# All Questions

12,053 questions
11 views

### Paying Filipino workers in USD. What should the inflation rate be? [migrated]

I'm not sure where to ask and, since this is not Personal Finance, I'm gonna ask it here. Here's my situation: for the past 2 years, I hired and trained a team of Filipino workers. They are paid in ...
144 views

### Modelling HFT data

In the context of Market making, how important is recent trades? In general, would i be able to get away with just modelling the Limit Order Book (LOB) and the evolution of the LOB in order to ...
33 views

### Morton Asset Volatility after Taxes

I'm writing a paper on Debt Covenants and I'm looking at the Asset Substitution Problem. I was thinking about looking at asset risk deltas before and after issuing, namely ß Unlevered and the Implied ...
52 views

### Python book on derivative pricing

Are there any books that show how to price exotic options in Python with monte carlo methods? I am aware of two books by Yves Hilpisch, but in his books there are only simple options. I am struggling ...
39 views

### Smoothing of Implied Volatilty

I'm using ATM 30D implied volatility in a model I'm building, but need to smooth out the data. Is the best way just to use exponential smoothing or are there any better alternatives?
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### Should the unsecured loan ( for example Bilateral loan) be more expensive than a secured loan ( Bond repo) in the 1 year?

What i am trying to understand is, the Repo trader when he prices a Reverese repo to the sales team, how should it be priced? Usually Repo trader or ALM gets funded (FTP) by their Treasury Dept. ...
45 views

### Difference between volatility measures of a basket of assets

I am trying to understand intuitively the difference between two different measures of realized variance of a basket of assets. The first measure I am aware of is when you take the realized variance ...
48 views

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### purpose of negative revenue

Can anyone explain negative revenue on quarterly reports? It is creating discontinuities when I compute growth rates. Here is some example from my SQL: ...
81 views

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### Can you model the LIBOR rate as a geometric Brownian motion?

i.e. The LIBOR rate is driven in the same way as a stock price in the Black Scholes model. For example let $R_t$ denote the LIBOR rate at time t. the stochastic differential equation (sde) would take ...
108 views

### How is volatility different from variance?

I always thought volatility was just variance ^ (1/2). Now I'm reading this book and it's saying that the two are different concepts. Excerpts include: Partly due to its use in Black-Scholes, ...
44 views

### Euler scheme to simulate trajectories + Python Code

Question: Euler scheme to simulate trajectories of S + Python code to get independent trajectories of S? For solving a problem I have the following assumptions: stochastic basis (Ω,FT,(Ft)t≥0,P) ...
44 views

### Fama French 3 model factors for German equities

I want to calculate monthly idiosyncratic volatility for the DAX index comprising 30 stocks. I will use the Fama french 3 model. My question is whether I have to calculate these factors for each stock ...
74 views

### Good references on Heston Model?

I am looking for good bibliographic references on Heston Model and Stochastic volatility models in general. Does anyone know any good introductory/intermediate references on this topic?
70 views

### Modeling independent variables that have an asymmetric impact on the dependent variable

I'm trying to regress a dependent variable on an independent variable that has an asymmetric impact. E.g., the dependent variable is much more responsive to an increase in the independent variable ...
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### Markowitz portfolio risk with PV01 instead of variance

As the PV01 ($= dpdy \times notional$) of a bond is a measure of its risk, as well as its price return variance, could we measure the risk of a bonds portfolio with the Markovitz portfolio variance ...
43 views

### Value-at-risk and Equity delta

How to validate value-at-risk calculation on an equity portfolio using equity sensitivities? I don't have trouble doing that for rates instruments or options but I don't know which underlying risk ...
50 views

### Poor results forecasting stock price volatility using Python's GARCH model

As far as I understand, forecasting stock price volatility should be more achievable than forecasting absolute prices or returns. It seems as though GARCH models are the traditional and most widely ...
53 views

### Financial forecasting and Optimal order submission [closed]

For instance, If i have a model that can accurately forecast 3s ahead, would the trading logic be rather trivial? I have fit a series of distributions to L2 data and believe I have a fairly good grasp ...
58 views

### Calculate asset allocation given “long and short” optimized portfolio weights

If the amount of capital that has to be allocated for each asset given the "long only" optimized portfolio weights is: ...
170 views

### Why does Kelly maximise $E[\log\space G]$ rather than simply $E[G]$?

Given $G=\frac {C_n} {C_0}$, with $C_0$ the initial capital and $C_n$ the final capital after $n$ trades, the Kelly criterion derives the optimal fraction of capital to invest in each trade, by ...
32 views

### Monte Carlo VAR with differente asset classes

I have found a very useful post regarding the use of Monte Carlo simulaton to obtain portfolio Value at risk, based on Cholesky decomposition, random variates, etc. This post I'm talking about is: Is ...
98 views

### An interview question: Swap rates

Calculate the missing par bid and ask swap rates for the following tenors and briefly describe the calculation (assume the simple zero rate is linear interpolated, short-end (<1 years) is simple ...
46 views

### ATM strike Heston model

I'm thinking about the heston model. price of the asset $S^1=(S_t^1)_{t \leq T}$ fullfills the differential equation $dS_t^1=S_t^1(\mu dt + \sqrt{V_t} dB_t^1)$ the stochastic volatility is given by ...
28 views

### Black Litterman - Sector rotation

I was wondering if anyone here have ever tried to introduce sector rotation with regards to the Black-Litterman model. I want to try to expand the BL model by introducing this feature, however I have ...
29 views

### Vasicek Short Rate

Consider a spot rate curve: 1% 1Yr, 2% 2Yr, 3% 3Yr. Suppose today issue a 3 year zero coupon bond, the price shall be 100 / (1+ 3%) ^3. My first question is, suppose the spot rate curve keeps the same ...

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