# Questions tagged [self-study]

A routine question from a textbook, course, or test used for a class or self-study. This community's policy is to "provide helpful hints" for self-study questions.

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52 views

### How to test a risk model?

I'm reading the Barra risk model handbook (2004) available online and trying to understand the methodology. I've read a few materials on portfolio theory, so I can get at least the theoretical ideas ...
5 views

### to adjust the constraints for both liquidity demanders and suppliers if I include asset income tax on risky asset

I have a question related to Vayanos and Wang's article I'm studying on this article for my course term project. I would like to some adjustment and changes on this article in order to improve it ...
82 views

### Implication of unique risk neutral measure

I'm reading Shreve Stochastic Calculus II, theorem 5.4.9 (Second fundamental theorem of asset pricing), This is the part that confuses me : suppose there is only one risk-neutral measure. This ...
60 views

### Literature recommendations regarding sentiment in the stock market

I plan to write a paper about the influence of investors sentiment on the stock market. I would like to look specifically at the question of what has an impact on what: does sentiment influence ...
80 views

### Calculate options prices based on given options and spread prices

Suppose you know the following information: Futures price on a stock is 66 70 strike straddle is trading at 27 50-60 put spread is trading at 2.5 50-60-70 put butterfly is trading at 0.2 Assume ...
217 views

### How to derive the weights of tangency portfolio?

I am well aware of this formula but I could not find how to derive this. Of course, I failed to derive (or prove) it by myself. I will appreciate if you guys provide me a good, detailed derivation.
1 vote
67 views

### Vega of derivative when volatility is stochastic?

What is Vega for a derivative when the volatility of the underlying asset stochastic process itself? When the value of the derivative is $V_d$ vegais $\partial V_d/\partial\sigma$. Consider for ...
58 views

### How to compute this current value using no arbitrage condition?

Suppose $X_t$ is a geometric Brownian motion with drift $\mu$ and volatility $\sigma$. $X_0$ is known. You have a machine that produces something worth $X_t$ at random times $t$ generated by a Poisson ...
75 views

### Simple hedging technique comparison question: forward market vs money market

I am trying to do some self studying and came across this question. I am not sure how I would analyze these hedging strategies to figure out which is better. Could you give me any help on how I could ...
33 views

### Finding historical data

I need T-bill rates in order to use it as risk-free asset from Jan,2003 t0 today.(monthly data) I don't know how to find it. Can you please suggest your idea about how to find it?
1 vote
615 views

### Trouble Calibrating a Vasicek Model

I have simulated some data according to a Vasicek process and I am then trying to apply ordinary least squares (OLS) regression analysis to see how accurate the estimated model parameters are from the ...
43 views

### Real domestic return

I would like to calculate the real domestic return of a foreign asset What I know Real price is $$P_{Real, t} = \frac{P_{Nominal, t}}{CPI_t}$$ where CPI is consumer price index. And I know that the ...
1 vote
91 views

### Show that portfolio's percentage contribution to loss (PCL) equals PCR (risk)

I came across this question during self study on a quantitative book (Question 3.6 on Page 75 of Quantitative Equity Portfolio Management: Modern Techniques and Applications By Edward E. Qian, Ronald ...
1 vote
65 views

### Characterizing distribution of a stochastic intergal

characterize the distribution of $\int_0^T f(t)Z_tdt$. In particular, verify that it is a Gaussian distribution and compute its moments.
1 vote
170 views

### issue with benchmarks in "standard securities calculation methods"

I wonder if anyone is using the benchmark cases in "Standard securities calculation methods" issued by Securities Industry Association (Vol 1, 3rd ed.) to calibrate their implementations for ...
1 vote
113 views

### Calculating European call option, the Bjork way

We have a 3 period binomial tree with values: ...
225 views

### Martingale Binomial Tree Process

3 step binomial tree process with $S_0=4,u=2,d=0.5,r=0.25.$ Determine the probability p and q such that the stock price process is a martingale (i.e. $E[S3]=S_0)$ I know P = 1/3 and Q = 2/3 but having ...
52 views

### Optimizing Portfolio Return by Targeting Variance

I understand Markowitz and targeting returns to minimize our variance. I know this optimization problem well and its constraints. However when the reverse scenario is to be considered I get very ...
63 views

### (Self-study) Futures, bonds, and arbitrage

I'm currently self studying futures, so I'm sorry if this questions comes off a bit stupid. I'm currently reading a book by Walsh, J.B. Knowing the Odds: An Introduction to Probability. I quote this ...
79 views

### the relationship between VaR(0.05) and mean?

What is the meaning of the difference between the quantile of prob=0.05 and mean for a sample form a specific distribution? In other words, I would like to understand the relationship between ...
221 views

### Most liquid index options?

I need to work with option prices in my master's thesis. Specifically, I investigate index options (S&P 500). Which kind of options could you recommend to use? I have seen that there are options ...
73 views

### Should he choose long position or short position? [closed]

On July 2, 1997, a a company is worry about the value of its Yen income over the next few weeks and makes a decision to hedge its risk by taking a position in the futures market. Right now, a futures ...
334 views

### calculation of theoretical value of futures contract [closed]

we form a stock index by using only two stocks in the index. One of the stocks is the Stock-A. The current selling price of the stock-A is 103 dollars and the second stock is the stock-B. The current ...
108 views

82 views

### Question about the writing a call option on an existing portfolio of stocks [closed]

My question is Please discuss about the following statement “ the advantages and disadvantages of writing a call option on an existing portfolio of stocks” Note that I read an article nearly ...
1 vote
425 views

### Difference between spread duration & IR duration for a fixed rate bond

I am struggling to comprehend the difference in impact between spread duration & IR for a fixed rate bond when yields move. I know that both measures would be the same for a fixed rate bond but ...
360 views

### Black-Scholes-Merton formula and option pricing

If the distribution is skewed to the right,Black-Scholes overprices out-of-the-money puts and in-the-money calls. It underprices in-the-money puts and out-of-the-money calls. How? Stock price log-...
658 views

### Carry & roll - question regarding the repo transaction

Could someone please explain the carry and roll trade that a lot of traders are doing with negative euro debt? I read an example that they borrow in the repo market then buy a longer dated bond to ...
1 vote
594 views

### How does buying a CDX and then taking a short CDS position generates alpha? [closed]

Can someone please explain to me how buying a CDX and then taking a short CDS position generates alpha? I am so confused.
1 vote
3k views

### Interpolating the swap curve

Does anyone know how I can calculate the swap rate in between main tenors for specific dates? For example: what is the implied swap rate in 1 year, 60 days time. Is there an easy way to do this in ...
178 views

1k views

### Tick Imbalance Bars - clarification on T index

I have been trying to learn quant related things on my own. I recently picked up a book called "Advances in Financial Machine Learning" by Marcos Lopez De Prado. I am having difficulty understanding ...