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2
votes
1answer
1k views

What exactly is the annualized forward premium?

A forward contract has a premium of $ 0$ because it is an obligation to buy or sell something in the future (hence there is more risk). Call and put options, on the other hand, have premiums of $C$ ...
13
votes
4answers
2k views

What approaches are there to order handling in automated trading?

I am currently developing a commercial automated trading program in which users can write their own proprietary code and develop strategies, like in NinjaTrader, MetaTrader etc. Right now I am working ...
11
votes
2answers
774 views

Is Walk Forward Analysis a good method to estimate the edge of a trading system?

Do you think Walk Forward Analysis is a good method to estimate the predictability or edge of a trading system? Are there similar methods to know (estimate) how much alpha can capture an algo (in the ...
-2
votes
1answer
80 views

Who is in debt when a bank investments in commercial paper? [closed]

If a company issues commercial paper and the bookkeeper, bank A, receives a buy order from bank B, in which bank B creates credit to buy the commercial paper, does the company has a credit in bank B ...
11
votes
1answer
577 views

What to ask for in a good prototyping framework?

Reading up on quantitative methods, model development, and back-testing, one obvious question springs to mind: What should one ask of a prototyping (model testing) framework? I know a lot of people ...
8
votes
2answers
367 views

Do you know a good article on ETF's counterparty risk analysis?

I am at the moment considering investing into ETFs, but I am looking first to understand how these products really work. Indeed, it is my understanding that ETF can vary in terms of structure, thus ...
8
votes
2answers
256 views

What is more appropriate: the EMA of the option price or the EMA of the underlying?

I'm progressing, all too slowly, on a site that aims to show real-time numbers for options that are listed on the CBOE. Most of the instantaneous numbers are all set. Now I'm going to pay attention to ...
9
votes
1answer
159 views

How should you manage lot sizes in this situation?

Imagine that prior to entering the market you know beforehand the profit factor of similar situations. For example: ...
8
votes
3answers
874 views

DSP: stationary non-periodic signal: what's the best causal technique?

This is a bit DSP-related: so if you turn your non-stationary time series into a stationary process, you'll probably see that it is not periodic.. This is an issue for Fourier-based techniques because ...
7
votes
4answers
939 views

Do low volatility stocks outperform high volatility stocks over the long run?

A recent article from Forbes seems to indicate that low volatility stocks outperform high volatility stocks over the long run. Does anyone have any supporting or contradicting evidence to this claim? ...
0
votes
2answers
2k views

Open source alternative to excel for investment and portfolio calculations [closed]

I am a Linux user, and taking an investment and portfolio management course that uses excel. I was wondering if there are open source alternatives to excel for optimal portfolio calculations? If yes, ...
18
votes
2answers
932 views

Duality between constant rebalanced portfolio (CRP) and corresponding derivative

One of the greatest achievements of modern option pricing theory is finding corresponding dynamical trading strategies in linear instruments with which you can replicate and by that price derivative ...
17
votes
4answers
934 views

Approximately what proportion of a stock’s volatility is explained by market movement?

Assume we decompose the daily (log) returns of a stock as beta times market movement plus an idiosyncratic part. If this is done ex-ante, what proportion of the variance is explained by the market ...
8
votes
1answer
731 views

Are shorter holding period strategies better?

Consider two statistically identical strategies (identical information ratios, sample size, ratio of transaction costs to total profit, etc.) except that one has a much shorter average holding period. ...
3
votes
2answers
2k views

Black Scholes and Monte Carlo implementations in Java [duplicate]

Possible Duplicate: Is there an all Java options-pricing library (preferably open source) besides jquantlib? Can anyone recommend a library with an implementation of Black Scholes and Monte Carlo ...
7
votes
4answers
254 views

What is a sound way to project Company X's earnings over the next Y years?

I need to estimate cumulative earnings over the next Y years and I'd like to find a solution that is theoretically sound and relatively simple. Can anyone recommend an approach? Given: I have 30 ...
8
votes
2answers
723 views

How to shift amongst asset classes in response to relative value views?

I am designing an asset allocation strategy/fund which invests in four asset classes (via four independent sub-funds): Domestic equity International equity Domestic fixed income Foreign currencies ...
-5
votes
1answer
452 views

get live data from national stock exchange [closed]

http://billing.finance.yahoo.com/realtime_quotes/signup?.src=quote&.refer=quote Can i get real time data(from NSE india) using Yahoo finance API after subscribing to their service ?
12
votes
1answer
286 views

How should FX options be priced when a currency is artificially capped?

The question is inspired by yesterday's (06/09/11) historic announcement by the Swiss National Bank that it would impose a ceiling on the franc of 1.20 against the euro. I would like to know if there ...
6
votes
2answers
591 views

What does put-call parity imply about option premiums?

We know that $$C-P = PV(F_{0,T}-K)$$ When we create a synthetic forward, we buy call and sell a put at the same strike price $K$. When we buy the call why do we assume the premium is positive? When ...
10
votes
2answers
3k views

How we can forecast stock prices using chaos theory?

I saw an article in which the writer had mentioned that he used chaos theory to predict stock prices and ended up with a profit over 30%. Chaos theory is basically about finding patterns called ...
13
votes
1answer
2k views

How should I estimate the implied volatility skew term when calculating the skew-adjusted delta?

I'm trying to come up with the implied volatility skew adjusted delta for SPY options. I'm working with the following formula: Skew Adjusted Delta = Black Scholes Delta + Vega * Vol Skew Slope. I ...
5
votes
1answer
695 views

How do I get the average transition matrix for three consecutive years?

I have a one year transition matrix for three consecutive years. Multiplying these three matrices together yields the three year transition matrix. I want to obtain the average transition matrix for ...
12
votes
4answers
882 views

What are the risk factors in analysing strategies?

What do you think of strategies displayed on timelyportfolio.blogspot.com? I really like the fact that there is some code to reproduce the strategies, but they seem very elementary because he does ...
8
votes
2answers
489 views

The T+H Problem in Factor model forecasts

Suppose we train on M individuals consisting of T observations (i.e. TxM design matrix). The dependent variable is one-year return for each security (H = horizon of one year). In a factor model ...
16
votes
1answer
2k views

How do I price OANDA box options?

How do I price OANDA box options without using their slow and machine-unfriendly user interface?: http://fxtrade.oanda.com (free demo account) sells "box options": If you already know what a box ...
9
votes
1answer
488 views

How do you calculate the implied liquidity of an option?

How does one calculate the implied liquidity of a specific option contract given a set of vanilla puts and calls with various strikes and maturities on a single underlying?
5
votes
3answers
3k views

Does the debt load affect the volatility of equity?

Does the debt load of a company have an impact on the stock price of a company and its volatility? Also, how does the market react to the announcement of a company issuing bonds?
14
votes
1answer
9k views

Time Series Regression with Overlapping Data

I am seeing a regression model which is regressing Year-on-Year stock index returns on lagged (12 months) Year-on-Year returns of the same stock index, credit spread (difference between monthly mean ...
35
votes
2answers
12k views

How useful is Markov chain Monte Carlo for quantitative finance?

Naively, it seems that Bayesian modeling, structural models particularly, would be quite useful in finance because of their ability to incorporate market idiosyncrasies and produce accurate ...
22
votes
2answers
905 views

How do macro funds manage risk and model asset returns? Do they use factor models?

Some of the largest funds in the world are entirely macro-based: Soros, Brevan Howard, Bridgewater. They trade across asset classes, and seemingly with very concentrated allocations. What type of risk ...
16
votes
3answers
2k views

How do strategies deal with corporate actions?

There are many corporate actions that will affect the stock price, like dividend, stock split and rights. Given a large series of historical price data, how do we adjust the data to filter out the ...
14
votes
3answers
780 views

What is the most effective way of determining & measuring the level of HFT activity in a stock in (close to) real time?

On a security by security basis, I want to be able to quantify the level of HFT activity (and later institutional & retail activity). Is it higher than it normally is? How much so? What would you ...
25
votes
3answers
7k views

Why hold options when you can dynamically replicate their payoff?

When holding vanilla options, you can cancel out, theoretically, all risk with dynamic (delta) hedging. Then you earn the "risk free rate of return". Why would you make such a portfolio when you can ...
8
votes
1answer
1k views

Value at Risk backtesting (kupiec)

I m doing my research on estimating Value at risk using different assumptions on volatility and then compare my results based on backtesting. I obtained results and just on question based on my ...
12
votes
3answers
1k views

How do I eliminate developed currency funding cross rate risk in an EMFX position?

Back in the "old days" (ie 5-10 years ago) when we wanted to be long or short an emerging currency (say the ZAR, BRL, or TRY) we simply did everything against the pre-eminent currency of the day, the ...
8
votes
1answer
246 views

What tradeoff is there to using an accurate estimate with a large confidence interval?

I am working on calibrating a Heston model from simulated historical stock data. After obtaining an accurate estimate of the model parameters I found very large 95% confidence intervals for these ...
17
votes
4answers
11k views

Is statistical arbitrage on FX possible?

Do you know of any papers which consider pairs trading (or statistical arbitrage) on foreign exchange? I couldn't find any. I asked this question on several forums and got no reply. Thus I guess this ...
16
votes
3answers
3k views
9
votes
2answers
2k views

Can one use options on Treasury futures to hedge a portfolio?

Can one use options on Treasury bond futures to hedge a typical fixed income portfolio? If so, how can one estimate the duration for an option on a Treasury futures contract, and taking this a step ...
19
votes
1answer
2k views

Portfolio optimization with monte carlo sampling from predictive distribution

Let's say we have a predictive distribution of expected returns for N assets. The distribution is not normal. We can interpret the dispersion in the distribution as reflection of our uncertainty (or ...
3
votes
1answer
427 views

Techniques for forecasting short-frame data?

I'm having a problem in which a time series of 24 data points is given to forecast the next 12 data points. This 24 data points might be sparse (many are missing). Do you have any suggestion on what ...
10
votes
1answer
1k views

Expected return from a multiple linear regression?

How can I compute the predicted return from a linear regression that includes a number of different terms. For instance, suppose my equation is: $r_{future} = \alpha + \beta_1 r_{history} + \beta_2 ...
8
votes
2answers
411 views

How to generalize the Vickrey auction for two-sided trading?

I want to try out the Vickrey auction for a project of mine, but I'm not sure that I understand it completely. The thing is that I have several consumers and several providers trading one resource ...
15
votes
1answer
2k views

Is QuantLib more trouble than it's worth?

I'm just starting to work with QuantLib and wonder if I'm going down a very wrong path. I'm working on a site that presents the visitor with a table of streamed real-time options data, including ...
9
votes
2answers
475 views

How well does CAPM beta track the risk of a particular market relative to world markets?

Can the CAPM beta of emerging markets be less than the beta of the developed markets? As part of my research, I run regressions using market indices. I estimate the beta using a regression of MSCI ...
9
votes
3answers
3k views

What programming language is best suited for implementing DeMark?

Jason Perl's book DeMark Indicators details rules for calculating signals developed by Thomas DeMark. These rules are not complex in themselves, but there is no dirth of ...
10
votes
4answers
2k views

How can I select the least correlated portfolio of assets?

Can anyone explain the process and the calculations needed to select a portfolio of liquid futures assets with the least correlation? Given a set of returns for a series of assets, how do I select the ...
3
votes
1answer
10k views

How to get a list of stocks symbol of a specific exchange? [duplicate]

Possible Duplicate: Where to download list of all common stocks traded on NYSE, NASDAQ and AMEX? Is it possible to download a list of stocks that belong to a specific exchange (e.g. NASDAQ, AMEX, ...
21
votes
2answers
2k views

Statistical properties of stochastic processes for moving average trading to work

Common wisdom holds it that a moving average approach is more successful than buy-and-hold. There is quantitative evidence for that across different asset classes (see e.g. this book, or this paper ...

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