All Questions

0
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0answers
16 views

Python Quantlib : what is missing in creating new Libor or Euribor object?

So I am trying to follow the guide on QuantLib Python Cookbook on Hull-White 1 Factor model calibration and was able to set it up. But what I wanted to do was to include a term structure model that ...
0
votes
1answer
42 views

Strategic asset allocation research

I am currently trying to form an overall asset allocation strategy which combines base strategic allocation and tactical shifts. My model already incorporates the tactical shifts using various factors ...
0
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0answers
16 views

Data Vendors for Equity Risk Premium, Risk Free Rate and Equity Index Price

I've been searching to see if there are vendors that could provide datasets for these 3 categories. Any recommendations? Thanks
1
vote
0answers
25 views

What's the interpretation behind this GARCH modeling?

I have an ARIMA model for monthly returns of the brazilian stock market index. Then I test the residuals of the model for ARCH effects. The ACF/PACF of squared residuals show that there are no ...
0
votes
1answer
47 views

Risk-neutral pricing and statistical arbitrages

I'm studying the martingale approach to asset pricing. Dealing with the concept of risk-neutral probability, I came up with a question about the possibility of "arbitrages in expectation". I'll be ...
0
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0answers
26 views

Value of portfolio with fixed discrete dividends

I know that this is a very simple question, but i want to make sure to grasp the concept of ex dividend and value of portfolio. Suppose that we have a two period binomial tree of a stock with initial ...
0
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0answers
11 views

Pricing barrier option under Levy process: Biased estimate?

I want to price a down and out call, barrier option, with the underlying asset following a Levy process. I am interest on the Kou double exponential model or the NIG process, to capture asymmetric ...
0
votes
0answers
18 views

Bootstrapping spot rates based on swap rates using QuantLib

I am bootstrapping the shibor curve and fr007 curve using swap rates in China. I created my own index like following: ...
0
votes
1answer
43 views

Vasicek model and sport interest rate parametrised by reversion rate

By solving an SDE I want to derive the analytical results for mean and variance of the process of extended Vasicek model. $$ dr(t) = \left(\eta - \gamma r(t) \right)dt + c dX(t) $$ where $\gamma$ ...
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0answers
23 views

Bachelier Model (with interest rates) - problem in deriving pricing formula

I want to compare the Bachelier model and the Black Scholes model. I am afraid my question is going to be a bit lengthy, but if there is someone who knows any literature, which concerns the ...
0
votes
1answer
43 views

How is the Fama French 3 factor model used for portfolio construction?

In which ways is the Fama French 3 factor model used by practitioners to construct portfolios? I understand that the betas can be calculated for a portfolio of stocks or for single stocks. Are the ...
0
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0answers
21 views

Is the implied volatility surface relative or stationary?

Do different strike values of options attain their volatility value dependent on their % distance from the ATM price continuously, or is the volatility surface stationary during a single day?
0
votes
1answer
42 views

Don't know if it is obvious, but how do I fit the following model in R?

From the Paper "momentum crashes", Daniel and Moskowitz $I_B$ is a dummy Variable which could be either one or zero Is it possible to regress on two intercepts? or do i get something wrong ? Are ...
0
votes
0answers
44 views

Barrier option on a basket with arbitrary stochastic process

Suppose I want to price a Down-and-out European call, barrier option. However, the stochastic process is not a gBm or any other Levy process with known structure. Practically, I want a barrier option ...
0
votes
1answer
31 views

How are open and close price of mini snp futures determined

I'd like to know how are open and close prices of the mini snp futures contracts determined. For some reason I cannot find an answer to this basic question on the cme website.
0
votes
2answers
59 views

understanding Value-at-Risk correclty

The are several types how to calculate the VaR. I am focussing on the method of calculation the VaR in percentage. $VaR=I*z*std*\sqrt{t}$ This gives the VaR in €. I have the z-value, the daily ...
0
votes
0answers
25 views

Wave Method and Implied Duration

I am pricing an MBS under three different rate scenarios: a base case, +5bps and -5bps I compute partial durations on the base case using the wave method (P. Hagan: Calculating Delta Risks and Hedges ...
1
vote
2answers
45 views

Find arbitrage opportunity in the given market model

Consider the following 3-period-market-model: The discounted price of the risky asset $S$: How can I find an arbitrage opportunity in this model? I know that there would be no arbitrage if we ...
1
vote
0answers
36 views

Pricing bond backed by collateral

I'm new to quantitative finance, and trying to derive an interest rate for a collateralized bond. Imagine there are two parties, Alice and Bob. Alice wants to lend $X$ units of an asset to Bob. The ...
1
vote
0answers
37 views

Why can't we create a “magic” basket of options to sell for no-arbitrage pricing in SVJ model?

I am learning how to price SVJ options and am reading some stuff on no-arbitrage pricing for SVJ model using the typical approach you would use (like in BSM option pricing) of creating a risk free ...
1
vote
0answers
49 views

What are good TEXTBOOK on stochastic volatility and interest rate theory?

I wanted to learn stochastic volatility modelling and interest rate modelling. On this site, a answer recommended me the books "Stochastic Volatilty Modelling" by Lorenzo Bergmo and "Interest Rate ...
3
votes
1answer
56 views

How to interpret the (expected) exposure and CVA of an option or a single share

I have a quick (hopefully simple) question regarding the interpretation of the expected exposure of a call option and a single share. I've done some computations on the formula for the expected ...
0
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0answers
57 views

Using securities finance transactions to facilitate short positions

The typical way to take a short position would be to borrow the security (facilitated by a custodian/prime broker). How can one use securities finance transactions to facilitate short positions (...
0
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0answers
37 views

Free dividend data API for non-US stocks

Is there are any free API for dividend data that does also include non-US stocks? I know of this question from three years ago. However, the situation has changed since then apparently, as there are ...
0
votes
1answer
106 views

How would one sell a security that they don't own?

I am reading an article about arbitrage and it gives an example where "If you buy one unit of security B for £11 and sell two units of security A for £6 each you make a profit of £1 at t = 0$. As ...
3
votes
0answers
54 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
1answer
61 views

Constant Maturity Swap dates and conventions

Let's note $L(t,T_i,T_{i+1})$ the libor rate observed at $t$, fixing at $T_i$ with delivery at $T_{i+1}$. The natural delivery date for this rate is $T_{i+1}$, so a vanilla swap with no pay lag would ...
1
vote
1answer
53 views

In-sample and out-sample backtest performance, how to do this?

I have a strategy in development that I am backtesting to optimize for parameters, a total of N combinations. Trying my best not to overfit. I run the first backtest for the in-sample period and I ...
0
votes
1answer
35 views

Using AlphaVantage For Japan/Shanghai/Hong Kong/Shenzhen stock exchange data?

Can I use AlphaVantage to pull data from Asian stock markets? I've been able to do it for others such as the London stock exchange, India stock exchange, Australian stock exchange etc. but haven't got ...
0
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0answers
15 views

How to forecast monthly volatility with daily gjrGarch estimates

I'm currently writing a paper and need to regress the 22 days realized volatility of the following month on its GARCH estimate and the 126days realized volatility up to t=1 The paper im referring to ...
2
votes
1answer
69 views

Black's Approximation - Discrete dividend for Put Options

I am currently trying to price and option chain for dividend paying stocks (american style exercise). I am able to calculate the Net Present Value (NPV) of dividends until maturity and then apply ...
3
votes
0answers
47 views

American Perpetual Put Option

I want to compute the expected payoff of a (classical) perpetual American put option in the Black-Scholes-Merton (BSM) framework with an optimal strategy of exercising the option at time $\tau=\inf\{t:...
2
votes
1answer
44 views

Difference between modelValue from HestonModelHelper and NPV() from VanillaOption

I am trying to calibrate an Heston model and price vanilla option using Quantlib 1.15 and Python 2.7. I use the following code ...
0
votes
0answers
44 views

How is Kalman Filter used to estimate Term structure Models

I am implementing "The Term Structure of Variance Swap Rates and Optimal Variance Swap Investments" . This paper is using kalman filter to estimate the state and the mean variance and a parameters on ...
1
vote
0answers
40 views

Symbol “.” in the derive of Quanto Adjustment

I am reading "Analysis, Geometry and Modeling in Finance". In section 2.10.2 which derives the quanto adjustment, it states that (in page 46) by definition the process $S_t^{d/f}S_t^f$ is the foreign ...
1
vote
2answers
108 views

How to create a volatile market, by combining less volatile markets?

This might be against the law of gravity, but I'll give a try 🙂 Is there a way to combine two financial products $p_1$ and $p_2$, into a single product $p_c$ that is more volatile than its ...
1
vote
1answer
95 views

Half life of Exponetial Weighted Moving Average

I am trying to apply a volatility strategy. I am reading a paper where the authors defined the volatility as: "Exponential Weighted Volatility of returns with a 1-year window and 3-month half-life" ...
0
votes
0answers
36 views

Choquet integral risk measure

I have one question that cannot fully understand why. What is the definition of the Choquet integral risk measure?
2
votes
2answers
53 views

Max allowable return in Markowitz model

The Markowitz model solves the following problem: The portfolio with the smallest variance among attainable portfolios with expected return µV. Here we have to choose µV to get the optimal portfolio ...
1
vote
1answer
56 views

Why do we need to borrow money in the call-put parity? [on hold]

As I understand it, the call put parity is given by $$c = p + S - \frac{X}{(1 + r)^T}$$ I understand the rationale behind simultaneously buying the call, put and underlying asset for $S$, but why ...
2
votes
2answers
103 views

Reference on Futures basis trading strategy

I have heard that it is possible to trade on the futures basis. In my understanding, the futures basis is essentially the difference between the futures price and the underlying asset (also referred ...
0
votes
0answers
25 views

Strange results in Fama-Macbeth regression estimates

I am reading the paper Chordia, Tarun and Subrahmanyam, Avanidhar and Anshuman, V. Ravi, Trading Activity and Expected Stock Returns (Undated). Available at SSRN: https://ssrn.com/abstract=204488 or ...
0
votes
0answers
51 views

Difference between characteristic function and Fourier transform

I'm struggling to understand the difference between this two functions. I have this condition: $P_j:=\mathbb{Q}(S_T>K):=\frac{1}{2}+\frac{1}{\pi}\int_{0}^{+\infty}Re[\frac{e^{iuK}f_j(u,x,v)}{iu}]\...
3
votes
1answer
86 views

What is upper left vol?

First time question, so please let me know if you have feedback for how I am asking. I am reading a market research piece and it makes reference to the performance of "vol, particularly the upper ...
2
votes
0answers
33 views

Simulating from a multivariate clayton copula

I am recently into copulas for finance, I've read several examples of how to generate dependent random variables with most kind of copulas. The problem for me is that all the books describe the case ...
3
votes
2answers
55 views

Interest Rate Assumption (Ornstein - Uhlenbeck Process)

Why can we assume that interest rate is stationary (identically distributed), Gaussian (has multivariate normal distribution), Markovian (the future is determined only by the present), and continous ...
0
votes
0answers
20 views

One-day Binary Event Implied Moves

What is the convention for pricing the expected 1-day move of a binary event based off of the implied volatility of the nearest series which contains that event? How do you distinguish between the ...
1
vote
0answers
41 views

Discounted self-financing portfolio still a self-financing portfolio?

Assume a self-financing portfolio $V_{t}=\theta_{t}^{0}S_{t}^{0}+\theta_{t}S_{t}$ with $S_{t}^{0}$ the value of the non-risky asset at time $t$ and $\theta_{t}^{0}$ the amount of shares of the non-...
1
vote
0answers
29 views

Has there been studies done on changes in model performance post-crisis?

My question is, has there been done any studies on whether the efficiency and accuracy of pricing and risk-management of derivatives using different models and algorithms has changed after the ...
0
votes
0answers
44 views

CDS Quote Conversion - Quoted vs Par

Just to be on the same page, let me start with some nomenclature: Par Spread = Coupon for which the CDS has NPV=0, assuming a piece-wise constant hazard curve (considered in conjunction with all ...

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