Questions tagged [reference-request]
use this tag to signal questions about books or papers on a specific topic. Please have a careful look at questions already answered on the same topic in this category.
237
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A book that has exercises which closely resembles the content of Lorenzo's Stochastic Volatility Modeling book?
I'm currently going through Lorenzo's book Stochastic Volatility Modeling. The one issue I have is that it does not contain exercises to test your knowledge and learn. Is there a textbook that is ...
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2
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116
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Suggested readings for a beginner with Math backgroung [closed]
Before asking any reference, I think it makes sense to give some feature of the recipient.
I am a pure mathematician. After the PhD I went to industry to work as software engineer. Recently I started ...
- 111
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Resource recommendations: Levy process estimation using programming languages
Perhaps this type of question is not very suitable for this forum, but I'll try to make my question a little useful.
I'm studying stochastic processes, more precisely, Levy processes. A Levy process $...
- 111
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32
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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{...
- 229
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178
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Quantitative trading strategies with a focus on low-frequency dislocations
I am looking for references that are specific to quantitative trading strategies that exploit low-frequency dislocations in markets, which lend themselves as overlays for a strategic asset allocation ...
- 1,736
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100
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Nominal vs. real (inflation-adjusted) prices/returns in cross-sectional asset pricing
I have the impression that asset pricing models such as the CAPM or Fama & French 3 factor model typically concern nominal rather than real (inflation-adjusted) prices/returns. If this is indeed ...
- 2,670
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92
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Input/References on Generating Exit Signals for Positions that Profit Very Highly from Extreme and "Unpredictable" Events?
For focus, let us restrict the scope of this to vanilla options-based positions/strategies.
In a lot of the accounts that I've seen of those that engage in this sort of investment/trading strategy (...
- 229
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Why do we use the letter $q$ for dividends?
In derivative pricing models, we often use the letter $q$ to designate the dividend yield i.e.:
$$\textrm{d}S_t=S_t((\mu-q) \textrm{d}t+\sigma\textrm{d}W_t)$$
for the price process $S$ of the stock.
...
- 7,999
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2
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158
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VaR backtesting. Reasons for over- and underestimation of value at risk estimates?
I use an ARMA-GARCH model for univariate distributions and a copula model for the multivariate distribution. For the value at risk (VaR) estimation, I do a Monte Carlo simulation. I'm looking for some ...
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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.
...
- 229
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72
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Method of conditional expectations for basket
I am reading paper "An analysis of pricing methods for baskets options".
Unfortunatly, I can not find the working paper "Beisser, J. (1999): Another Way to Value Basket Options, Working ...
- 241
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192
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Is there a commonly accepted way to leverage the granularity of high frequency data while working within the constraints of lower frequencies?
Apologies if this is not the correct forum for this question.
Access to high frequency data (trade data, quote data, limit order book updates, etc.) is currently relatively easy through various public ...
- 229
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149
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Estimating the knockout probability of a discretely observed autocall note
For simplicity, let's suppose the underlier follows a Geometric Brownian Motion $S_t\sim\text{GBM}(\mu, \sigma), t\ge 0$ with $S_0=1$. A discretely-observed binary autocall note is a derivative ...
- 893
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Optimal Input and Target Variables for Forecasting Using a Deep Neural Network on Daily Stock/Index Data [closed]
What is the optimal input and target variables for forecasting with a deep neural network on daily stock/index data? More specifically I’m training a temporal convolutional network, but a more general ...
- 147
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Good guide to test a new 'factor' and control using other factors in regression model (like Fama French)?
I'm trying to get a better understanding of different ways one can test a new factor within the Fama-French framework?
For example, some questions I have are:
I want to test if Warren Buffet is in a ...
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Is the time derivative of asset returns expressible as an SDE?
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may ...
- 128
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CAPM yields very poor fit (low R-squared). Is that normal?
I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I use five years of monthly data (January 2017 to December 2021) to estimate betas for each firm using ...
- 2,670
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References for path-dependent GBMs or continuous time analog of discrete time filters
Consider a path-dependent GBM model for a stock price:
$$dS_t = \mu(t, S_.)S_tdt + \sigma(t, S_.) S_t dB_t,$$
where $\mu, \sigma : [0,\infty)\times C_{[0,\infty)}\to \mathbb{R}$ are previsible path-...
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What is an algo wheel and where can I find references?
The term "algo wheel" has been flying around for some time yet I have yet to find a consistent definition. It obviously has to do with making trading strategies more comparable, but where ...
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115
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First known reference using martingale theory to derive BS formula
What is the first known paper which derives the Black-Scholes valuation formula for an option (1973) using martingale machinery - instead of PDEs?
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Where to find dissertations in risk management
I'm looking for open databases of master's dissertations/theses in risk management & quantitative finance written by risk practitioners.
The goal is to find current research topics or problems in ...
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399
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References for Stochastic Control for finance
What are some good references to study Stochastic Control with applications to Finance, like the Merton problem and other variants? Books or review papers?
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285
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AFML (by Lopez De Prado) Vs ESL by Trevor Hastie
The books "The Elements of Statistical Learning" by Trevor Hastie, and "Advances in Financial Machine Learning" by Lopez De Prado are highly recommended books for ML. They both ...
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412
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Game theoretic description of stock market
I read the book "Theory of Games and Economic Behavior" by John von Neumann and Oskar Morgenstern. I think that stock market may be described by game theory. But here are the problems:
...
- 278
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Is GameStop is a lottery-like stock?
I am finding the evidence or reference saying that GameStop is a lottery-like stock but I could not find that.
What I did find so far is:
Hasso, 2021 documented that
GameStop investors had a history ...
- 307
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0
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225
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Research papers and other resources to learn about useful statistical tools for pairs trading
Brief background: I recently started writing a Python code to find stocks which might be cointegrated. I iterated over a really long list of stocks trying to find a pair which might be cointegrated. ...
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2
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43
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What is the source of classify the developed and emerging market worldwide?
I am doing a cross-country research where different countries implement anti-corruption at the different year. I want to examine the impact of the laws in each set of countries (developed and ...
- 123
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150
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Reference for path dependent options
I want to study path dependent options for which I am following the book Paul Wilmott on Quantitative finance.But here I dont find the detailed explanations or derivations for the various PDEs .So is ...
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293
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What is Nassim Taleb's Stance on Volatility
Over the years I have read all of Taleb's Incerto. I recall him more or less writing that "stock returns have no second moment". Hence stock volatilities, defined via the standard deviation ...
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What is the relationship between the estimated GARCH(1,1) conditional volatility and the true conditional volatility
Suppose that the data has been generated by a GARCH(1,1) model, i.e.
\begin{align}
y_t &= h_t \epsilon_t, \; \epsilon_t \sim N(0,1) \\
h_t &= \alpha_0 + \alpha_1 \epsilon_{t-1}^2 + \...
- 2,436
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Compound Option Monte Carlo Methods Reference Request
I am interested in valuing option where the underlying security is similar (not exact) to an option. The underlying security might be a Preferred Share (option to convert into common share plus ...
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Quantifying climate change risk
I am looking for resources on applicable and practical solutions for estimation and quantifying climate change risk from asset owners perspective (for example, a portfolio of equity, fixed income, and ...
- 1,830
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Current research in price prediction
I am returning to studying the markets after ten years spent in banking. I would like to ask for directions, what approaches to price prediction are currently used - I want to catch up quickly.
Papers ...
- 111
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Reference request: “Sustainable competitive advantage” and "cash holdings"
Sustainable competitive advantage are company assets, attributes, or abilities that are difficult to duplicate or exceed; and provide a superior or favorable long-term position over competitors.
In ...
- 307
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List of Option Payoffs [closed]
Does anyone know of a good resource which lists all commonly used options together with their payoff functions? I'm specifically interested in non-path-dependent options.
- 456
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158
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Finding optimal calendar spreads and diagonals
I am looking for some pointers on risk/return profiles of calendar spreads and diagonals with different strikes and expiration dates, preferably based on historical backtests with SPY options.
Please ...
- 27.3k
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Is there a source for structured product statistics?
Is there a source giving statistics for structured products by type, number of issuances, location, etc.?
Thank you
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Replication of "recovery bond"
I just started learning about credit products.
Let $B_t^T$ be the price of a risk free zero coupon bond at time $t$. Similarly, let $C_t^T$ be the price of a zero coupon risky bond from some fixed ...
- 495
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Machine/Deep Learning for Exotic Option Pricing - Reference Request
Exotic options, in general, have very time-consuming valuation models. I believe in recent years there has been some research done on using supervised machine/deep learning to predict the valuation ...
- 968
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Starting Point for understanding Financial Theory for a Statistician
I am a Master’s student in Statistics who is interested in the field of Financial Modelling. I have very little experience or knowledge of Finance and have mostly worked on introductory projects in ...
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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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Looking for a good introduction to modelling ARCH-type models
I am starting to think about my dissertation topic for my undergraduate degree.
I am interested in comparing volatility of stock indices during COVID-19 to the years leading up to the pandemic. I have ...
- 21
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Long-Term Energy Price Modelling: Log Returns, Distributions, Time-Weighting
I wish to forecast energy prices in the long-term (ca. 20 years) for energy-efficiency investments. While I understand that the energy carriers are particularly sensitive to external (geo-political) ...
- 75
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672
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Mathematical proof that the covariance between two portfolios is $w_A^\top\Sigma w_B$
How to prove in a line-by-line derivation that the covariance between two mean-variance efficient portfolios is equal to
$$w_A^\top\Sigma w_B$$
where $w_i$ is a unique portfolio weight vector, and $\...
- 2,980
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Efficient frontier portfolio's analytical solution for a given expected return $r$
$$\begin{equation}
\boldsymbol{w}(r) = \frac{r\mathbf\Sigma^{-1} \boldsymbol{\mu}}{\boldsymbol{\mu}^{\top} \mathbf{\Sigma}^{-1}\boldsymbol{\mu}}
\end{equation}
$$
is the closed-form analytical ...
- 2,980
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Alternative low-moment measure of skewness
$$
\widehat{\text {Skew}}_{i, t}=\frac{3 \cdot\left[\hat{\mu}_{i, t}-\operatorname{median}\left(r_{i, d, t}\right)\right]}{\hat{\sigma}_{i, t}}
$$
is called Low Moment Skewness by Baltas and Salinas (...
- 2,980
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Proof of Feller condition for CIR square root process. Any reference?
Could you please give me some reference for the proof of the so-called Feller condition as to a stochastic differential equation of the form:
$$dr_t=a(b-r_t)dt+\sigma\sqrt{r_t}dB_t\tag{1}$$
with $\...
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Good references on PNL explain?
Can anyone share good references for how PNL explain should be calculated and presented for the best use of a derivatives trading desk?
- 1,875
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98
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Concentration of measure phenomena in financial mathematics
Concentration of measure is a small area of statistics and probability theory that proved inequalities regarding the statistical properties of sets of random variables that exclude one of those random ...
- 2,980
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Spectral clustering in finance
What are some examples of applying spectral clustering to financial times series data or other areas of finance? Why spectral clustering was used for each application rather than other types of ...
- 2,980