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votes
2answers
79 views

Is there any funds that do market making?

In spite of banks, market making firms, brokers is there any funds that specially do market making?
0
votes
0answers
23 views

Milan Stock Exchange model [closed]

I would like to ask whether some of you know what kind of model (order driven/quote driven/hybrid) is used within the MAT market at Milan Stock Exchange or alternatively where is this information to ...
0
votes
0answers
35 views

Portfolio Return Decomposition

Barra gives factor weights for a common set of factors, for each asset. Given a long-short portfolio, is there a way I can combine the individual factor weights to get the factor exposures for the ...
0
votes
1answer
49 views

Are pure PIK bonds' payoffs known from the start?

I am developer working in the financial field and I would like to understand what I'm doing. My latest work subject involves Payment In Kind bonds with coupons fully reinvested (e.g, no coupons ...
1
vote
0answers
31 views

Why does an American option on a continuous dividend paying stock have a critical price above which it is optimal to exercise early?

An American call on a continuous dividend paying stock must be above its intrinsic value, i.e $c(t)\geq\max(S_t-K,0)$. Why is there a critical price above which it is optimal to exercise (i.e. we ...
1
vote
3answers
551 views

Why somebody buy the defaulted loans?

Why somebody buy the defaulted loans from the banks, if the debtors can not pay back their debt? If I bought these loans I will cause losses myself, because nobody will pay me (or just a lower price ...
2
votes
2answers
334 views

Black and Normal Model for Caplet using Python

I am able to Price Caplet using Black 76 model in Python. However, I am unable to price the same with Normal Model. Can anyone suggest what is missing ? I am valuing caplet that caps interest rate on ...
0
votes
1answer
62 views

Chorent risk measure with superaddative

In some definition of chorent risk measure Superadditive is one of the properties I don't understand Why? With subadditivity and homogeneous CvaR is convex, but if we assume another definition for ...
0
votes
2answers
37 views

Will the Delta of an Option always be the same irrespective of the underlying stock price?

Suppose, under the Black Scholes model we keep all the parameters the same except that we vary the asset price. Will the Delta of the option always remain the same?
0
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2answers
103 views

Questions on CDS

I have a few questions on CDS and especially sovereign ones: I've read that usually CDS are generally traded in millions of notional value, which means that not everybody can purchase sovereign CDS, ...
3
votes
0answers
62 views

Pricing eurodollar futures

How are Eurodollar futures priced in practice? What I already know: The implied 3 Months rate by the futures is 100-price, since it matches the payoff. Using daily LIBOR rates, one should be able to ...
1
vote
2answers
379 views

Importance of z-spread in CDS-Bond Basis trading

Consider the following: A bond with a 9% coupon and a price of $98. Let's say the zero swap curve is flat at around 7% (e.g. the zero swap curve is high because we're at the end of a business cycle). ...
1
vote
1answer
105 views

Simulating assets of different currencies

I have a situation as follows: One year call option on a Euro stock with a Euro denominated strike. Knock in feature as follows - The option can only pay out if the growth in the Euro stock over ...
1
vote
1answer
57 views

Pricing with local volatility for derivatives beside options

Say I have calibrated an local volatility mode to market data on a forward on stock X. Say I want to price a derivative Y that is NOT a call/put option. What is the (or one of many) general strategy ...
0
votes
0answers
18 views

What kind of standard deviation? [closed]

Can someone help me convert the following standard deviation into something I can actually use e.g. in Excel? Also I don't understand why the T-1 is taken to the power of 0.5? The problem at the ...
0
votes
1answer
71 views

Yield Curve Flattening Trade

Relatively simple question, but came upon it in class and have not been able to come up with an answer: The two-year bond yield is equal to 4% while the 10-year one is equal to 10%. You want to put ...
0
votes
1answer
52 views

How do Repo traders use OIS and Fed fund rates

I would like to know how do Repo traders use FED Fund rates and OIS to cover themselves. For example assuming the repo trader bought paper(borrwed paper/lent cash) in the 1 year. How do they cover ...
2
votes
1answer
75 views

Why did high yield corporate bond ETFs tank during the great recession

My apologies if this is not mathematical enough for this outlet. My understanding of the pricing of a bond ETF is that lowering interest rates drive the price up and increased risk of default drives ...
6
votes
1answer
52 views

Control variate for pricing a best of assets option : $\mathop{{}\mathbb{E}}[ \max ( F^1_T,F^2_T, …,F^N_T )]$

I want to use Monte Carlo to price a best of assets derivative : $$\mathop{{}\mathbb{E}}[ \max ( F^1_T,F^2_T, ...,F^N_T )]$$ where the $F^i_T$ is the forward of the ith asset observed at expiry ...
22
votes
3answers
9k views

What is a “coherent” risk measure?

What is a coherent risk measure, and why do we care? Can you give a simple example of a coherent risk measure as opposed to a non-coherent one, and the problems that a coherent measure addresses in ...
1
vote
1answer
80 views

PCA on a portfolio of spot and forward contracts

I have a portfolio of spot and FX forwards on various currencies all based to AUD. I need to able to quantify how the changes in amount, tilt and curvature of the AUD curve would impact my p/l. ...
1
vote
2answers
798 views

How could I become a market maker in forex/equity market?

By being a market maker, I mean when I post a limit order, someone could take your order. For example, suppose during this second the bid-ask is 1,1.01 constantly and I posted a limit order to buy at ...
0
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0answers
58 views

Is there a way to find the settlement date of a coupon bond given its dirty price?

Background: I am creating a software on my own involving these formulas: I am following the Financial Market Analysis course of edx.org / FMIx and got some methods involving iterative processes in ...
2
votes
1answer
62 views

Trading Vol with options

One can trade vol swap to get exposure of the volatility of the underlying security in a 'clean' way. On the other hand, we know that vol swap, theoretically can be replicated by a dynamic position of ...
3
votes
1answer
9k views

Duration of a floating rate note

I have the following C# code for calculating the modified duration of fixed coupon bonds: ...
0
votes
1answer
55 views

Duration. Floating rate note

I don't understand why the duration of a floating rate note equal to the time to the next coupon payment? Please, look at my calculations. Here: P - is price at moment 0.
1
vote
1answer
60 views

Why is there inconsistency in WACC vs unlevered return?

To evaluate an enterprise we can discount free cash flow by either the unlevered required rate of return or the WACC. With Tax we have: $WACC=R_e \frac{E}{E+D}+R_f\frac{D}{E+D}(1-t)$ where $R_e$ is ...
0
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0answers
14 views

Investigating the relationship between mutual fund alphas and market volatility

I am writing a master thesis on the relationship between mutual fund alphas and market volatility. As I have never performed an empirical analysis before, I would like to have some opinions on the ...
0
votes
0answers
23 views

Labeling Returns in 5 categories based on BL view approach

I have to label a time series of returns into 5 categories based on the Black Litterman view approach. The categories should look as follows: very bullish: + 2 std. dev. bullish: + 1 std. dev. ...
0
votes
1answer
53 views

What is Yield To Convention?

I know what gross redemption yield of a bond is. I am unaware of "Yield To Convention". It is a Bloomberg ticker code (multiple in fact) YLD_CNV_MID, YLD_CNV_ASK & YLD_CNV_BID The term "Last ...
0
votes
0answers
23 views

Framework for hedging fx and utilizing correlation between asset returns

Can anyone point me in a direction (research paper, books, ..) which developes a framework/strategy for hedging currency exposure for an international bond portfolio? This paper finds optimal ...
0
votes
0answers
38 views

Doubt about metrics in the Performance analytics package of R [closed]

I have a large database of daily returns on investment funds. I would like to know if to apply the performance evaluation metrics, such as Sharpe ratio, Information Ratio, etc., of the "Performance ...
0
votes
0answers
23 views

Monte Carlo Simulation with varying expected returns and volatilities

I have yearly CMAs which denote the 5-year forward looking returns and vols. These CMAs are updated every year. For example in 2004, the outlook for next 5 years is 11%, in 2005 the outlook is 10.8%. ...
0
votes
0answers
24 views

FX Options Greeks: Is there a meaning in converting the sensitivities values in different currencies?

Suppose you have a Call on JPY, domestic currency is USD The price will be in USD Let's say delta = 0.93 Does it make sense for any reporting reasons to convert this value into JPY ? What is even the ...
2
votes
1answer
89 views

Overlapping vs Non-overlapping returns

Suppose I want to estimate the following regression: $R_t=\alpha + \beta X_{t-1} +\epsilon_t$. Where I use asset returns as the dependent variable. Both overlapping as well as non-overlapping returns ...
9
votes
2answers
2k views

How to forecast high-frequency data?

Introduction: I have seen a plenty of articles/books regarding volatility forecasting applied to high frequency data, but none of them were dedicated to forecasting the actual prices (for example bid/...
0
votes
2answers
122 views

Efficient market hypothesis vs random walk

I am having trouble to understand the distinction between the EMH and random walks. If I understand correctly, the EMH states that all available information is incorporated into prices, which ...
0
votes
0answers
31 views

OIS vs Libor for cross currency

I would like to understand the convention for discount rates fro cross currency swaps. It seems to be market convention (Australia) to discount collateralize positions with OIS and uncollateralized ...
1
vote
0answers
28 views

Swaption pricing and strategies

I am looking for resources (books, papers, websites, etc.) that deal with Vanilla and Exotic swaptions from a more advanced and quantitative perspective. I am interested in both the pricing side (e.g. ...
7
votes
4answers
649 views

List of interesting Quantitative Finance podcasts

Which podcasts are interesting to listen too for quants? If you recommend one, why?
0
votes
1answer
49 views

Black Scholes Replication If Underlying Does Not Move?

Let's say you are long a call and want to replicate that call buy being short underlying and long bonds. If the underlying moves up in the next period but not enough to cover theta, the option ...
0
votes
1answer
125 views

Calculating Flat Price Risk for Physical Commodity Trades

I've been reading Craig Pirrongs Economics of Trading Firms published by Trafigura: https://www.trafigura.com/media/1364/economics-commodity-trading-firms.pdf Very informative read. The point I have ...
1
vote
2answers
40 views

ISDA SIMM swap sensitivities

Most of the commercial SIMM models require sensitivities to be passed in in CRIF format. The documentation mentions that "par sensitivities" need to be used. What exactly is a par sensitivity? When we ...
1
vote
1answer
22 views

Where do the zero returns in QMNIX (AQR Market Neutral) come from?

QMNIX, Which is a market neutral offering from AQR, has a surprising number of totally flat days. https://finance.yahoo.com/quote/QMNIX%3FP%3DQMNIX/history/ Looking at the returns, 124 of them, which ...
-2
votes
0answers
18 views

How can i insert a if condition in my loop to create returns for my formation period [closed]

I'm trying to implement a momentum strategy. To do this i need to sort my stocks based on their return in the previous 11 mths. My current code works quite well: ...
0
votes
0answers
18 views

predefined model structure for stock data

I've signed up for stock data service (IEX Cloud). I now want to fetch and save the data locally. I will need to design the ERD, is there a pre-defined open-source model (preferably Django) that I ...
1
vote
1answer
44 views

Basic FX-Forwards trading Guide

What fundamentals or other factors should one follow to trade currency Forwards intraday?
0
votes
1answer
61 views

Compute implied volatility surface of a put option from a call option

Suppose the function double bsCall(double S0, const double &K, double T, double r, double sigma) computes analytically the Black-Scholes price of a call option ...
0
votes
2answers
62 views

Backtesting with Stock Indices, how does one deal with it?

I was wondering how to backtest using stock indices. For example, the FTSE100 has had changes in its components over time. How does one go about testing a time period from i.e. 2000 - 2018, even if ...
34
votes
5answers
66k views

How can the implied volatility be calculated?

We all know if you back out of the B.S. option pricing model you can solve for what the option is "implying" about the underlyings volatility. Is there a simple, closed form, formula deriving Implied ...

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