# All Questions

12,672 questions
163 views

### Getting sets of random correlated variables

For the training of a machine learning model I need to add additional features (macro variables), and these features are correlated. I need to run the model N times, and for each time I have to add ...
19 views

### BHAR Event Study - Index

I want to perform a BHAR event study. For that, I subtract the compounded returns of a benchmark portfolio from the respective stock. Is my assumption right, that I can simply take any underlying ...
6k views

### What mathematical theory is required for high frequency trading?

I am an applied math postdoc and I have been presented with the option of leaving academia to work in high frequency trading. I wanted to get a feel for the field and the theory underlying it so I ...
38 views

### Zero rate computation in Quantlib [on hold]

I am trying following code, zerorates which is received is different than I expect. Can someone suggest where am I going wrong? ...
29 views

### Going from normal to Log-normal implied volatility

Let's denote the Implied normal volatility (Bachelier) as $\bar{v}$, and the implied log-normal (Black Scholes) as $v$. When everything else is known (spot, strike, maturity, rates etc) how can you ...
62 views

### what are the underlying transactions for SOFR?

Recently I am reading about SOFR (Secured Overnight Financing Rate), which is projected to replace LIBOR to be the reference for risk-free rate in the market. But I still don't understand or imagine ...
44 views

### Why is the volatility of an Ito process not the square root of its variance?

The volatility $\sigma$ of an Ito process $dS_t = r S_t dt + \sigma S_t dW_t$ is not the square root of its variance. But you often hear that "volatility = standard deviation". What's going on here?...
36 views

### Why the variance of a process is $\left( \frac{dS_T^2}{dt}\right)^2$?

Consider an Ito process $dS_t = f(t,S_t) dt + g(t,S_t)dW_t$ What is the reason that we can compute the variance as: $\sqrt{VaR(S_t)} = \frac{(dS_t)^2}{dt}$
35 views

### Annualization of higher order Co-moments

I'm developing a dynamic portfolio optimization procedure based on the implementation of the Modified sharpe ratio. The mentioned ratio depends, among other factors, on the skewness and kurtosis of ...
37 views

### How is hypothesis testing work in population sampiling? [on hold]

I am learning the basics of quant trading from quantconnect's tutorial Confidence Interval and Hypothesis Testing. I understood the first part of the article but I dont understand "Hypothesis Testing"...
100 views

### What is the easiest way to learn Option pricing with PDE?

I was reading about Ito's formula and Girsanov theorem, but I am still struggling to grasp how in reality these are combined to compute the price of an option. What are the main source to understand ...
91 views

### Are questions in Joshi's book really asked at Quant interviews? [on hold]

I am reading some questions in Joshi's book on Quant Job Interview Questions, and am perplexed at some of the questions in the book. Some of them are extremely easy (like, "explain the Black Scholes ...
43 views

### How to calculate necessary gain to compensate a loss in a financial transaction?

(Feel free to suggest the correct Stackexchange community - or otherwise - if this is not the correct one) When trading financial markets, a gain of x%, won't ...
39 views

25 views

### Is the undiscounted value process of a Euro call option under Bachelier model a Martingale? [duplicate]

Assume that $c_t$ is the UNDISCOUNTED price process for a European call option in Bachelier model. In Bachelier model call option pricing formula the formulas is discussed. The undiscounted value ...
72 views

### Estimating a Yield Curve in a country without Bond Stripping

I am currently working under estimating a Yield Curve. From my understanding common procedures to construct a yield Curve like Nelson Siegel have the input of a series of different zero rates and ...
73 views

### Fixed Income Portfolio Optimization

I'm trying to solve for a maximum sharpe ratio portfolio in the fixed income space. To do so, i use CVXPY in python. I use this Paper as reference. This is my "setup": ...
23 views

### Mean directional accuracy and zero

I'm trying to use mean directional accuracy to evaluate my directional predictions in back-test, but it can't deal with realised directions which are 0, due to the comparison of the signs of ...
55 views

### transactions costs and leland modified volatility

When there are transactions costs, we are in a situation of incomplete market. What does the modified volatility of Leland (Option Pricing and Replication with Transactions Costs, 1985) bring us? can ...
21 views

### Calculating management fees paid during the last 12 months [on hold]

I'm looking for a way to calculate the total management fees paid by a customer during the last 12-months. I'm taking the following assumptions: The total accumulation as of today is A The monthly ...
18 views

### Units of measurement for Minimum Variance Hedge Ratio

The minimum variance hedge ratio is given by $h=p*\frac{\sigma_S}{\sigma_F}$. I was wondering if you wanted to calculate the S.D yourself and the spot prices were in Dollars per barrel while futures ...
42 views

58 views

### Modeling mortgage loan defaults

I have a machine learning model trained with a list of mortgage features that include macro variables where the field to predict (the label) is "Mortgage Defaulted" = 1 or 0 (Yes or No). Now, I need ...
79 views

### Is there a method to interpolate the volatility smile?

I have a small question of interest. During my classes at the university I have learned about the Nelson-Siegel method to fit interest rate curves. With this method you are able to determine interest ...
61 views

### Derivative of the Black and Scholes equation [closed]

What is the financial interpretation that the derivative of the Black and Scholes equation is equal to 0? St n(d1) - Xe^-rt n(d2) = 0
85 views

### Least Squares Monte Carlo

Could you explain to me in words (no formulas) the concept of the Least Squares Monte Carlo method to price an American style option?
95 views

### Where can I get the actual info about how many stocks are there in markets all over the world?

I need to test an algorithm for large-scale data in stocks market. I wanna know how many stocks are there all over the world and the data source.
64 views

### Term structure equation in the Vasicek model

Consider the SDE $$dr_t = (b-ar_t)dt +\sigma dW_t, \text{with } a; b > 0.$$ Let $$F(t; r) = E(\exp(-\int_{t}^{T}r_sds)| r_t = r).$$ (F can be interpreted as price of a zero coupon bond with ...
50 views

### Pension funds co-investing with private equity?

Not a quant question, but not suited for Money stack exchange... I've heard rumblings of a trend of pension funds co-investing with private equity and was curious as to the reasoning of that strategy ...
61 views

### Valuation of Callable Bonds

Is there any way to price American Callable Bonds (those which can be called on any date before expiration) other than basic CRR interest rate trees, since they won't be accurate enough to give ...
78 views

### Convexity in interest rate curve bootstrapping

Whether the bootstrapping is a multicurve one or not, one can use futures quotes. One link these quotes to corresponding (synthetic) forwards (that can be expressed as known functions of zero-coupons) ...
24 views

### In a multi-curve context which numéraire is used to change to the payment probability of a forward asset X paid at time T?

Should it be the coupon associated to the funding curve of the asset? Thanks.
21 views

### Crank–Nicolson for Discrete Type Barrier: Backward propagation

The boundary conditions for Discrete Type Barrier (e.g. Up-and-Out) are: - Dirichelet boundary condition (set to 0 when spot is bigger than Barrier) on Barrier event dates - Otherwise (the other sides ...
48 views

### Estimating monthly GDP growth based on quarterly data

Apologies for this newbie question. Given the following quarterly GDP growth: ...
35 views

### Gatheral's SVI implementation in Java/Scala

I am trying to fit equity option implied vols using SVI model in Java, and I am using apache math commons library. Some of the option expiries fit very well, but others are completely off, and I am ...
541 views

### List of interesting Quantitative Finance podcasts

Which podcasts are interesting to listen too for quants? If you recommend one, why?
32 views

### Risk-factors and autocorrelation

I wonder in how far risk-factors and autocorrelation are related. Detected autocorrelation in stock returns is often discarded as not being profitable and thus not impacted market efficiency. ...
37 views

### Does adverse-selection have a time-frame associated with it?

When my limit order gets filled, the price almost always moves against me due to adverse-selection. However, given 'enough' time the price may yet move back in my favour. Has there been any study ...
81 views

### Efficient market hypothesis vs random walk

I am having trouble to understand the distinction between the EMH and random walks. If I understand correctly, the EMH states that all available information is incorporated into prices, which ...
104 views

### A crash course in pricing

I need to refresh all the pricing theory. Is there anything like a crash course with practical and intuitive explanations? I will provide any further information. I am a mathematical engineer. I am ...
55 views

### Fast implied volatility for american options

Peter Jäckel has developped a method to compute implied volatilites from option prices, called "by implication", see the papers : By Implication Let's be Rational on its website -- as well as a ...
18 views

### Anyone know a GJR-GARCH-MIDAS Multivariate

I'am trying to run a model like mfGARCH package but with multivariate, not univariate like mfGARCH does.
65 views

### What are the main problems for calculating the implied volatility of in the money American put options?

As stated in the question I have a problem with calculating the implied volatility for in the money put options I have a data set of 2.6 million American style plain-vanilla call and put options. For ...