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4 views

Log-normal model for volswap prices

First of all, I don't know if this is allowed on this forum, so if not please by all means remove the post. I've been looking at 'market models' of variance swaps such as the Bergomi model and ...
2
votes
1answer
64 views

Evaluting the SDE $dX = tds$

The process $S$ is a geometric Brownian motion with an SDE: $dS = S(\sigma dB + \mu dt)$. I'm stuck evaluating $\int dX = \int tdS$, $E(X)$ and $V(X)$.
1
vote
1answer
32 views

Possibility of delta greater than 1

Can delta of an option be greater than 1? Please illustrate it with an example.
1
vote
3answers
83 views
+50

How to calculate standard deviation of continuously compounded four-year stock returns?

Currently I am preparing for quant interview and I encounter the following question in Heard on the street. Question: If the standard deviation of continuously compounded annual stock returns is $...
2
votes
1answer
67 views
+50

Implied vol vs Realised vol on Event Days

How implied vol varies vis-a-vis realised vol on an event days?
1
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0answers
18 views

Fair Strike for Variance Swap with no Skew in IV Surface

I am reading through Derman's 1999 research notes, "More than you ever wanted to know about Volatility Swaps." In equation B4 of Appendix B, the author takes the Taylor Series of the variance swap ...
0
votes
0answers
21 views

sort of asked before but would be good to get updated sources of tick data

Hi: I am looking for reasonably priced quote data or ohlc minute bars for US stocks. I would want the history to go back say 2 or 3 years. I realize that getting US quote data for reasonable prices ...
2
votes
1answer
134 views

Options basics needs to be cleared

I'm not clear for the terminology of options and the mechanics of it. Any help is appreciated. For example the following statement: European call option of Apple stock with maturity 1 year and ...
1
vote
0answers
51 views
+50

Using Python Quantlib's FittedBondDiscountCurve as Evaluator of Parametric Curve - Errors

I am using Quantlib's FittedBondDiscountCurve in Python 3.7 and setting MaxIterations to 0, and giving a guess_solution, which then turns the routine into an evaluator for the parametric form I choose,...
1
vote
1answer
104 views

Leverage constraints

I am trying to complete my project on Mean-Variance Leverage Optimization, and I have found lots of helpful advice on this forum. I wanted to ask you if you have some idea on how to implement a ...
0
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0answers
12 views

Negative forward variance

At times, extrapolation and interpolation of ATM curves throws error that says negative forward variance is not acceptable. Please explain why this happens with an example.
3
votes
1answer
89 views

Why do options market makers make their spread as wide as the corresponding vega?

I've heard that option market makers make their bid ask spread as wide as the vega of the contract they are quoting. If the quoted spread is narrower than the vega of the option it is said that the ...
1
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2answers
86 views

Interesting Undergrad Thesis [on hold]

I'm searching for an undergrad thesis in finance. I already have some ideas, but still wanted to ask: Is there a an interesting topic that jumps to your mind, when you think about implied volatility (...
1
vote
1answer
65 views

Why the weight vector of 'global minimum variance' the 'eigenvector' with the minimum eigenvalue?

Question Why is it the case that the weight vector of the global minimum variance portfolio the eigenvector of the covariance matrix with the smallest eigenvalue? Question with more details I ...
1
vote
0answers
36 views

Exotic Derivatives Model Calibration

Suppose if we will like to price an exotic option with a model,we calibrate them to natural hedging instruments that are available in the market. Do we use all the instruments as hedge or only a ...
3
votes
1answer
69 views

Stochastic Volatility and Sticky Delta

"Stochastic volatility models can be thought of as sticky delta model. And Local volatility model as sticky Strike." Please help me understand how the author has reached this conclusion.
10
votes
2answers
9k views

Annualzing the log of daily returns riddle

Two popular ways to measure returns are Arithmetic returns and Log returns. Let's define arithmetic (simple period) returns as: P(t) - P(t-1) / P(t-1). Let's define log return as Ln( P(t)/P(t-1) ) or ...
1
vote
4answers
9k views

Symbols for DAX from Alpha Vantage

I found the website https://www.alphavantage.co as an alternative for yahoo finance stock API. I am interested in the top 30 DAX symbols, but I seem to cannot find them on Alpha Vantage. Is there a ...
270
votes
30answers
201k views

What data sources are available online?

What sources of financial and economic data are available online? Which ones are free or cheap? What has your experience been like with these data sources?
2
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0answers
37 views

How to interpret CAPM model?

I want to run CAPM model on two portfolios P1 and P2. Where CAPM is Rt - Rft = λ0 + λ1 (Rmt - Rft) Results which I got: Portfolios Intercept Coefficient of Rm-Rf Adjusted R2 P1 0 i.e not sig. ...
1
vote
2answers
92 views

What is the stock price expectation?

The Hull textbook (and accompanying technical note) says that the expected stock price $\mathbb{E}[S_T]=S_0 \exp(\mu T)$. However, the answers to a British actuarial examination (Q4 for September 2018)...
2
votes
0answers
35 views

Estimating Market Price of Risk

I need help with estimating market price of risk. Assume money market account and two risky assets which exposed to same two sources of risks follow process: $dM(t)=rM(t)dt$ $dS_1(t)=S_1(t)(\mu_1dt+\...
1
vote
1answer
89 views

Calculation cross-currency basis

I am trying to calculate cross-currency basis on the 3-month horizon for a certain set of currencies. The formula should be $ccb = F/S (1+y_{foreign currency}) - (1+y_{USD})$ where $y_{USD}$ is Libor ...
5
votes
1answer
156 views

Solving $dX_{t} = \mu X_{t} dt + \sigma dW_{t}$

I want to solve the following SDE: $$ dX_{t} = \mu X_{t} dt + \sigma dW_{t} \quad X_{0} = x_{0}$$ Integrating, I get: $$ X_{t} - x_{0}= \mu \int_{0}^{t} X_{s} ds + \sigma \int_{0}^{T} dW_{t} $$ $$ ...
3
votes
1answer
586 views

Are there any software libraries for backtesting FX algorithms against tick data?

I've read question, however it doesn't appear as if any of those libraries work for FX data. A Google search for python forex backtesting turns up this project, ...
4
votes
1answer
197 views

Where can I find a clear explanation (brief derivation) of N(d1) and N(d2)?

Where can I find a good explanation (perhaps with a brief derivation) of N(d1) and N(d2) from Black-Scholes? Just trying to understand the general idea about these 2 probability functions and how they ...
8
votes
2answers
3k views

Pricing of a Foreign Exchange Vanilla Option

To understand how Bloomberg prices foreign exchange vanilla options , I extract the following screenshot from its OVML function. The Black-Scholes formua for vanilla options are \begin{split} & P=...
1
vote
2answers
134 views

Is there an inverse relationship between (future-spot) price and yield?

If the difference between futures and spot prices rises will the yield for the current bond increase as well?
1
vote
2answers
100 views

Returns and logreturns differences

I have a time series of stock prices and I tried to calculate simple returns and log returns. However, I end up that simple returns has positive mean, but log returns has negative mean. Is it possible ...
1
vote
0answers
46 views

How can one apply models such as Fama-French factor model?

I'm reading into Fama-French 3- and 5-factor models. I notice that they use the returns from market portfolios to "predict" stock excess returns. But obviously we cannot know ahead of time the returns ...
-1
votes
1answer
62 views

Stochastic Vol Mathematical derivation [on hold]

I want to understand the mathematical steps done. Can someone please simplify the derivation of d(pi) from Pi? Thanks in advance.
9
votes
1answer
278 views

Heston model reparametrisation

It is well-known that calibrating Heston to the vanilla market is not as easy as it seems: some parameters are "interdependent" and the objective function exhibit plateaus in the parameter space (at ...
15
votes
4answers
11k views

Trading C++ Libraries

Are there any free c++ libraries that would have some of the functions that would be used in developing a trading strategy. For instance, calculating drawdown, Volatility Forecasting, MAE, MFE....etc. ...
-1
votes
0answers
52 views

Exotic Traders: Trading Decision [on hold]

I am curious to understand the mind of an exotic trader. Suppose if you just sold an exotic option and want to hedge out some greeks risk of your exotic option, would you hedge your gamma or your vega ...
2
votes
4answers
2k views

Bloomberg-alternatives for intraday stock price data?

Given the limitation Bloomberg imposes in terms of the number of days you can go into the past when retrieving historical intraday data, what are similarly reliable alternative solutions? I require ...
34
votes
2answers
8k views

Which approach to estimating fundamental factor models is better, cross-sectional (unobservable) factors or time-series (observable) factors?

There are many approaches to estimating fundamental factor equity models. I would like to focus on two traditional methods: The time-series regression approach of Fama and French. Factors are ...
2
votes
2answers
407 views

CBOE Index Minute Data

I am doing a small research and looking for a place to purchase historical minute CBOE Index data. I am interested in: VIX - CBOE Volatility Index VVIX - CBOE VIX VOLATILITY INDEX VXV - CBOE VIX ...
4
votes
1answer
68 views

Bloomberg Ticker mapping with Reuters RIC

I am trying to map Bloomberg ticker into Reuters one. For example this one: EDZ3C 96.625 COMDT Few years ago aforementioned BBG ticker would be mapped to Reuters ...
3
votes
3answers
10k views

Where can I download intraday series for DAX and S&P500 Index?

Where can I download intraday tick data for DAX and S&P500 index prices? I found only daily closing prices.
1
vote
5answers
903 views

10 years intraday for a single stock

For a personal experiment I need to acquire 10 years worth of data (with time resolution hourly at least) for a single stock. It doesn't really matter which stock, and the data doesn't need to be very ...
3
votes
1answer
132 views
+50

Finance: Portfolio - Long Short Portfolio construction

I am trying to construct a Long / Short portfolio in R. Say I have two portfolios Tech and Mature and I want to go long on the <...
1
vote
1answer
41 views

SDE Parameter Estimation

Have a question about "How to estimate parameters for SDE with multiple Brownian Motions ?" Let's say $X_t$ follows the process: $dX_t=\mu dt+\sigma_1 dW_t^1 + \sigma_2 dW_t^2 $ I think I've checked ...
8
votes
1answer
563 views

Transforming 3M volatilities into 6M volatilities in EUR forecast curves

I have implemented a stripping algorithm to extract forward volatilities from cap/floor flat volatilities for different currencies. I am however struggling a bit when implementing a method to convert ...
9
votes
4answers
1k views

Software for decomposing payoff diagrams into plain vanilla products

Nowadays structured products (or packages) with complex payoff diagrams are omnipresent. Do you know of any software, add-ons, apps, code whatever, that enables you to enter a payoff diagram or a ...
3
votes
1answer
62 views

S. Bossu's Correlation Swaps Model

I am reading Sebastien Bossu's "A new Approach For Modelling and Pricing Correlation Swaps" (link). I am recalling some of the definitions from the paper and would like to understand how to prove one ...
9
votes
5answers
28k views

Why do some people claim the delta of an ATM call option is 0.5?

I am looking for a mathematical proof in terms of differentiating the BS equation to calculate Delta and then prove it that ATM delta is equal to 0.5. I have seen many books quoting delta of ATM call ...
0
votes
0answers
21 views

ATM Curve Construction: Short-Dates

Please explain example 1 and example 2. In example 1 how does 6 appear in the square root function. And in example 2 it is written:" Assume it is known that spot will be completely static during the ...
1
vote
0answers
35 views

Volatility spread of Strangle

It's written in a book by Giles Hewitt : " The bid-offer spread quoted on a Strangle in volatility terms will usually be wider than the ATM spread to the same maturity because strikes away from the ...
1
vote
0answers
37 views

LP for max stress test

I'm trying to find a solution to the following problem: Assume a portfolio of $n$ zero coupon bonds mapped in risk by their respective DV01. Assume that the ZC portfolio created cannot exceed max ...
1
vote
2answers
54 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 ...

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