Questions tagged [simulations]
The simulations tag has no usage guidance.
43
questions with no upvoted or accepted answers
7
votes
0answers
283 views
simulating from the CIR++
I am looking at the CIR++ model which is described in interest rate models by Brigo et al, and was wondering on how to actually simulate from this model. The model reads
$$r_t=x_t+\phi(t),$$
where $...
4
votes
0answers
117 views
How does one simulate intraday strategies which don't end up flat at the close?
I ran into this trying to simulate trading interlisted names between the NYSE and the TSX.
Depending on my strategy parametrization it would sometimes end up with a significant short or long dollar ...
3
votes
0answers
68 views
Simulating volatility process in the Heston model using the relation between the CIR Process and Ornstein–Uhlenbeck processes
I am trying to simulate the volatility process in the Heston model using the relation between the CIR Process and Ornstein–Uhlenbeck processes. In fact, giving $\mathbf{X}$ a $n$-dimensional vector ...
3
votes
0answers
66 views
Solving BSDE in R
I was wondering how to implement a BSDE approximation in R. For example, if I have the toy BSDE
$$
dX_t = \mu dt + \sigma dW_t ; X_T\sim N(\mu_1,\sigma_1),
$$
for fixed real numbers $\mu,\mu_1,\sigma,...
3
votes
0answers
62 views
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 ...
3
votes
0answers
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 ...
3
votes
0answers
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 ...
3
votes
0answers
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 ...
3
votes
0answers
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" ...
2
votes
0answers
131 views
Longstaff-Schwartz, special american option simulation using Python (numpy package)
I got a put option, which can be exercised 3 times, all at different times, which are each month of a year $$t_1 = \frac{1}{12}, t_2 = \frac{2}{12} ... t_{12} = 1$$.
Respectively, if exercised at $$...
2
votes
0answers
70 views
Generating Correlated Quasi Random Numbers
Hi I am trying to generate correlated quasi random numbers using a sobol sequence in matlab. My Problem is the Following: Using "standard" random numbers it is easy to generate the 6 correlated random ...
2
votes
1answer
147 views
How to interpret and define statistics of GBM output
I am trying to model the future prices of a number of commodities. For this, I am applying geometric Brownian motion, writing a Monte Carlo code in Python. Given that I want to estimate tommorows ...
2
votes
0answers
3k views
Models for simulating FX movements
My goal is to develop a model to simulate long term FX movements. (I am not sure if long term makes any difference, but if it does I am more interested in long term fx movements)
These Monte Carlo ...
2
votes
0answers
146 views
Problems with exact Heston simulations
I am just wondering if there is any problem with the so-called "exact" Heston simulations? So far what I have seen are the good things about it, what are the disadvantages? Because if it is so perfect,...
1
vote
0answers
30 views
Why do simulation schemes have difficulty in pricing options with low spots?
If you apply a simulation Scheme (log-Euler discretization, Euler discretization and even more advanced ones) on for instance SABR and other models, then they price a call option (where we can easy ...
1
vote
1answer
51 views
Simulation scheme for SABR beside the standard Euler discretization
QUESTION:
Beside Euler Scheme, is there another more robust (and preferably easy to implement) way to simulate asset path with SABR dynamics?
Simulation that will withstand even for high volatilities....
1
vote
0answers
34 views
Pricing call option on bond under CIR model by simulating noncentral chi square distribution
In the original paper of CIR model, there is a pricing formula about call option on bond
$$
\begin{array}{l}{C(r, t, T ; s, K)} \\ {=P(r, t, s) \chi^{2}\left(2 r^{*}[\phi+\psi+B(T, s)] ; \frac{4 \...
1
vote
0answers
55 views
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 ...
1
vote
1answer
226 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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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....
1
vote
1answer
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 ...
1
vote
0answers
23 views
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 ...
1
vote
0answers
89 views
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 ...
1
vote
0answers
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 ...
1
vote
0answers
85 views
Implementing Pykthin Multi-factor adjustment
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 ...
1
vote
0answers
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 ...
1
vote
2answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
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 ...
1
vote
0answers
68 views
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 ...
1
vote
0answers
34 views
Optimizing Monte Carl integral calculation with control variate
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{\...
1
vote
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 ...
1
vote
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 ...
1
vote
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 ...
1
vote
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/...
1
vote
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 ...
0
votes
1answer
79 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 ...
0
votes
1answer
97 views
Simulated Sharpe Ratio Calculation for Leveraged Portfolio
I've written some VBA code to simulate the effect of borrowing money, investing it, and repaying the loan daily.
PseduoCode:
Start with a portfolio value of P = 1
Each day borrow P, invest 2*P, ...
0
votes
0answers
69 views
How are Levy driven SDE simulated?
Do you just use an Euler scheme as before?
E.g. take this process, OU process with a Levy driver.
\begin{equation}
\text{d}V_t = -\lambda V_t\text{d}t + dZ_t
\end{equation}
Do you just have
$V_{...
