QuantLib to model short rate and looks like QL has some material here http://gouthamanbalaraman.com/blog/hull-white-simulation-quantlib-python.html I have been able to simulate ...
TRex's user avatar
  • 179
0 votes
0 answers
29 views

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. ...
Ganesh S's user avatar
  • 141
0 votes
0 answers
132 views

Entry points to finance for Applied Mathematics (Numerical Analysis/High Performance Scientific Computing) PhD Student [duplicate]

I'm looking to go into quantitative finance after my phd in around 2 years. With a background in pdes/numerics/heterogenous and distributed computing, I think my skill set is applicable in this area, ...
anon-scicomper's user avatar