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1answer
70 views

Practical purpose of overnight repos

I know this might not be a very quantitative question, but I figure this is the most relevant place to ask this. Over that last few days, there has been a lot of news from the repo market, for ...
0
votes
0answers
17 views

The best ways to compare Monthly historical volatily [on hold]

Can you help me with the best ways to analyze/report about of difference between recents months in terms of volatility? I want to demonstrate with "numbers" why a month had been more volatile than ...
0
votes
0answers
14 views

CDS ISDA Pricing (usage of accrued in calibration)

I am looking to understand the ISDA CDS Pricing Model for a 1Y "Buy Protection" CDS with Coupon = Quoted Spread = 100bp. Numbers are from Bloomberg. Cash-Flow Matrix ...
0
votes
0answers
10 views

Fama French Regression Data matching with returns [on hold]

as I couldn´t find anything similar in the forum.. I am doing portfolio sorts on a variable (MISP) with stocks that are held for a month: Each month, I am building portfolios by grouping into ...
-1
votes
0answers
27 views

Ideas for research questions on market efficiency [on hold]

I am looking for a topic or research question on the efficiency market hypothesis for my doctoral thesis. I would like to write a paper by empirically testing the efficiency market hypothesis. I can ...
1
vote
1answer
48 views

Interest Rate Swap curve: CMS vs. OIS?

I'm working on a project where we're trying to create a database model where we can (daily) update collected data in order to make RPA predictions. We received data from Interest Rate Curves called ...
1
vote
2answers
71 views

Why annualizing sampled covariance matrix changes stock weight vector?

Question While optimizing a portfolio using 'Global Minimum Variance' (GMV) method, I found that annualizing a sampled covariance matrix makes a difference in stock weight vector. Q1. Why ...
1
vote
1answer
23 views

Fama-French Annual Returns Regression?

I see that the Fama-French library offers annual factors for their models, but everyone seems to exclusively use monthly returns of stocks in their regressions involving Fama-French factors. I am very ...
0
votes
1answer
67 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
2
votes
0answers
28 views

Why does change in Sight Deposits reflect Swiss National Bank FX action

I am confused of how the Swiss National Bank's famous FX interventions are reflected in the change in Sight Deposits. Against the backdrop of the ECB meeting, it is said that the SNB has taken ...
2
votes
1answer
29 views

Definition of interest rates in binomial tree model

I'm studying financial mathematics from Shreve's text. I have two problems. 1) "for a binomial tree with three steps, where $S_0=20$, $u=1.05$, $d=.95$ and continuously compounded risk-free interest ...
4
votes
0answers
37 views

How to calculate average entry price for perpetual swap contracts?

I'm trying to calculate the average entry price for perpetual swap contracts for use in back-testing a trading strategy, as per Bitmex's documentation: A Perpetual Contract is a derivative product ...
-5
votes
0answers
38 views

Options pricing equations mission impossible [on hold]

So if I was Ethan Hunt, I would break into the exchanges and go to their mainframe computer while hanging from a thread and insert a super secret disk and download the data but since I am not him (yet?...
2
votes
1answer
47 views

Why do not include loan payments in NPV?

Textbooks in finance claim that one should not include financial cashflows in capital budgeting. I get the idea of not including interest (as it should be included in the cost of capital), but I don't ...
2
votes
0answers
43 views

Optimizing monte carlo code in python [on hold]

What are they key points to use while coding a monte carlo simulation in python? I have the following monte carlo code : ...
3
votes
1answer
65 views

Basis Swaps in Quantlib/Python

I am aware that I can create a IRS in Quantlib/Python by using the following function: ...
4
votes
1answer
42 views

Alternative relative performance measure to Sharpe ratio for non-IID return

The Sharpe ratio is often used to compare the relative performance of portfolios despite its IID-assumption for the returns being violated. I can find ample warnings about the consequences of ...
1
vote
1answer
38 views

<Credit Default Swap> Auction Recovery vs Fixed Recovery

What is the Difference between Auction Recovery CDS and Fixed Recovery CDS?
1
vote
0answers
20 views

Manually calculating and backtesting VaR and CVaR from DCC-GARCH R

I estimated a GARCH fit to the log returns of three series (CAC 40, a french real estate index and french T10 bond yield series) using rugarch. I then manually ...
2
votes
0answers
51 views

When to remove a trading strategy?

Every strategy has a limited lifespan. How do you decide when to stop a particular strategy as it has lost its edge? Few of things that can be thought is strategy crossing its maximum drawdown, net ...
1
vote
1answer
34 views

Understanding Front-End Spreads (terminology, lingo, convention)

Would appreciate a clear explanation as to what the OIS/Tsy spread and the TU OIS spread is. I've seen it being talked about in Wall St research reports but can't seem to find good explanations on ...
5
votes
1answer
123 views

When would open interest equal trading volume?

I know the difference between open interest and trading volume. Open interest is the number of contracts, long or short, outstanding. Trading volume is the number of contracts traded in a day. ...
1
vote
1answer
57 views

Duan (1995) GARCH Option Pricing Model with MATLAB

This is the MATLAB code that replicates the option pricing model proposed by Duan in his paper "The GARCH Option Pricing Model". However, the parameters estimated in the file do not match with the ...
1
vote
0answers
32 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 ...
3
votes
0answers
45 views

Using transaction data to predict default of the customer

I am trying to build a prediction model that utilize the huge transaction database of all the customers of a bank. My dataset currently looks like this: ...
1
vote
0answers
55 views

What is the name of these digital basket options?

Consider a basket of correlated assets $(S_1(t),\ldots, S_N(t))$, as well as a vector of strike prices $(K_1,\ldots,K_N)$, and let's look at the following European payoff types: An option that pays 1€...
1
vote
0answers
38 views

Calibration using only strike price

I have a binary option and want to calibrate it's BS pricing model. I only have a series of Strike Price vs the Option price, no knowledge on time to maturity, volatility, risk free rate or the ...
2
votes
4answers
297 views

Px last in Bloomberg

This is my first post to this forum. I want to calculate security returns , so therefore, I have downloaded the PX last price from Bloomberg. My question is: What is PX last in Bloomberg? Is this ...
-2
votes
0answers
56 views

Problem with plot using utils - use cookbook quant finance EONIA curve bootstrap example

I have problem using utils/python_utils function in Python Quantlib. Code is mostly follow CookBook for Quant Finance for Quantlib - EONIA Curve Bootstrap Chapter I imported python-utils, and utils at ...
4
votes
2answers
123 views

Comparing Investment Style with Fama French 3 Factor Model

How do you evaluate this? I have tried searching online but there are no matching results. Is it just a simple average of the 3 Betas? And how do we determine the investment style aggressiveness? In ...
3
votes
1answer
74 views

Arbitrage free in a Black-Scholes/Poisson model

I am trying to solve the following exercise from Bjork's Arbitrage Theory in Continuous Time: Consider a model for the stock market where the short rate of interest $r$ is a deterministic ...
-2
votes
0answers
24 views

Finding payoff and profit [closed]

Consider a European call option on a Microsoft stock with an exercise price of 20 dollars. Assume that the expiration date is in four months and the price of the option is 5 dollars. The current stock ...
1
vote
0answers
41 views

Quantlib Python OISRateHelper using Quantlib Cookbook - hands on Quant Finance

I am completely new to Python, just trying to reference Quantlib Cookbook to construct eonia curve, here is my code. I didn't change much compared to the cookbook Eonia Curve BootStrapping chapter, ...
0
votes
1answer
39 views

Finding distinct possible values in binomial tree

I wonder how to solve this problem. Lets say we have a binomial tree with the following parameters: $u=1.25,\ d = 1/u,\ T=15$. How many distinct possible values are there for $X_{7}$?
1
vote
0answers
35 views

Option pricing with definite integral

I would like to consider a slight generalisation of this question, which I recall here: At date of maturity $T_2$ the holder of a financial contract will obtain the amount: $$ \frac{1}{T_2−T_1}\...
2
votes
2answers
86 views

If price is a random walk, is ok to use the binomial distribution to estimate a trading strategy?

Is it OK to assume a trading strategy should have a binomial distribution if the price is just a random walk? using p of the event as: $$\frac{AverageStopLossPercent}{AverageStopLossPercent + ...
1
vote
0answers
42 views

Simple 3 way delta hedge

Consider 3 futures contracts: A BTC/ETH, settled in BTC B USD/ETH, settled in ETH C USD/BTC, settled in BTC As the markets aren't efficient, sometimes these ...
3
votes
1answer
170 views

Options Market Making Used Implied Volatility Surface

Suppose you are a market maker with a model that is producing an implied volatility surface for you. Suppose you quote bid/ask prices (vols) around the prices given by your implied vol surface. In ...
1
vote
1answer
71 views

Realized Volatility Methods

Can someone explain to me which of these two methods is more accurate or commonly used to calculate Realized Volatility? I'm seeing both used, but I get very different results from them. 1) Standard ...
2
votes
1answer
74 views

time series data modeling for deep learning

what is the best format to feed the input data, which are time series with varying density over time, to a deep learning network, while at any iteration we want to feed a batch of data including a ...
1
vote
0answers
54 views

Different definitions of volatility (simple question)

I have a basic question on volatility that I wanted some clarification on. In finance books (such as Hull), there's a few different ways volatility is defined. One of them is the standard deviation ...
2
votes
0answers
42 views

Stochastic differential of a time integral

Suppose that $S$ follows a geometric brownian motion: $$ dS(u) = r S(u)du + S(u)\sigma(u,S(u))dW(u) , $$ with $r$ a deterministic constant, and let the process $Z$ be defined by: $$ Z(t) = \int_0^t ...
1
vote
1answer
41 views

Caplet price under stochastic volatility is the black price integrated over volatility distribution

Hull&White 1987 state that when the brownian motion driving the volatility and the brownian motion driving the forward rate are uncorrelated, the caplet price under stochastic volatility is the ...
-4
votes
0answers
25 views

How to convert a tuple of tuples to a list of tuples? [closed]

I was wondering if any of you knew a quick and efficient method to convert a tuple of tuples to a list of tuples : Basically what I have is : ...
3
votes
2answers
108 views

Using cumulative returns to hedge against the overall trend

I am curious about a hypothetical strategy where you are long for a given period (like a year), and at the same time you hedge against the overall trend by going short everyday and accumulating the ...
2
votes
2answers
47 views

What is the difference between a cleared interest rate swap and a OTC interest rate swap with collateral in theory

I understand the aspect that central clearing reduced counterparty risks. From the valuation side, am I right that cash flows for both trades will be discounted at the OIS rate? The party that holds ...
1
vote
1answer
38 views

factor selection for predicting fnd returns

I have a list of factors (and their returns) as well as a set of mutual fund returns. What are some techniques I could use to select relevant factors for the funds. For example fixed income ...
0
votes
0answers
24 views

Deriving the risk-neutral pricing formula for the 2-state credit risk model

I am reading Interest rate models by Cairns—specifically the chapter on credit risk. Cairns introduces first the simple 2-state continuous time Markov model for credit risk—with the two states being "...
0
votes
0answers
22 views

Risk neutral measure in the binomial approximation of geometric Brownian motion

Suppose an asset is described by geometric Brownian motion with a drift, i.e. $$dS_t = S_t\mu dt + S_t \sigma dW_t$$ for a Wiener process $W_t$ and $S_0=1$. By some consequence of Girsanov's theorem (...
0
votes
1answer
34 views

How to use ARMA GARCH to do forecasting in R?

How to use ARMA GARCH to do forecasting in R? I only know how to use ARMA to do the prediction and GARCH to do volatility forecasting but how can we use ARMA GARCH to do forecasting in R. Can anyone ...

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