All Questions

12,272 questions
7 views

pricing a fx forward with legs separately

In the answer to this question, it says At time $t$, the forward exchange rate $F^X(t,T)$, for maturity $T$, is the exchange rate such that the payoff $X_T-F^X(t,T)$ has a zero expected value ...
3 views

how to test OMS functionality via FIX?

Has anyone done app dev that tests OMS functionality ( FIX ) ? Do any brokers or other financial entities make test apis available ?
12 views

Achieving an even distribution of orders in the queue

Market Making under a Weakly Consistent Limit Order Book Model contains the following paragraph "The market maker may achieve her target execution profile by continuously adjusting her limit ...
27 views

What are reliable sources to download plain-text files listing current composition of various popular indexes such as S&P 500 (SPX) or Dow Jones Industrials (DJI) or Nasdaq 100 (NDX) ? At a ...
30 views

Computing FX forward returns using spot returns and an existing term structure

Sorry for the naive question, I am new to the area. I have YTD spot returns on the USD/GBP pair and a forward yield curve. How would one go about computing the forward returns in 2 years using this ...
14 views

Local Volatility calculation in Python

I am trying to price Local Volatility in Python using Dupire (Finite Difference Method). I have following set of information Spot: 770.05, Strike: 850, Type: 'C', rfr: 0.0066, time to maturity = ...
24 views

Expected value of stochastic optimization

I have a optimization problem where the SDE is: $$dX(t) = [X(t)(u(t)-\beta(t))+\theta(t)]dt+X(t)u(t)\sigma dW(t), t \in [0,T], X(0) = X_0$$ where $u(t)$ is the portfolio, $\beta(t)$ and $\theta(t)$ ...
27 views

How to hedge x gamma in callable prdc?

How do you hedge the short rates - fx cross gamma in a callable PRDC (Power Reverse Dual Currency note) ?
16 views

American look Back Option (put)

Hello everyone I'm having some trouble calculating the value of an american lookback put option using any other method but "similarity reductions", if you could kindly describe such method or provide ...
25 views

ODE solving on GPUs using Python

I am building a financial model and i need to compute simultaneously the same ode with 6 different real-time time series datasets. As I have a mining rig of 6 Asus gtx 1070 8gb, can i use it if I ...
29 views

Calendar roll terminology (buy vs sell)

I am trying to get the direction/terminology correct in futures calendar trading. Let's say I have two calendar futures contract where the prices are 100 and 102 reflecting the front and back ...
39 views

pricing deliverable vs non-deliverable fx forwards

I am trying to link these two questions together Pricing a regular FX forward This is a contract (say USD vs JPY) where you exchange 2 currencies at maturity at a pre-determined rate, while no ...
22 views

How is a LIBOR Market Model volatility skew determined?

LIBOR based interest rates are derived from the prices (supply / demand) of swaptions, caps and floors. These prices are generally quoted in yield vols. Their prices are given by the Black formula. ...
32 views

Temporal aggregation of daily implied volatilities

Suppose I have a time series of daily implied volatility values for a given month and I am interested in calculating the monthly implied volatility for that month. What would be the most theoretically-...
33 views

Risk Measure-identication

Let X be a variable with existing moment generating function $M_x(z)=E[e^{zX}]$. Define the following risk measure: $\rho_{\alpha}(X)=inf_{z>0}(z^{-1}ln(\frac{M_x(z)}{1-\alpha}))$ Does anyone know ...
55 views

Distribution of portfolio values with constant spending rate

If your portfolio is invested in an asset that follows a geometric Brownian motion, and you withdraw a constant dollar amount at the beginning of each year, is there an approximate analytical ...
34 views

Solving for Implied Volatility Vega gets stuck at 0 (Python)

So my goal is to calculate option greeks with as few manual inputs as possible. I managed to get the IV for at the money options but then when I try further OTM strikes my results get completely ...
54 views

Calculation of Bond returns

Given that I have a portfolio of High yield bond with USD 50. Duration : 5 years and Spread duration: 5 years CSI BARC Index (Barclay US Corp HY) is as below for the last 30 years. USGG10YR Index (...
36 views

How to implement an investment strategy in MATLAB? [on hold]

Since I`m a total novice in MATLAB I am struggling with a question that might be not even really hard. I have to implement and backtest 4 heuristic investment strategies but literally no idea how to ...
38 views

Scenario Analysis - Real life application

Given a portfolio consists of Stock = usd 40, Bond = usd 40, commodity =usd 20. Also given the correlation between these assets. Scenario 1 : stock down by 30% When performing scenario analysis, do ...
43 views

What is needed in Brownian Motion [on hold]

What data is needed for Brownian Motion? I’m currently having an dummy firm, and want to simulate stock market using this dummy firm and firm data. How can I proceed this ? Edit: I have a simulated ...
33 views

serial correlation and CUSUM results

I have the following CUSUM test resulted from autoregressive distributed lag models (ARDL). Does the CUSUM results show that the model is stable? I am a bit confused because the red line in CUSUM ...
51 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?
46 views

DeMark Indicators

Would anyone know of a library in R that handles DeMarkindicators. Just wanted to check-in with the community before I invested a whole lot of time reinventing the ...
28 views

Learning short-rate dynamics and how it affects optimal portfolio strategy

I'm looking for some advise. Here is the problem: For absolute simplicity, assume that we have one risky asset with price process \begin{align} dS_{t} = \mu S_{t}dt + \sigma S_{t}dW_{t}, \end{align} ...
35 views

does anyone calculate substitution risk?

So a company can post collateral to borrow money (repo agreement) and they may have different options of collateral to post. I have to pay a return on their collateral while I hold it. Since, at the ...
61 views

Portfolio volatility - Real life application

Given that a portfolio consists of Stock=USD 30, High-yield bonds(duration=5 years,spread duration=5 years) =USD 40 , Commodity = USD 30. I was given monthly data for MXWD Index for stock, CL1 Comdty ...
24 views

Integration of Brownian motion and square root

If $\mu$ is a Borel measure on $\mathbb R_+$ such that $\int \sqrt{t}d\mu$ is finite, I wonder how to show that distribution of $\int B(t)d\mu$ is normal. I think I need to use the fact that the ...
33 views

how to simplify Inflation year-on-year option to Zero-coupon option

Belgrade 2004 paper basically proposes that inflation year-on-year volatilities (and hence yoy options) are basically the spread vols between the Zero-coupon vols from (t0 to T) minus the zero-coupon ...
49 views

Is it possible to create an instrument on the amount of beds sold within the real-estate market

I have been doing some research on the PBSA (purpose-built student accommodation) market around the globe. The market is growing year on year there is an index on this market the cbre. What ...
49 views

How to build an inflation term structure in QuantLib?

This is what I've got, but I'm getting weird results. Can you spot an error?: ...
83 views

Pricing a callable bond

I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs): Market ...
51 views

1 day VaR vs 10 day VaR

Even while using historical simulation VaR, 1 day VaR is converted into 10 day VaR by multiplying 1 day VaR by Sqrt(10) for regulatory reporting purposes. What are the underlying assumptions for ...
102 views

Difference between IRS and OIS

Is the understanding right that OIS can be accessed only by banks whereas IRS is for corporates. Also, since corporates borrow at Libor + spread, to hedge Libor I use IRS. Banks can borrow overnight ...
44 views

Errata for Mark Joshi's Concepts and practice of mathematical finance

I am wondering if anyone has a PDF copy of the errata for Mark Joshi's book "Concepts and practice of mathematical finance"? It seems that Mark's website markjoshi.com is not accessible anymore. I ...
23 views

Gueant-Lehalle-Tapia, reproducing figure 4

I'm having some trouble reproducing figure 4 from Gueant-Lehalle-Tapia Using the asymptotic quotes given by Left: sigma=0.4, A=0.9, k=0.3, gamma=0.01 Right: sigma=1, A=0.2, k=0.3, gamma=0.01 In both ...
33 views

Statistical distribution of MACD

I was (unsuccessfully) trying to find results on what the distribution of the MACD values for a stationary time series with IID returns would be. Are there any such results or any that go in a similar ...
122 views

When $E[f(\alpha,X)] = f(\alpha, E[X])$

When $E[f(\alpha,X)] = f(\alpha,E[X])$, where $f$ is some convex function of the first and second variables, except when the first variable takes the value $\alpha$ in which case the equality holds, ...
31 views

Calculating Ex-ante Sharpe Ratio in multi-period setting

I have built a return process $\{x_t, t = 1,\dots,T\}$ for an asset. Suppose I have generated $K$ sample paths $\{x_t^j, t=1,\dots,T\}, j=1,\dots,K$. I think of two ways to compute the Sharpe ratio. ...
75 views

Predicting portfolio returns

I suppose there are roughly two approaches to predict portfolio returns. Either predict the returns of all underlying stocks and aggregate all individual stock predictions, or predict the portfolio ...
29 views

Using CFNAI index for identifying sample periods

I'm doing my Thesis on Asset pricing models and I would like to find out the effects of business cycles on the performance of asset pricing models for industry portfolios. My initial idea was to ...
53 views

How much senior debt could be issued? [on hold]

Is there a limit on how much senior debt could be issued? If a company issues a small amount of debt relative to its assets and wants to issue more could it still be called "senior" or it would have ...
97 views

Find the brownian motion associated to a linear combination of dependant brownian motions

I have $N$ correlated standard one-dimensional Brownian motions $W_1,\ldots,W_N$ with correlation matrix $\rho$ and I consider the process $Z_t \equiv \sum_{i=1}^N \mu_i (t) W_t$ where the $\mu_i$ are ...
36 views

Using variance reduction on only some models

I am pricing options with some copula based models using Monte Carlo simulation. I was looking up some easily implementable variance reduction methods and decided on antithetic variates. However, ...
47 views

Calibration of 1-factor Hull-White model using Jamshidians trick - see my code

So, I'm trying to calibrate the Hull-White 1-factor model given Black swaption volatilities that I have from the Bloomberg terminal. I'm following the Jamshidian method as described in this thesis (3....
90 views

R: Book with extensive examples for either portfolio optimization or volatility forecasting?

I'm at a new job and there's the option to use R (you don't have to, but I'd like to). I used R years ago, so I while I'm somewhat familiar with it, I have forgotten most of it. For me, the best ...
20 views

Where can I get large dataset [duplicate]

Where can I get large unbiased dataset for all stocks in the world (and not just the historical price but also the balance sheets fact and ratios). By unbiased I mainly mean to: 1. not being ...
43 views

Brownian motion for modelling future asset values

Assume that an asset price $S$ is given by a Brownian motion. Argue from the definition why it is not possible to predict future values of the asset based on the past values of $S$. I am not sure ...
I would like to know when it is allowed to interchange derivation and expectation. Suppose $X$ is some r.v whose dynamic is controlled by some parameter $\sigma$ and suppose $h$ is some smooth ...