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13 views

Mapping internal ratings to external ratings for a scorecard

I am building an internal rating model for commercial loans relying on expert-based scorecards. The ultimate goal of the exercise is to develop the model so that it maps with credit rating agencies' ...
-1
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0answers
18 views

Equity Ratio: Short Sell / Sell [on hold]

Is there any value with analyzing Cash Equity securities where you aggregate a specific Sell Short (trade volume) / Sell (trade volume) ?
-1
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0answers
31 views

Is it an obvious high reward low risk strategy?

FXCM broker's rules about financing, it state that the account will be charged for financing fees at 5PM NewYork time, and its get tripled on Wednesday. Then, I am think that what if I open an large ...
0
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1answer
23 views

Binomial Option Pricing Model

This isn't homework. I'm going through sample questions for an exam. They include the answer, but no explanation. I've studied this model, but I don't know how to setup this tree to get any of the ...
0
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0answers
29 views

Trading 3 stocks X Y Z where X correlated to Y, Y to Z, but no other correlation is available

Suppose you have 3 stocks, say X Y Z. You also know that X is correlated to Y using some test (say ADF) and Y is correlated to Z. However, no transitivity, and no threesome correlation whatsoever ...
0
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0answers
21 views

Converting 30day annualized vol to 2day annualized vol

I would like to convert 30-day annualised vol to 2-day annualised vol as the title reads. Am i right to say: 2-day annualised vol = sqrt(2/30)* 30-day annualised vol.
1
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0answers
16 views

Currency Hedged Excess Return

In the famous article "Global portfolio optimisation" of Black and Litterman, the authors defined the excess return on currency-hedged assets as the following : $$ E_t = 100 \frac{P_{t+1}X_t}{P_tX_{...
2
votes
1answer
25 views

Negative Libor Simulation

Can LIBOR rates be simulated using short rate models? If no, what is the reason behind it? What is a simple model to simulate LIBOR rates? Especially in a negative rate environment.
1
vote
1answer
30 views

Alpha estimation from factor models

This question makes reference to section 8.4 - Application to performance measure - of the 2007 publication "Performance Measurement for Traditional Investment" by Véronique Le Sourd. You can find the ...
0
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0answers
32 views

Which curve does the interest rate risk fall in?

For example, Australian government issues a bond denominated in USD currency? Which curve does the interest rate risk fall in? Australian Gov Curve or USD Gov Curve?
0
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1answer
28 views

How is CPR (re-)calculated for fixed fully amortizing agency mortgage pass-throughs given prior partial prepayments by mortgagors in the pool?

Background: in the US, mortgagors are allowed to prepay any amount and in any arbitrary time during the lifetime of the mortgage, which leads to prepayment risk if this deviation differs from the ...
-1
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0answers
14 views

Matching the frequency of Fama-French factors and asset returns

I want to double-check and be sure I am working with the same data frequency - I am interested in monthly data. I get data from two different sources: prof. French's website Yahoo Finance - I take ...
1
vote
1answer
40 views

Modifying Basic Black Scholes Equation For Time Dependent Variables - Per Wilmott?

I am reading Wilmott's book and don't understand why he makes the following step to re-write the PDE. I get equation 8.4, that's just the typical PDE for a dividend yielding stock where r(t), D(t) ...
0
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1answer
32 views

OTC Derivatives Moneyness Conventions

When looking at the OTC Derivatives market, is there a standard moneyness convention that is applied? And if so, what is that bucketed approach? For example: 90%-110% for ATM, 70%-90%, 110%-130%, etc.....
0
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1answer
36 views

Intrinsic value vs Time value of an option: what's the purpose/motivation for their definitions? [on hold]

I am an actuarial student and our text has the following definitions: Intrinsic value: This is the payoff assuming the expiry of the contract immediately rather than at some future time. ...
3
votes
1answer
55 views

Rationale of Fama Macbeth procedure

I am confused about the rationale behind the Fama Macbeth regression methodology. I understand how to practically perform the two steps but not why one should do so. For instance, considering the ...
0
votes
1answer
68 views

Bootstrapping zero coupon rates

How do we obtain discount rates to obtain zero coupon rates given only swap rates? what is the procedure? Also what exactly is curve calibration?
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0answers
21 views

How does the implied correlation change when the spot price of the Basket Call/ Put option goes up?

Given a basket Call/Put: $BasketCall_{payoff} = max[0, \Sigma^n_{i=1} w_iS_i(T) - K]$ If the spot price of the basket goes up/down, how would the implied correlation change? I guess what I am not ...
0
votes
1answer
42 views

SABR Implied Vol: Normal Approximation vs Log-Normal Approximation

I am having trouble understanding the difference between the normal and log-normal implied volatilities from Hagans SABR model: http://web.math.ku.dk/~rolf/SABR.pdf. As far as i understand the main ...
1
vote
2answers
59 views

Insight on how factor models achieve dimensionality-reduction?

Going through the literature on factor models, I keep seeing the phrase "dimensionality reduction" and how factor models allow for the modelling of assets in high-dimensional cases, and I would ...
1
vote
0answers
26 views

Rolling seasonal and seasonal reversal patterns factor investing

I am trying to create a pattern variable that takes the mean of the same month (lag 12, 24... 240) for the last 20 years and the mean of the other months lag (1-11, 13-23, 25-35... 229-239). (...
0
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0answers
44 views

Beginner FFT (Fourier) transforms on closing prices for Apple

I don't know math very well, but I have been programming for many years. I would like to use FFT as a parameter to a ML model. The FFT is diving down sharply. I tried many stocks and its the same. ...
4
votes
1answer
105 views

Exotic Trading Basic Questions - Banking

I just joined a support team for an equity exotic trading desk in a bank, I am looking for a high level overview of how exotic trading works in a bank. For my questions let's take a common product: ...
0
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0answers
17 views

Nasdaq price index, dividend yields and dividend

In a paper that I'm reading it says: We collect monthly observations on the Nasdaq composite price index (without dividends) and the Nasdaq composite dividend yields, and compute the Nasdaq ...
0
votes
2answers
58 views

How to handle Holidays in Time-Series Datasets?

Im currently analyzing a Dataset of the German Stock market. While Holidays like Christmas or New Year aren't a problem for Return Calculation or Portfolio Performance, im testing some regressions and ...
0
votes
1answer
57 views

What does A(B) mean in time series

So I have been reading some papers regarding time series, mainly from Granger and Engle. I am a bachelor econometrics student, but I have never seen such notation before. For example, A(B)(1-B)x(t) = -...
1
vote
1answer
55 views

Why use the risk-free rate for discounting in a risk neutral world?

I am reading Options, Futures, and other derivatives by John C. Hull. In the chapter on Binomial trees, he remarks: A risk-neutral world has two features that simplify the pricing of derivatives: ...
0
votes
1answer
39 views

Jensen alpha estimation

I am a bit confused about how to calculate Jensen's alpha, having encountered a variety of methodologies. Based on his 1967 paper, Jensen's equation for the estimation of alpha is: $\tilde{R_{jt}} - ...
0
votes
1answer
52 views

Market Maker ETF Hedging Strategy

Some thoughts about ETF hedging; feel free to leave comments! Scenario 1: An investor sells 1M ETF shares to a Market Maker(MM) at bid price. MM has a long position and will need to offload the ...
0
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0answers
44 views

Measures of strength of a trading signal

I have an algorithm producing (potential) trading signals with a given time horizon (eg. it will suggest buying a specific stock, with the expectation to beat the market in a specific time, say 1 ...
0
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0answers
16 views

Asian option, portfolio of calls control variate

One possible control variate for the Asian option with strike $K$ and discrete time average at the times $t_i$ for $i\in {1,\dots, m}$ is the portfolio of $1/m$ European call options at times $t_i$, ...
-1
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0answers
33 views

Get Bloomberg News (alert) in Excel

What is the best way to get notified as soon as their is significant news on a stock through Bloomberg. I just want to be able to pull my orders is news just came out.
0
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1answer
45 views

How to calculate premium in Black Scholes model with quantlib?

I am new to quantlib as well as option price modelling. I need to get premium from black scholes model and found this code in internet ...
1
vote
1answer
35 views

Hindsight overhedge for pricing path dependent options

I understand how to use the longstaff schwartz method in Monte Carlo to compute the continuation value of path dependent options but someone recently mentioned another technique called "Hindsight ...
1
vote
0answers
25 views

What methods of Data-Screening are necessary before starting an analysis?

So im currently focussing my research on Momentum-Trading Strategies. I downloaded Constitutents of different All Share indices (including Price, Return index, Market value and Dividend Yield). For ...
0
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0answers
54 views

Stock prices and PCA

I'm trying to construct a portfolio using PCA based on a number of stocks. I was wondering what the best way to standardise the stock prices are. Which method would be more appropriate? Standard ...
1
vote
1answer
79 views

ETF Market Making

I understand market makers of ETFs earn a bid-ask spread (buying low from investors and selling high in the market). But how exactly do they determine when's the right time to buy, and at what price? ...
1
vote
0answers
37 views

Nearly replicate a basket with a few of its constituents

Motivation I have a basket with 30 constituents each with a weight which I want to nearly replicate with less than 30 trades for reducing trading costs. Better definition Better replication equals ...
0
votes
1answer
46 views

How is the pre-tax and post-tax return calculated?

I am looking at the lectures about advanced investments and in the first lecture of the series, the professor mentions, To increase the return without bearing more risk one has to invest with pre-tax ...
1
vote
2answers
215 views

Probability that the price of stock following a brownian motion goes under a certain value

The price of the stock XYZ follows a brownian motion pattern with starting price = 10, μ = 0 and σ = 20 (on annual basis). What's the probability that in 6 months the price is less or equal to 8? ...
2
votes
0answers
34 views

CDS pricing using intensity models incorporating liquidity

I want to price a CDS using an intensity based model, but I want to account for liquidity as well. General model: The default time $\tau$ is the first jump time of a cox process, and the survival ...
0
votes
0answers
15 views

Tickers of companies included in Euro Stoxx 600

I'm trying to analyze the historical data of the individual companies that are part of the Euro Stoxx 600 index. For that, I am using a Python code that needs the tickers of the companies. Due to my ...
0
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0answers
39 views

mean reversion model estimation - what method?

how can I estimate this model for mean reversion?
0
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0answers
9 views

Firm/Industry-level database cross-country|world-wide

I've been looking for a while any source of information, any firm-level or industry-level database with information like: number of employees, sales, market share, assets, liabilities, etc. cross ...
2
votes
1answer
68 views

Local Volatility with Monte Carlo Simulation

I am trying to implement a Monte Carlo Simulation using Local Volatility Model (Dupire’s Equation). I’m pretty sure I can build a very good LV surface, however, I do not know how to use it in the MC ...
0
votes
0answers
30 views

What data should be used for short-rate in simulaiton?

For short-rate models like Vasicek and Hull-White, what rate should be used as the starting value of short rate? Is it Federal funds rate or 3-month US treasury?
1
vote
1answer
86 views

Useful Book for starting to programming quantative Finance

Could anyone recommend me a good book for an introduction to start programming quantative finance (preferably in R)? I found a lot of different ones, but unfortunately without any reviews.
0
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0answers
27 views

Performance Analytics SnailTrail Chart subscript out of bounds error

I am running the chart.SnailTrail function from the PerformanceAnalytics package in r. I get the following subscript out of bounds error. Error in chart.SnailTrail(z, Rf = 0.009261, main = "", : ...
0
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0answers
32 views

Why do these Monthly vs. daily plots differ?

I got my data from Thomson Reuters Datastream. As an Input for my plot i calculated daily Returns based on the Return-Index provided by datastream. Then i plotted the Monthly and the daily Returns.(...
0
votes
1answer
40 views

Why does an exchange (IEX) need connection to other exchanges (like information about average prices)?

I have read "flash boys". The author describes how the Royal Bank of Canada uses THOR and an own SIP against certain practices of flash traders. I understand why a bank or a broker can make beneficial ...

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