All Questions

0
votes
1answer
12 views

Antithetic sampling Monte Carlo

In Peter Jaeckel, Monte Carlo in Finance book, I read the following sentence: Whenever the first realised moment of the underlying variate draws $\{z_i\}$ has a strong impact on the result of the ...
0
votes
1answer
9 views

Investors degree of risk aversion in capm model

I am a bit confused about one assumption of the capm. My professor said that in the capm model all investors share the same utility function and the same degrees of risk aversion. Then as a final ...
0
votes
0answers
9 views

Portfolio return with changing assets over time

I need some feedback on a very basic question regarding the calculation of the portfolio return. I have created an example of a portfolio with two assets and attempted to calculate the return: I've ...
0
votes
0answers
9 views

How can i fit the following regression in R? Why is the coefficient [second Columns] for R so low?

'Rwml' is the monthly log return So the first column is clear, I got nearly the same values, at least the same magnitude. But: If I regress on the variance, my input values are way too low to get a ...
0
votes
2answers
69 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 ...
1
vote
1answer
109 views

Ito formula (lemma) problem

I am trying to solve this problem Consider the following one-dim. stochastic process $$dX_t = b_t dt + \sigma_t dW_t$$ where $W$ is a one-dim. Brownian motion. The above SDE is well-defined. ...
2
votes
0answers
917 views

How to calculate time-segmented volume? [closed]

amibrokers has this calculation for TSV: ...
-2
votes
2answers
243 views

How do I calculate expectancy from a past series of trades in my trading account? [closed]

Expectancy is defined as "How much money gained for every $1 risked". What is the expectancy for this particular series of trades? Risked €1, won €2 Risked €2, won €1 Risked €3, won €6 Risked €3, ...
0
votes
1answer
49 views

Vasicek model and spot 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 $\gamma$ ...
1
vote
1answer
63 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
votes
0answers
34 views

2 ways to calculate profits, which both seem legit, but produce different results - what am I missing?

I'm trying to calculate this simple example with 2 ways which both seem legit, and getting different results. Way 1: at the beginning of day $t$, first reset the holdings to 0, then buy the number of ...
1
vote
1answer
54 views

Proof standard Brownian Motion under change of measure

Let's split the usual time horizon $[0,T]$ like $0=T_{0}<T_{1}<\dots<T_{n}=T$ and consider the bond price $P(t,T_{i})$ for $i=1,...,n$. We assume $$\frac{dP(t,T_{i})}{P(t,_{i})}=r_{t}dt+\xi_{...
0
votes
0answers
21 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 ...
1
vote
2answers
3k views

What is the EUR swap curve on Bloomberg? I.e. what is the EUR equivalent of S23 curve on Bloomberg?

I am trying to understand the currency basis calculation and whether there is a difference in currency basis when quoted vs. OIS and -IBOR rates.
2
votes
1answer
2k views

What is the unconditional variance for a GARCH model?

I want to use a Matlab script to calculate Heston Nandi GARCH prices. I found an appropriate script online and it asks for the "unconditional variance" as an input. How do I calculate the appropriate ...
0
votes
0answers
22 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
28 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 ...
1
vote
2answers
85 views

When constructing a cointegrating series, does choosing the linear regression with the lowest ADF test statistic yield the optimal hedging ratio?

Multiple sources say that you should find the optimal hedging ratio between two stocks in a pairs trade by conducting 2 linear regressions (with each stock as the independent variable), and using ...
2
votes
2answers
60 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 ...
0
votes
0answers
31 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
votes
1answer
46 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
votes
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
1answer
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 ...
0
votes
0answers
22 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
0answers
45 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
0answers
25 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
0answers
29 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 ...
0
votes
1answer
43 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
1answer
33 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
0answers
25 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?
1
vote
2answers
49 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 ...
0
votes
2answers
62 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
2answers
149 views

Portfolio - Default Probability

Suppose we want to identify the frequency of default on a portfolio with a 1000 loans. In the independence case, each firm’s default process follows a Bernoulli distribution with parameter $p = 0.01$. ...
95
votes
18answers
17k views

Video lectures and presentations on quantitative finance

What are your favourite video lectures, presentations and talks available online? A few rules: Must be related to quantitative finance. No Economics 101 courses, please. Try to avoid DIY lectures ...
1
vote
0answers
37 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 ...
3
votes
2answers
2k views

Alternative to tradertest.org for mental math practice

The most recommended resource for preparation for Optiver's math test is tradertest.org. But the website is down. What are the closest alternatives to it? Although this question has been asked on ...
4
votes
4answers
4k views

Does anyone know of an equivalent to trader test?

I've been looking at forums that provide links to prep for trading interviews and TraderTest.org always pops up however, the website is down. Does anyone know what happened to the website or what are ...
0
votes
1answer
91 views

Best practice approach for computing beta

I was wondering how one should choose parameters such as "frequency" of returns (daily, monthly etc.), "time frame" (1 or 3 or 5 years of historical data etc), benchmark (same of the portfolio or the ...
1
vote
1answer
55 views

Do companies' Reuters Instrument Codes (RICs) change over time?

I am merging two datasets: 1) One which includes Reuters US companies' RICs and the number of news linked to each company; 2) Compustat US, taking data from 1996 to 2018. I have few questions: ...
2
votes
2answers
66 views

How to calculate necessary gain to compensate a loss in a financial transaction?

(Feel free to suggest the correct Stackexchange community - or otherwise - if this is not the correct one) When trading financial markets, a gain of x%, won't ...
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
4answers
4k views

Why is the value of debt modeled as a short put option in Merton's model?

Can someone give me an intuitive understanding of why the Merton model models the value of the debt from the lender's point of view as a short put with a risk free bond? I'm not well versed in this ...
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
50 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 ...
1
vote
1answer
97 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
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
1answer
63 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 ...
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
votes
0answers
58 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
votes
0answers
40 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 ...

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