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14 views

Limits of Credit Card Factoring [closed]

I'm building a business plan for a company that would operate in the hotel reservation field (similar to Trivago and others). It's an exercise on credit card processing for e-commerce businesses. In ...
1
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0answers
16 views

How to Take Advantage of Arbitrage Opportunity of Two Options

I got the following interview question and corresponding solution, but I have a different understand that might be wrong, so I really appreciate your advice on it: A European put option on a non-...
0
votes
1answer
76 views

Why is it desirable to receive fixed on a zero coupon swap, and undesirable to pay fixed on a zero coupon swap?

In most established rates markets, swaps are discounted using risk-free reference rates, such as Sonia in the GBP market and Eonia in the EUR market, as opposed to Libor. Because of the way zero-...
6
votes
1answer
90 views

Periodic functions when determining No Arbitrage price

Is it possible to value a T-claim which has a periodic component? For example a claim such as $X = cos(S(T))$. We assume here that $S(T)$ is the stock price derived from the dynamics $dS(t)=rS(t)dt+\...
0
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1answer
24 views

Valuing interest tax shield with constant rate of loan redemption

A $D=\$30mm$ loan at $r_D = 6.5\%$ and a tax rate of $\tau_c=40\%$ yields an annual tax shield of $$TS=D*r_D*\tau_c=\$0.78mm$$ If $\rho=5\%$ of the loan remainder in the current year is to be payed ...
0
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0answers
32 views

Uncovering patterns in price timeseries using linear regression

I have some minute-bar data which my professor suggested I resample to 5 minute bars and then separate it into timeseries per bar period. For example, I get one time series for 12:00, another one for ...
0
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0answers
13 views

What variables are used for the Institutional Activity Index (IAI)?

I've been looking for various ways to get more information about institutional trade action. Although weekly COT report is available, it's already outdated by 1 week at the time the report come out ...
-1
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0answers
12 views

Where can I find historical prices of options? [duplicate]

I am looking for historical prices for appl call option for 230 strike price starting from 12 weeks back. Where can I find the data?
0
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0answers
18 views

Does “Interest Costs during Construction” impact NAV or IRR of a project?

Does “Interest Costs during Construction” impact NAV or IRR of a project? Companies often, based on accounting principles, capitalize Interest Costs during construction (i.e. they added fixed asset by ...
1
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0answers
29 views

Residual Income Valuation with Term Structure

I'm implementing a residual income model (RIM) to value stocks as described by Ohlson. https://pdfs.semanticscholar.org/c0a5/4ef41311951fe406d15cd7d7ce19502cdc7c.pdf The key to this model is ...
0
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0answers
25 views

How important is it that numerical methods can price for various strikes simultaneously?

I am reading a paper which presents a numerical method to price call options. Call this Method 1. The method can also price several call-options for a range of strikes simultaneously if you want it to,...
0
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0answers
17 views

Market model for european/american options on underlying paying discrete cash (and maybe proportional) dividends

Black Scholes is the market model for european and american options on an underlying paying no dividends. What is the standard market model for european or american options of underlyings paying ...
1
vote
2answers
62 views

Question regarding No Arbitrage price of a call option

I have a question regarding how to solve the NA price for a slightly modified call option. Say that I have a money account $B(T)=e^{r(T-t)}$ and a stock dynamic $\frac{dS(t)}{S(t)}=(r-\delta)dt+\...
2
votes
1answer
59 views

Since implied volatility is the standard deviation of returns, why do people treat it as the standard deviation of the price process?

In the Black Scholes framework, the parameter sigma (volatility) is the standard deviation of the underlying's returns NOT the standard deviation of the underlying price process. But I often see when ...
0
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1answer
58 views

Limit of product

Suppose $g(X, \delta_t)$ approaches a constant $J$ as $\delta_t$ approaches $0$, where $X$ is a random variable, and suppose $Y^2/\delta_t$ approaches some constant $K$ as $\delta_t$ approaches $0$, ...
0
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0answers
12 views

MMD rate lock - OAD

would anyone have an idea on how to calculate OAD for Municipal rate lock that has a fixed contractual DV01? or point me to a book/paper
1
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2answers
90 views

Are densities used in finance square integrable?

Let $f$ be the density of the stock asset under some model (Heston, SABR, Black Scholes, Variance-Gamma, etc). Is $f$ square-integrable in these models?
0
votes
1answer
30 views

Drawing values from a lognormal distribution of a GBM

I'm looking at a GBM with parameters $$ r=0.05 \\ \sigma=0.2 \\ K=130\\ T=0.25\\ S_0 = 100 $$ This is a process that is lognormally distributed with mean and variance given by $ \mu = S_0e^{r T+0.5\...
4
votes
2answers
108 views

What are Market Makers hedging?

I know that the target of the market makers is to provide liquidity to the markets. Right now I'm working as a developer in a quite large project of F.I. I know that they are providing liquidity for ...
0
votes
2answers
55 views

calibration - negative call price

Im trying to calibrate a stochastic volatility model to market. I end with an MSE of 2-3 with approximately 500 quotes. Some out of the money options with call-price under 1 dollar ends up being ...
0
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0answers
34 views

Option PnL Attribution

I am trying to compute the pnl of an option where for the both days option greeks delta, gamma, vega, theta and stock price and IV is given. I know the option pnl will be the sum of delta pnl+ gamma ...
0
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0answers
55 views

Put implied volatility increasing over time, is this normal?

After calculating different volatilities surfaces (IV, Heston and Dupire) from my European call data, I was wondering if it would be the same thing from my put data, as it should be ( ?). But I had ...
0
votes
1answer
36 views

What is the difference between exercise and expiry date?

I know in American options you can exercise the options at any time before expiry date but in European options you can only exercise the options on expiry day. On National Stock Exchange of India the ...
-3
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0answers
35 views

Uridashi and Redeem Uridashi [closed]

What are Uridashi and Redeem Uridashi Options? Please explain with examples their significance.
3
votes
1answer
54 views

Forward rates are martingale under the T-forward measure

Forward rates are martingale under the $T$-forward measure but this derivation is suggesting otherwise. Could anyone please point out the mistake ? Let $dW_Q$ be a Brownian Motion in the risk ...
1
vote
1answer
32 views

Confusion about bid- ask- and last-prices from option prices data

I’m struggling with the interpretation of quoted option prices I obtained from Bloomberg. The call options prices are available for a daily time series with different strikes at a given day. I ...
0
votes
1answer
43 views

Recovering index weights via least squares regression on components

As an exercise, I wanted to re-construct the index weights for the Nasdaq-100 (^NDX) via linear regression. For these purposes I got the daily adjusted close of its 103 components from alphavantage.co ...
3
votes
2answers
64 views

Proof that $\exp(aW(t)-0.5a^2t)$ is a martingale

I'm trying to prove that $Z(t)=\exp(aW(t)-0.5a^2t)$ is a martingale where $W(t)$ is a Wiener process and $a$ is a constant. Here is my attempt: $$E[Z(t+s)] = E\left[\exp\left(aW(t+s)-0.5a^2(t+s)\...
1
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0answers
26 views

Relationship between Calendar Spread Arbitrage and Probability Density Function (pdf)

We all know that the butterfly spread no-arbitrage condition can be expressed as an inequality restriction on the second-order derivative $\partial ^2C/\partial K^2 \geq 0$, which also means the ...
0
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0answers
23 views
0
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2answers
47 views

Heston Model and antithetic variables

I was implementing some variance reduction techniques for the heston model and came up with a question when implementing the antithetic variable technique. Namely, I was not sure if I had to implement ...
1
vote
0answers
28 views

Can you reduce the amount of VWAP sale by initiating a VWAP buy against it?

Outright cancelling the VWAP sale order and resubmitting a new order would result in a VWAP "price" that is very different from the theoretical VWAP. Could this be used to get a closer VWAP price ...
1
vote
1answer
34 views

How to determine the no arbitrage price of following claim? (change of numeraire)

How do I determine the no arbitrage price for claims such as $min(S_1(T),S_2(T))$ or $max(S_1(T),S_2(T))$? We can consider a standard Black Scholes model. Hence $S_i(T)=S_i(t)e^{(r-\sigma_i^2/2)(T-t)+\...
4
votes
1answer
175 views

99.97% Percentile VaR Approximation

I have been working with a group which references a 99.97% 10-day VaR figure. They calculate this value via a 99% 1-day historical simulation over 500 days and then scale it under the assumption of a ...
0
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0answers
22 views

Interpretation of $\alpha$ (confidence level) in mean CVaR optimization

How are an investors risk preferences related to $\alpha \in (0,1)$ in a mean CVaR optimization? Would a risk averse investor choose a higher value of $\alpha$, and if so why? My understanding is, ...
-1
votes
1answer
34 views

Custom normalisation from 0 to 20

I want to normalise from 0 to 20 For example right now I do normalisation with dynamic outlier exclusion , using median. So it works fine for some values like below ...
-1
votes
0answers
31 views

How to Understand the Gambler Ruin Problem [closed]

I'm reading the probability chapter from an interview book called A Practical Guide to Quantitative Finance Interview, and cannot make sense or understand one of the problems called "Gambler Ruin ...
-2
votes
0answers
36 views

How to Compute and Understand Probability [closed]

After leaving school for 6 years, I'm reading the probability chapter from an interview book called A Practical Guide to Quantitative Finance Interview, and cannot make sense or understand how ...
-1
votes
0answers
41 views

Two Probability Questions from Interview Book [closed]

I'm reading an interview book called A Practical Guide to Quantitative Finance Interivew / Chapter 4 Probability Theory. So I ask those following questions (I highlighted my doubts in bold) in this ...
0
votes
1answer
46 views

Does the Heston calibration have to be done on an arbitrage-free surface?

In a similar way to local volatility? I'm trying to calibrate a surface, but the results aren't convincing, so I was wondering if it was necessary to first use a way to regulate it (splines, ...
1
vote
1answer
76 views

Analytical portfolio optimization for VaR under multivariate normality

Given a set of assets with returns following a multivariate normal distribution with a known mean vector and a known covariance matrix, I want to find optimal portfolio weights that maximize value at ...
1
vote
2answers
60 views

Price American call equal to price European call (non-dividend-paying stock)

Let $\tilde{C}_K(t,T)$ be the value (price) of an American call option at strike $K$ and maturity $T$, and $C_K(t,T)$ the value (price) of a European call option at same parameters. For a non-...
1
vote
1answer
45 views

Swaps curve building with Deposit, FRAs & Swaps

I'm new to curve building with Deposit, FRAs & Swaps, I understand the process the main struggle I've is with day conventions and swap delays,cash delays, pay delays ... it's hard to find a book ...
0
votes
0answers
27 views

Fama-Macbeth Regression: Weird Risk Premia

I just conducted a Fama-Macbeth regression where in the first step I calculated a time-series regression for each individual stock to get three betas (for mkt-rf, smb, hml) for each stock. Then I ran ...
1
vote
1answer
36 views

Vasicek Model Parameters Estimation

I'm currently trying to estimate the market price of risk (lambda) in the Vasicek Model, and am running into difficulties. Using the Excel Solver tool and the Maximum Likelihood Estimation method ...
1
vote
1answer
41 views

Formula for quantiles of swaprates in the 1-factor Hull-White model

Is there a closed formula to approximate the quantiles of swaprates in the 1-factor Hull White model? Background The Hull-White is a Gaussian model for the short rate. Its mean and covariance ...
0
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0answers
29 views

how to find a good ML stock prediction implementation? [closed]

I know there are lots of github repositories about applying ML techniques into stock market prediction. But I can't find the one for my purpose: Suppose I have lots of data sets from stock exchange ...
1
vote
0answers
23 views

In building volatility curve for etf options, should I use synthetic forward price or cash price

Assuming option market moves faster than ETF cash price in intraday high frequency setting. That means at each time point, when implied volatility is calculated by black-schole model by using cash ETF ...
0
votes
0answers
27 views

Volatility and Variance Swap [closed]

What is the difference between volatility swap and Variance swap? Volatility can be converted into variance and vice-versa. Then why do we need to trade two different product?
0
votes
1answer
14 views

Option symbology with reuters DSWS

I am trying to systematically extract option data at a certain date based on the underlying. Input: interchangeably ISIN/RIC/Mnemonic Output: list of underlying symbols, preferably mnemonics. I am ...

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