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9 views

How does duplicate data affect backtesting?

Before developing a trading strategy, one should clean and preprocess his data set. It is very common that a data set contains huge number of duplicates. Question: How does duplicate data affect ...
0
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1answer
33 views

How does one calculate the duration of a cash flow

The question reads: A firm has liabilities as follows: £2,910 at time t = 0 and £7,501 at time t = 4 (time is measured in years). On the asset side the firm has two payments, each for £5,000, at time ...
1
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1answer
19 views

GARCH MODEL AND CONDITIONAL VARIANCE

Suppose you wanted to model a $1 million dollar loss (for black swan events) on 1% of days, how do you incorporate this into GARCH? Is it through changing the alpha/beta weightings?
2
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1answer
44 views

Question about volatility surfaces

As a learner, I'm curious to know the answer to 2 questions regarding volatility surfaces 1) It's stated that volatility surface should be flat accdording to Black-Scholes model. Why is that? Time (...
5
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3answers
451 views

Do banks' profitability really suffer under low interest rates

It is always said that European banks suffer, amongst other things, from the low interest rate environment governing the Eurozone. And that in a rising interest rate environment, banks' profitability ...
1
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1answer
45 views

What is the annualized realized volatility of simulated Brownian motion paths?

I saw this following question in an exam. My intuition is D, but I wonder if there's a trick. (The question can't be that straightforward?) Take a Brownian motion simulation with drift 5% and ...
1
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0answers
27 views

International Baccalaureate - Balance Sheet Format

I would like to transform Tesla's balance sheet (https://www.nasdaq.com/symbol/tsla/financials?query=balance-sheet) into the IB-balance sheet format (see below). In the current assets section, is it,...
1
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0answers
7 views

How to implement Time varying EWMA cross correlation in STATA?

I have read this question, I know about lambda, demeaned subindexes. But not able to implement in STATA?
1
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0answers
20 views

How to find the right Shift for the SABR Model

I'm looking for the right approche to find the right Shift for the SABR Model.
1
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1answer
41 views

Can we use Black-Scholes to price path dependent options?

I know that we can use the Black-Scholes framework to price vanilla products like a European call or put, where the payoff only depends on the share price at maturity. But can we use it to price path ...
0
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0answers
26 views

Negative drift when calibrating GBM parameters

Setup for question: Consider a basket of $N$ stocks $\{S^1, S^2, \dots, S^N\}$. For fixed strike $K$, each stock in the basket, $S^i$, follows the SDE $$dS_t^i = \mu^i(t) S_t^i dt + \sigma^i(K, t) ...
3
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0answers
70 views

monte carlo simulation

I'm a graduate student working on a real options research problem suggested to me by my advisor. I'm not looking for a solution, but I'd like to know about the feasibility of numerically solving the ...
0
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1answer
78 views

What does “Gamma profit/loss” mean?

I understand the Greeks as derivatives, but I'm very confused with terms like "Gamma profit/loss""Theta profit/loss". What do these terminologies mean? I've searched online but can't find a proper ...
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0answers
10 views

Confidence Intervals for ARMA+GARCH forecasts

I have fitted an ARMA(1,1)+GARCH(1,1) model to my logreturns series. When it comes to my standarized error's distribution however, I have opted for a Skewed Generalized Error Distribution, because of ...
1
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0answers
41 views

FX Spot Delta market standard calculation (Trader View)

I am just writing my thesis about FX instrument and hedging and one question popped up which I can't solve. Maybe it is silly but cant find anything about it how the delta of a fx spot is defined and ...
0
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0answers
18 views

Bates Model Jump Percentage Parameters

I am trying to calculate the jump parameters for the Bates volatility jumps, specifically, the mean of the jump percentages, $\mu_j$. For the value of $J$, I am using jumps $|\frac{s_{i}-s_{i-1}}{s_{i-...
0
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1answer
45 views

Clarification on certain finance terms surrounding bonds

Whilst revising for my upcoming financial mathematics exam I've been struggling to get to grips with certain terms/ phrases used when studying Bonds. I am very new to Finance and get confused very ...
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0answers
24 views

Good benchmark for european Flexible asset allocation funds?

Flexible allocation funds usually do not state any benchmark. Because flexible funds allocations are dynamic and less constrained, determining an appropriate benchmark for the funds is challenging. I ...
0
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1answer
37 views

Where to get MSCI World Index constituents (+ weights)

Where can I download The MSCI World index constituents and their weights (daily update) The current prices of the constituents plus three years of EOD (or weekly) history Corporate actions of the ...
1
vote
1answer
27 views

Gibbons, Ross, Shanken Test derivation by MLE

I Am trying to derive the expression for the GRS test of the CAPM. I am following the book: The Econometrics Of Financial Markets by Campbell, Lo, McKinley (1997). Define $Z_t$ as an $N×1$ vector of ...
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0answers
23 views

Covariance matrix from GJR-GARCH?

I am implementing a AR(1)-GJR-GARCH(1,1) model to some asset returns, and I would need to have a covariance matrix but I struggle to see how I can compute one from the model I used? I know I can have ...
0
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0answers
27 views

Cega - Correlation Delta from multi-asset derivative

I want to calculate the Cega, i.e. correlation delta, for a multi-asset derivative numerically (the difference of the price from a tiny move in correlation). However, I found it is difficult to follow ...
3
votes
1answer
92 views

I am trying to solve this question about optimal stopping theory. I don't know how to get started. Any hints would be very helpful

Let $Z = (Zn)_{n=0,1,...,N}$ be the Snell envelope of $X = (Xn)_{n=0,1,...,N}$ and $τ ∈ T_{0,N}$. Let $Z_n = M_n − A_n$ be the Doob decomposition of Z, then $Z_n^τ = M_n^τ − A_n^τ$ is the Doob ...
-4
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0answers
15 views

What is the difference between the total simple interest and compound interest earned on a sum of money till any year? [duplicate]

What is the difference between the total simple interest and compound interest earned on a sum of money till any year? Is there a general formulas for the same? Have searched throughout the website ...
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0answers
13 views

Finding the redemption yield of a bond given a capital gains tax

Let's say a bond has a face value of £$100$ with semi-annual coupons at a rate of $3$% p.a which is redeemable at par in $10$ years. Assume an investor purchases the bond for £$92$ on the day it is ...
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0answers
29 views

Calculating average Momentum from multiple daily stock returns

I have a dataset with daily stock returns for a period of 1 year. The first few lines and columns of my data look like this: ...
1
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2answers
70 views

Single-step Monte Carlo in Excel

How do you simulate correctly using raw prices not returns? I have corresponding periods of earnings to Futures but the Excel call function =NORMINV(RAND(),mean,stdev) generates negative Futures ...
0
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0answers
16 views

Arbitrage bounds on volatility of price of binary option?

What are the arbitrage bounds on the volatility of the price of a binary option? If the binary price moves too much (such that it violates the arbitrage bounds) what trades would you actually execute ...
4
votes
2answers
42 views

How can one effectively approximate the fill portion of a limit order in a FIFO order book given it's recent state?

What methods could one use to find the step wise probability of a partial or full fill of an order in the best ask/bid level of a limit order book given the historic best ask and best bid quantities ...
0
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0answers
24 views

Is the ACT/ACT.AFB convention meant to supersede the ACT/ACT convention for interest rate swaps

https://www.isda.org/a/pIJEE/The-Actual-Actual-Day-Count-Fraction-1999.pdf The determination of day counts are slightly diferrent between ACT/ACT (ISDA) and ACT/ACT(AFB). Is the latter more common ...
1
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0answers
42 views

option model value vs market price

In my job as FX trader we use as option pricer a variant of B&S. We use that model for “accounting” purpose, i.e. for storing the daily P&L of the portfolio, and also for control the trading ...
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0answers
18 views

black scholes stochastic volatility modeling proof [on hold]

Bear with me, I don't have any experience in this subject matter. I'm trying to work through Stochastic Volatility Modeling by Bergomi (https://www.amazon.com/Stochastic-Volatility-Modeling-Financial-...
4
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1answer
92 views

evaluation of option pricing models based on Greeks empirical hedging effectiveness

I’ve studied many different pricing models (B&S, Vasicek, CIR, Merton jump, Heston, ecc), each of them gives as output a different price and different values for the Greeks. So, for example, if ...
3
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1answer
62 views

Why does VIX need to calculate the Forward term?

From the reference, the Vix Whitepaper of CBOE, I found the formula of VIX. There are two terms. The first one is focusing on the info from Option contracts. And the second one is focusing on the ...
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0answers
16 views

one regression equation with several independent variables vs several regression equations with one independent variables

For example, we want to use age and IQ to predict GPA. Of course we can do a multiple linear regression, i.e. regress GPA on age and IQ. My question is: can we do two simple regressions instead? ...
1
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0answers
22 views

Possible interference of Cross-Rate inaccuracy and CIP Deviations

I am currently attempting to calculate historical deviations from covered interest rate parity between 2013 and 2018. I recently read that: "Unlike the interbank spot market, in the interbank ...
0
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2answers
45 views

What is a good reason to accumulate a stock that is going to be delisted?

There is a stock in the Philippine market under Resorts World Manila with the stock code RWM and I have been monitoring this ...
2
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2answers
89 views

How to Mathematically Prove Markets are Price-Discovering?

We all know that the Efficient Market Hypothesis is true if you're willing to make enough simplifying assumptions about the market participants. But where can I find a mathematical proof of this in ...
0
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1answer
42 views

Libor Forwards from Swaps

I am trying to understand how to interpret a few forward curves that I grabbed from Bloomberg. In Bloomberg, you use ICSV command and choose the USD to Libor swap curve. I did this and grabbed the 1mo,...
0
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0answers
43 views

Calculating a trading profit rate

I wanted to chek my backtester engine, so I opened a tradingview account and I ran the same test. All buy and sell numbers, prices, dates, indicator calculation, etc were exactly same, but profit ...
6
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2answers
1k views

How exactly are corporate bonds priced at issue

I am interested in Debt Capital Markets but I am struggling to understand how bonds, particularly corporate bonds, are priced initially. I know that a company will tap an investment bank as book ...
-4
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0answers
38 views

What's Implied volatility for Swaption? [closed]

I'm looking for a formula of IV of Swaption
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0answers
25 views

Entry price to consider while doing a forward/backtest test?

1 min timeframe signal generation. Thing I have considered: 1 - Close price can be predictive in nature Counter: shifted the ...
0
votes
1answer
39 views

How do I calculate option payoff before its expiration date? [closed]

How do I calculate option payoff before its expiration date? For example, if I long a 6 month call with K = 11100, T = 0.5, p = 150, what would be the payoff of the option if I exercise it in 3 months ...
-6
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0answers
63 views

Can someone weigh in what formula or theory Jeffrey Epstein was teaching here and what his markets may have been? [closed]

I'm curious if anyone can determine what theory or model Jeffrey Epstein was working on here in this photo. Very interesting. Some people have told me he's a notch below a James Simons but i'd still ...
0
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1answer
38 views

Definition Of A Portfolio

I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ...
1
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1answer
66 views

Integration and expectation of geometric Brownian motion

Let the stock price S follows the geometric brownian motion: $$dS=\mu Sdt+\sigma Sdz$$ $$\frac{dS}S=\mu dt+\sigma dz$$ where $dz$ is a wiener process. Naively integrating the second equation above ...
2
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1answer
78 views

How to calculate the expected stock returns for an individual stock?

I know about CAPM. My question is if this method is also viable: Calculate monthly logReturns ...
1
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0answers
41 views

To calculate the Hedge Efficiency and Optimal Hedge Ratio with BEKK in R

I estimated an MGARCH-BEKK model (using the R package BEKK). (BEKK= Baba, Engle, Kraft and Kroner; see Engle and Kroner (1995)) on time series of spot and futures prices. The estimated parameters are: ...
0
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0answers
32 views

REMIC vs MBS Bonds

What are the primary differences between REMIC vs MBS bonds? I understand MBS is mortgage backed securities with different mortgages are pooled together and after servicing fee, the investor gets the ...

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