# Questions tagged [simulations]

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### Equity Options - “How do I build a forward simulation model with regards to shocks in spot pricing and IV?”

I am trying to build a "What-If" Portfolio, consisting of a total of 20 options, across different tenors, strikes (delta), but on the same security. Simply put, the objective is for me to test the ...
90 views

### Electricity Prices: Change of measure in practice

I'm working on a model of electricity prices. I have empirical data $X(t)$ and managed to find a reasonable fit given by a Levy process $\hat{X}(t)$. I understand in theory what a risk-neutral ...
44 views

### Regularity requirement for convergence of Euler scheme for stochastic integral?

Let $S_t$ be follow Black Scholes, then I am interesting in simulating the process $\int ^t _0 e^{-rt}1_{\{S_t\leq K\}}dS_t$ which is like a naive hedge of a European put, which does not work in ...
149 views

### How to simulate stock price with support and resistance level

I couldn't find good resources on how to simulate a stock price data sequence including some basic effects. The basis might be a Brownian motion model; but in real stock prices, there are additional ...
64 views

### Credit spreads vs default events dependence

Reading this note it strikes me that credit spreads and defaults seem not to be commonly modeled jointly (e.g. more or less directly in structural models), but at best with some kind of "ex post" ...
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### Jump Diffusion Model - Volatility and Mean of Jumps

I am trying to understand the concept of jump diffusion model. So far what I've understood is that by adding a Jump parameter to a GBM (Geometric Brownian Motion) we can generate a Jump diffusion ...
236 views

### Monte Carlo simulations in Python using quasi random standard normal numbers using sobol sequences gives erroneous values

I am trying to perform Monte Carlo Simulations using quasi random standard normal numbers. I understand that we can use sobol sequences to generate uniform numbers, and then use probability integral ...
39 views

### Negative theta in Log-linear stochastic volatility model

I was asked to simulate the following geometric Brownian motion to get paths for the SPX stock price. the process follows a Log-Linear stochastic volatility. $dS_t = \mu S_tdt+e^VS_tdW_1$ where ...
27 views

### Why no prepayment fee for the reverse mortgage?

I am currently studying the costs (to lender) of adding certain additional options to the reverse mortgage, including the option of prepayment. Would there be any scenarios of housing price/mortgage ...
118 views

### Multivariate Hawkes Process Simulation

I am trying to implement Ogata's thinning algorithm to simulate multivariate Hawkes Processes in Python (the algorithm can be found here: https://www.math.fsu.edu/~ychen/research/Thinning%20algorithm....
105 views

### Simulating assets of different currencies

I have a situation as follows: One year call option on a Euro stock with a Euro denominated strike. Knock in feature as follows - The option can only pay out if the growth in the Euro stock over ...
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### Simulating Taxed Equity Return Series (U.S.)

I'm looking to learn how to correctly simulate taxes on dividends and capital gains on simulated return series for U.S. Equities with dividend reinvestment. I understand I will have to keep track of ...
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### Monte Carlo Simulation of correlated returns based on different frequencies

I am simulating through Monte Carlo, multivariate correlated returns of different products composing an Oil&Gas portfolio. The historical prices (from which I computed the log-returns) of the ...
39 views

### Bootstrapping to Judge the Fit of a Sampled Return Distribution

Consider the following: I have sampled yearly stock returns from a specified distribution. What I want to do is compare how well my sampled distribution fits the empirical distribution of yearly ...
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I've made a mistake in the implementation of Pykthin Multi-factor adjustment which I'm fairly certain comes from me not understanding the model completely. The model was developed to drastically ...
179 views

### Open Source library for calculating exposures?

I would like to know an open source quantitative library/ies that can calculate exposures out of the box (I have investigated a bit on OpenGamma/Strata libraries with no luck and the website of ...
125 views

### Choosing a proxy for asset credit event correlations

I'm interested in modeling the joint likelihood for rating changes and default events across a portfolio of bonds. To estimate the correlation between these assets, I can use a third-party factor ...
106 views

### Simulating asset returns: (Academia) state of the art

I want to run some simulation studies of (linear) factor models and for that reasons I am wondering about the features such a simulation should contain - every suggestion is welcome, I'll do my best ...
34 views

### Simulating Asset Prices by Independently Simulating Supply and Demand

If I have an asset, whose supply is generally mean-reverting and whose demand is generally cyclical, could I somehow simulate / project the supply and demand levels across multiple discrete time ...
106 views

### Smooth ornstein uhlenbeck process

I want to simulate paths for a commodity price. I use the historic data in the following way: $X_t$ is the price. $\ln\left(\frac{X_t}{X_{t-1}}\right)$ is the daily return. I calculate the slope of ...
418 views

### Stochastic Vol simulation - Quant job interview question

this is a question from a quant interview (FO quant for IR Exotics for a big 4). First it might be useful when preparing your interviews, second, any brainstorming will be appreciated. Note that no ...
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### Calibrating and simulating returns from a t-distribution

A slight twist (I hope) on the familiar problem of simulating log returns from a t distribution. My two questions concern calibration to sample data. First, one can infer the degrees of freedom in the ...
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For an exercise I am asked to calculate an integral with a monte carlo simulation, after that I need to optimize the results with a control variate. This was the given integral: $\int_0^1 \! \frac{\... 0answers 115 views ### Generating financial data I am trying to generate monthly stock data using a one-factor model: $$R_{a,t} = \alpha + BR_{b,t}+\epsilon_{t}$$ The description says:$R_{a,t}$is the excess asset returns vector,$\alpha$is the ... 0answers 77 views ### Long-term proportion of convex and concave strategies in artificial financial markets In their classic paper "Dynamic Strategies for Asset Allocation" Perold and Sharpe state: "That convex and concave strategies are mirror images of one another tells us that the more demand there ... 0answers 133 views ### What are commercial impact models and transaction cost analysis models out there for simulation? I have heard that ITG, LiquidMetrix, MarkIT and TradingScreen has good Transaction Cost Analysis (TCA) research. I wonder which firm one would choose to have an impact model formula inside his ... 0answers 112 views ### Review of Excel Stock Simulator I am currently a senior in high school and I built a stock simulator using knowledge gained from a semester of AP Statistics. I was wondering if someone could tell me if my simulation is legit/... 0answers 104 views ### Order 1.5 strong SDE integration methods for systems with diagonal additive noise I'm looking into simple-to-implement and efficient order 1.5 strong SDE integration schemes for my system. My noise is diagonal and additive (possibly time-varying). Thus methods designed for either ... 1answer 80 views ### Historical Simulation of Bond, Stock and Option Portfolio If I have a portfolio consisting of 1-one stock of unit price equal to S, 2-one 9% coupon American bond with 20 years to maturity and a par value of$1000, 3-and one European call option on the ...
Do you just use an Euler scheme as before? E.g. take this process, OU process with a Levy driver. $$\text{d}V_t = -\lambda V_t\text{d}t + dZ_t$$ Do you just have \$V_{...