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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 ...
12 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 ...
26 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 ...
37 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 $V(X)$.
48 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,...
102 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 ...
38 views
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Implied vol vs Realised vol on Event Days

How implied vol varies vis-a-vis realised vol on an event days?
8 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.
67 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 ...
73 views
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87 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 ...
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: $$X_{t} - x_{0}= \mu \int_{0}^{t} X_{s} ds + \sigma \int_{0}^{T} dW_{t}$$  ...
584 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, ...
196 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 ...
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=...
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?
94 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 ...
42 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 ...
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.
277 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 ...
11k views

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. ...
50 views

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 ...
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 ...
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 ...
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 ...
67 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 ...
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.
902 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 ...
131 views
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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 <...
39 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 ...
562 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 ...
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 ...
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 ...
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 ...
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 ...
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 ...
35 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 ...
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 ...