All Questions
22,248
questions
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12
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Factor investing for traders
Can factor investing be used for short term trading ? If yes how macroeconomic and style will be different from long term ?
- 101
0
votes
0
answers
13
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Yield to Maturity (YTM) to Zero Coupon Yield Curve (ZCYC) Forward Rate and Discount Factor mismatch in QuantLib
I have a set of YTM data for various tenors, and I'm constructing a ZCYC using the QuantLib library. However, when I calculate the forward rates and discount factors from the ZCYC and compare them ...
- 47
0
votes
0
answers
14
views
GARCH for Mean Variance Optimization
I am currently trying to carry out a mean variance optimisation, with the implementation of GARCH. I'm not sure if this is going to make complete sense as my understanding of GARCH is limited.
In the ...
0
votes
0
answers
21
views
Market Fragmentation
Consider a scenario where a security can be exchanged on two exchanges A and B. A trader who has access to A and B with same execution probabilities submit an order and split it between A and B ...
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0
answers
18
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SDP and riskless profit
I am trying to understand the Single Dealer Platform model that a lot of banks and prop shop are launching.
So I am not sure to understand really how a Single Dealer Platform works. From what I ...
- 31
0
votes
0
answers
25
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Validate spread of simulated rates under the LMM
Looking for a way to validate the spread of simulated forward rates from the LMM model. Test Log-Normality for LIBOR forward rates under the Libor Market Model this post suggests using the simulated ...
- 1
3
votes
1
answer
84
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Help me understand super replicating portfolio
Lets consider a hypothetical stock with current price of $S_t$ at time t and it can take any positive value with a strictly positive probability.
There exists a derivative that pays $ e^{S_T}$ at ...
- 131
0
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answers
21
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India 10yr Government security/bond yields
Which sites can provide historical data for India 10year government security which is monthly. Im assuming yield implies total return data (including dividends/interest) reinvested. Im a newbie so pls ...
0
votes
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answers
24
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YUIMA: Drift and diffusion parameters must be different?
I am currently working with the Yuima package and trying the estimate the parameters of a CARMA(p,q) model to real data. Using the eacf function of the TSA package a ARMA (2,1) process is recommended ...
- 135
1
vote
0
answers
26
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ARCH-Vasicek model solution
I understand how we can obtain the solution of Vasicek model $dr_t=\alpha(\mu-r_t)dt+\sigma dW_t$:
$$
r_t=r_0e^{-\alpha t}+\mu(1-e^{-\alpha t})+\sigma\int_0^te^{-\alpha(t-s)dW_{s}}
$$
This easily ...
- 21
2
votes
0
answers
37
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What is the impact of the rollover of VIX futures contracts on VIX options?
I am inquiring about the potential impact of futures rollover on VIX options prices. I am currently exploring diagonal and calendar spreads on VIX options, and I need to modelize this. Your insights ...
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0
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0
answers
26
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Probability distribution function for boundaries on brownian motion
What would be the probability distribution function for brownian motion with 2 boundaries ie a stop loss and take profit. The process is a standard brownian motion. However at values a and b any ...
- 1
0
votes
2
answers
62
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How close to the issue date should the "on-the-run" and "first-off-the-run" treasuries be?
I was trying to replicate the paper by Gürkaynak
and wondering how I could filter out the "on-the-run" and "first-off-the-run" from CRSP dataset.
- 1
0
votes
1
answer
39
views
Exchange redirecting order
I was reading about exchange to understand better how they execute my market-orders. So let's say I am sending a market order to buy one share of AAPL to NYSE.
When NYSE gets my order he looks at the ...
- 31
0
votes
1
answer
52
views
Do perpetual futures have initial and variation margins?
When trading perpetual futures (for example, on crypto), do the concepts of initial and variation margins take place?
I'll expand on my point:
Perpetual futures without leverage. For example, we want ...
- 101
0
votes
1
answer
35
views
Producing hedge ratios via regression via returns and not price
I'm a quant student and I need someone to clearly and plainly explain to me better than my professor did about this topic. Please be patient if my question seems very basic.
to find hedge ratios or ...
0
votes
0
answers
23
views
Last look window in us treasuries
Last look window is always discussed for Fx but I was wondering if people analyzed also its effect in other Asset Classes like US treasuries?
Because I think that the holding time of a quote in US ...
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0
votes
1
answer
67
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Portfolio optimization with Scipy in Python
I performed Scipy portfolio optimization in two scenarios: 1) when I cannot lend or borrow at the risk-free rate; 2) when I can lend and borrow at rf=1.5%. Now, optimal risky portfolio weights anyway ...
0
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0
answers
39
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How to arbitrage options prices against prediction markets?
Suppose we have both put/call European-style options market and price prediction market on same underlying asset and same expiration date.
How can one arbitrage one against the other?
It seems that ...
- 101
0
votes
0
answers
12
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Getting standardized residuals from MSGARCH in R
After estimation by the MSGARCH package in R, I couldn't find a way to extract residuals from the estimation results.
Anyone know how to extract the residuals from MSGARCH package in R? Thanks!
- 11
0
votes
1
answer
50
views
How to prove the inequality for the standard deviation of a linear combination of two random variables
The variance of the linear combination V of random variables X₁ and X₂ is given by the following formula:
$$
\sigma_{V}^{2} = s^{2} \sigma_{1}^{2}+(1-s)^2 \sigma_{2}^{2}+2 s(1-s) c_{12}
$$
where s and ...
0
votes
0
answers
33
views
Barrier Puts Pricing (down-and-in put)
I am trying to price the down-and-in put option with European Style (when barrier level < strike price) by using Black Scholes Option Pricing model.
but after checking the formula several times, I ...
0
votes
2
answers
50
views
US treasuries TRACE
For all trades on US Treasuries made through RFQs, all the trades should be reported to TRACE to have post-trade transparency.
But is TRACE then available to the public? or is it just for SEC?
If it's ...
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-2
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0
answers
47
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No arbitrage implies no good strategies?
I am trying to understand the concept of no arbitrage and its consequences. In my theory book we assume that inversors are small enough as to not have an impact on the price, etc, etc.
Then, to my ...
- 97
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votes
1
answer
73
views
PCA factors not uncorrelated
I ran into an interesting case recently. I am trying to construct a set of uncorrelated factors for a statistical factor model. I have started with picking a certain amount of assets (indices) which I ...
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1
vote
1
answer
74
views
Question about pricing kernel definition in "Quality minus junk" paper
I'm reading the paper "Quality minus junk" by Asness et al. published in Review of Accounting Studies (2019). The authors present the following definition of the pricing kernel on page 2:
$$
...
- 11
0
votes
1
answer
59
views
Leveraged ETF construction
It says that leveraged ETF are constructed using options/swaps, but I didn't see any example of how you can replicated a leveraged index using options and swaps.
For example taking the S&P500 ...
- 31
4
votes
2
answers
264
views
Does value of a TRS only involve past price movement and not expected returns?
Is the value of a TRS just the difference between the "financing leg" (e.g. the side paying -IBOR plus spread) and "asset leg" (e.g. the side pay income and price changes), with of ...
- 155
0
votes
0
answers
30
views
Parameters bounds for Heston model calibration
Still working on my master thesis and I have a question I have been looking at for some time but can't find a good reason.
I am looking to follow the steps of Horvath et al. (2019) in order to ...
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1
vote
0
answers
31
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Question about the integrand space of stochastic integral wrt martinagles
I am reading the book "Introduction to Stochastic Integration" by Hui-Hsiung Kuo. In Chapter 5, he introduces the definition of stochastic integral w.r.t martingale:
$$I(f) = \int_a^b f(t) ...
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answers
32
views
LSTM stock price predictin [closed]
My question is the following: beyond the functioning of the recurrent neural network LSTM, are there possible purely financial explanations that can motivate it? To be more specific in what I do mean, ...
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0
answers
31
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How to implement copulas into a Monte Carlo Simulation
Let’s say I wanted to estimate the expected shortfall (CVaR) for a portfolio of $d=10$ stocks using a Monte Carlo simulation.
We use some historical data to determine the mean and covariance matrix of ...
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0
answers
37
views
For portfolio variance, why does w⊤Σw indicate the variance? [closed]
Im trying to understand why w⊤Σw indicates the variance of the portfolio? Is there any mathematical proof of this?
Also, I reformulated the markowitz model to capture the total profit rather than ...
1
vote
0
answers
67
views
Bond basis arbitrage
The popular media refers to US.bond future basis trades in some contracts as arbitrage..they cite that as the future trades richer to cash hedge funds can buy basis and make money.
I'll assume they'...
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0
answers
73
views
How to access the Black Sholes Formula through the Distributive Law?
Recently I read a comment on how to interpret the Black Sholes Formula and more specifically how to wrap your head around the d1/d2.
Although there were many good comments, this one stood out when one ...
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38
views
When to use SOFR strip VS Eris interest rate swap, what is the difference?
I am a beginner in financial risk management. learning this as a hobby. Please guide me here.
Here we have 2 examples where one example uses ERIS swap futures and other uses SOFR strip to hedge.
What ...
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0
votes
0
answers
52
views
Kurtosis and skewness trading resources
I am writing and dissertation about distribution arbitrage, which is basically kurtosis and skewness trading with the Risk neutral densities. I found a few research papers, but I am looking for some ...
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0
votes
1
answer
42
views
STIR Topic: How to calculate implied policy rate for next meetings using FRA
Here a question about market implied rate using FRA: In some countries, like Poland, Hungary, Czech and South Africa, you have only FRA to find the zero rate for maturity less than 1 year. Here a ...
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2
votes
1
answer
62
views
Heston Model Sensitivity Qualitative Property
Consider the following Heston model:
$$\begin{aligned}
\mathrm{d}S_t&=rS_t\mathrm{d}t+\sqrt{v_t}S_t\mathrm{d}B_{1,t}\\
\mathrm{d}v_t&=-\kappa(v_t-\bar{v})\mathrm{d}t+\sigma_v\sqrt{v_t}\mathrm{...
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0
votes
0
answers
49
views
Trying to calculate FX SWAPS CARRY TRADE
Is this accurate ? I got it from the lehman brothers manual .
EXAMPLE OF A POSITIVE CARRY TRADE
• USD/JPY
Spot/Next Points: -0.45
3-Year Points: -1040 or (-0.95 per day)
Sell/Buy $10 USD /JPY three ...
- 1
0
votes
0
answers
31
views
Understanding simple calibration of Hull-White process
I've encountered issues with understanding how to calibrate the Hull-White model without Quantlib package. I want to calibrate this model for the time series of short-rate ($r_1, \cdots,r_n$).
I will ...
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0
answers
11
views
How to calculate Term Deposit Redemption Rate (TDDR)?
How would you estimate Term Deposit Redemption Rate (TDRR) in the context of regulatory banking (IRRBB and ALM)?
Supose I have a database with net balance of term deposits (1), early redemptions (2) ...
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0
votes
1
answer
53
views
Constructing payoff diagram using European calls [closed]
Hello I am self studying some concepts and I am super confused with constructing payoffs. I just cannot understand this. I tried GPT to explain replication but got confusing answers.
You can long or ...
- 131
1
vote
1
answer
57
views
Step by step integration of the Hull-White SDE
I'm struggling to understand the integration process of the Hull-White equation:
\begin{equation}
dr(t)=[\nu(t)-ar(t)]dt+\sigma dW(t)
\end{equation}
In the majority of the references that I have ...
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0
votes
0
answers
18
views
Construct DeFi yield curve
I was wondering if anyone knows how to construct a yield curve for cryptocurrencies (for yTokens like yDAI and yETH for example). It'd be best if yield curves could be dynamic (though I think it could ...
0
votes
0
answers
17
views
How is the continuous order and market book merged together at market close?
This question is specifically about how NASDAQ merges the two order books at market close in order to match orders, but I am guessing the same concepts apply to other on close/opening auction markets.
...
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0
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0
answers
37
views
Generalization of pairs trading to portfolios?
Standard pairs trading only trades one security against another.
In principle, nothing is stopping one from trading a portfolio of N stocks. There must be work on this? If so, can you point me to any ...
- 1,170
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0
answers
44
views
Quanty brain warming [closed]
a more relaxed question here, about learning quant/options trading. As I am self studying quant stuff, I feel often losing the thread of thoughts/the "touch" the next day when I want resume ...
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0
votes
0
answers
20
views
What is "period of report" on SEC form 4? [closed]
What does this date represent?
I cannot figure out exactly what it is. The date of the signature is often after this date. Is this the date of the last transaction?
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0
votes
0
answers
42
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Black scholes derivation [closed]
I am trying to understand the black scholes formula's derivation process. There are several parts I lose my intuition: why do we only need a two degree Taylor expansion for the stock price variable? ...
- 11