# All Questions

12,688 questions
41 views

### What is the earliest mention of ROE as an asset pricing factor?

Can anyone tell me, what is the first application of ROE in an (empirical) asset pricing model? I am aware of the 2011 paper by Chen, Novy-Marx and Zhang. Are there any earlier papers on the matter?
119 views

### Factor-Based Equity Investing [closed]

What is the simplest way (process) to develop a factor-based investing strategy with STOCKS? ...
44 views

### What exactly does shifting a barrier in a barrier option mean and how does it hedge delta?

How exactly is shifting the barrier to hedge delta implemented in case of barrier options. Is it just changing the barrier, if so, how does it hedge delta or is it making the barrier a range like a ...
110 views

### CVaR formulation

I am a research intern and I am working on a topic about a profit maximization of a risk-averse newsvendor by using Conditional Value-at-Risk.The problem is that I found different expressions of CVaR. ...
45 views

### Anyone need a daily Ticker to CIK mapping?

Since I've seen several "Ticker (symbol) to CIK" mapping questions over the years, thought I'd put this out here. I had a need to map this myself for another project. I finally have a baseline that ...
56 views

### Correlation between Two Factor Gaussian Shortrate Model and Black Scholes Model

I want to implement a two factor Gaussian Shortrate Model \begin{align} r(t) & = x(t) + y(t) + \phi(t), \\ dx(t) & = -ax(t)dt + \sigma dB_1 (t), \\ dy(t) & = -by(t)dt + \eta dB_2(t), \end{...
37 views

### Fractional derivative returns on a VWAP series?

In Marcos Lopez De Prado's book, Advances in Financial Machine Learning, the author explains the method of fractional differentiation as an alternative to calculate returns. The method basically ...
40 views

### Calculation of IRR Given Stage Assumptions

I am trying to replicate Union Square Ventures Fund #1 model. A number of assumptions are given and the outcomes are listed. I have copied these into google sheets. I am not sure exactly how IRR is ...
47 views

### Condition expectation calculation examples and theory [closed]

I want to ask you an advice about reading theory and examples of conditional expectation and conditional variance. I want to have my understanding deeper, because sometimes I can't understand ...
63 views

### What are the go-to textbooks for advanced quant finance topics? [duplicate]

Credit risk, interest rate modelling, volatility modelling. What are the go-to books for each of these 3 topics in quant finance? The target audience should be someone who understands the basics of ...
35 views

### Calculating historical volatility and returns from bond yield

I am interested to calculate the historical volatility and returns from a time series of US 3m T-bill yield (see screenshot below), for portfolio optimization. I am not too sure how to bridge the idea ...
74 views

### Greek gamma theta vega

I have a question concerning the greek. Can some one explain to me why vega, theta and gamma are extremum when the spot is equal to the strike price ?
169 views

### Value of a European Call option with Infinite maturity

It is a job interview question. So, what's the value of a vanilla European call option of infinite maturity, and a given strike, vol, interest rate, spot price. I think, the answer should be "zero". ...
116 views

### How to verify sticky delta property on a stochastic volatility model

Given a stochastic model for the evolution of St, with a given SDE for its volatility, how can you tell if the given model satisfy the sticky delta (or the sticky strike) property? Is it possible to ...
49 views

### Sticky Delta Property - Heston Model

Given the model in the picture, how can you verify the sticky delta property without any computational methods? I was told that it is possible to deduce it just looking at the model but frankly i have ...
169 views

62 views

### Predicting time series using Jump Diffusion model and Neural Networks

I am trying to understand the difference between using Jump diffusion model and Neural Networks or more precisely LSTM to predict time series data regardless what that data contains for example a ...
17 views

### Preference Shares and free float

I am calculating the free float of shares included in an index, would the preference shares be counted as part of free float?
27 views

### Floating coupon rate based on sales?

Just a quick question, can a floating coupon rate be tied to SPV daily revenue? My client want to issue an ABS bond, and its coupon would be (0 + 2% of the daily sales) Would it be admissible? or ...
146 views

### Portfolio calculation for 20 currency pairs

I'm trying to find a way to compute an optimized basket of n currency pairs based on 2 properties. Let's say i have 50 pairs * 2 (long/short) = 100 possible items. A basket has 2 properties to ...
48 views

### Stochastic solution (mean, variance) to lognormal drift and normal volatility

I have trouble deriving the state equations for a mixture of normal/lognormal stochastic differential, namely for its a) expected mean, (b) variance, and (c) drift adjustment for LMM - libor model I ...
52 views

### Real World pricing of a Constant Notional Cross Currency Swap

I have a question about Cross Currency (XCCY) Swap pricing in the real world. There are plenty of papers going nicely into detail, how XCCY Basis Swaps and XCCY Constant Notional Swaps work. Also ...
206 views

### What stochastic process produces Student's t-distributed returns?

If I think daily log returns have a normal distribution, I can simulate intraday log returns as normal, because the sum of normal variates is also normally distributed. What if I want to simulate ...
99 views

### What's Hedge Curve Template

what's a Hedge Curve Template (HCT)? How does it help value a bond? It appears to me it normally is used together with another curve where x,y-axis being maturity dates and discount factors ...
15 views

### Heteroskedasticity-Consistent Covariance Matrix Estimation [R] [migrated]

I would like to ask about the difference between the vcovHC and vcov in R. The former is described as the Heteroskedasticity-Consistent Covariance Matrix Estimation. What is the difference between ...
49 views

### From risk limits to pnl projection?

As a fresh risk manager, today I got an assignment to check whether our risk measurements / limits are setup properly (whether the limits are so tight that affect our p&l) . Better if I can ...
26 views

### Risk neutral interest rate calibration

I've only worked with RW model before but not RN interest rate models, so I'm looking for some practical insights on how RN calibration is done for interest rate models. Let's say I want to start ...
37 views

### Relationship between tick size, tick value, and contract size?

For many options and futures I can see that Contract Size = Tick Value / Tick Size Are these values always related like this, and if so what does the relationship mean?
44 views

### How should one hedge option positions on the date of expiry?

Let's say we are looking at a non-liquid equity ticker and a slightly OOM option on it. The problem is that if we buy delta to hedge it, it could move the underlying market and push the option to be ...
30 views

### FORECAST-Diabold-Mariano TEST

how can I interpret the test of Diabold-Mariano, here ar my results from R-STUDIO: ...
53 views

### Vasicek and Extended Vasicek Model

I want to ask about basic reasoning in Vasicek and Extended Vasicek model. Why $P(T,T) = 1$ for non arbitrage model? Can we place $P(T,T) = 10$ or other numbers? Is it correlated with The Law of ...