# All Questions

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### Standard Assumption Terminology

Regulators are starting to analyse (or at least they are talking about it) model assumptions. We all know that too often our assumptions are just in the model documentation. Furthermore, we have no ...
421 views

### which product supports Basel III LCR (liquidity coverage ratio) reporting?

After Jan 2013 change, now the main reporting changes requested from Basel III is LCR, Liquidity Coverage Ratio. Moody's has a product named RiskAuthority (previously Fermat CAD) that is going to ...
2k views

### Portfolio software that shows 'total return' for each investment

I'm a high school technology teacher and sponsor for the Charity Student Investment Project. Currently our students track our investment portfolio via a google spreadsheet (http://...
1k views

### Dynamic hedging strategy example

I am faced with the following problem. Let the standard Brownian motion $W_t$ be the price process of a traded asset in an economy with zero interest rate. Define $$A_T=\frac{1}{T}\int_0^T W_t^2 dt$$ ...
5k views

### Monte Carlo simulating Cox-Ingersoll-Ross process

The CIR process is given by the SDE $$\mathrm dr_t = \theta(\mu-r_t)\mathrm dt + \sigma\sqrt{r_t}\mathrm dW_t$$ where $W_t$ is a Brownian motion. I am interested in finite-difference schemes of ...
531 views

### Blackbox Optimization + Bootstrapping = Parameter Selection?

Most automated trading systems have a number of embedded parameters such as the lookback periods, entry and exit thresholds, etc. This is like the moving average crossover system or any of the systems ...
783 views

### Mathematical theories of (sub)-optimal trading strategies under “idealized” assumption - price is random process known to trader

The question is NOT about real trading, but about simplified mathematical models for trading. One of the main problems in trading is that asset prices are not correctly described by the some random ...
28k views

### Central Index Key (CIK) of all traded stocks

Is there a way by which I can get a list of CIK of all registered stocks at the SEC?
2k views

### What is the difference between a recovery swap and a CDS?

As I understand it, recovery swaps and CDS are both used to privide hedging against the default risk of a loan. What is the difference between them?
1k views

### What is lagged interest rate?

I am trying to reproduce a plot in "Statistics and Data engineering for Financial Engineering" by D. Ruppert. The author uses the risk free returns data available in the Ecdat package in R. ...
3k views

### Risk Budgets with Target Portfolio Volatility

I'm working through the implementation of a risk budgeting approach as described in the recent Roncalli paper. The idea is that the portfolio manager sets a contribution of total portfolio volatility ...
31k views

### What does the prefix PX stand for on a Bloomberg Terminal?

Regarding PX_LAST, PX_VOLUME etc... What does the "PX" prefix stand for?
159 views

### Relating Quantitative Easing to the rally in the SPX

The Fed's balance sheet has been expanding over the last few month due to QE3. When the Fed goes out to buy treasuries or MBS, it's taking those securities out of the market and exchanging them with ...
594 views

### Matlab; How to specify Coupon frequency for Interest Rate Swap

I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using ...
2k views

### Statistical models for exchange rates?

What stochastics processes (if any) are used to model currencies exchange rates and how good are such models ? References on subj. are also highly welcome.
4k views

I am currently doing my research for my master thesis, which will clearly focus on the question of risk managment in algorithmic trading systems. I have done research about this topic and found some ...
2k views

### LIBOR Rates available in CSV, XML etc

Is there a website that offers current LIBOR rates for all tenors for free in machine readable formats?
195 views

### Different Exercise Style Options on Same Underlying

Some equities on European markets have options traded in two different exercise styles: American and European. Examples: ABB and ABB (european) on Eurex Banco Santander on MEFF Consider ...
439 views

### Which prices to use to compute realized volatility?

For computation of realized volatility, especially range based volatility, deal prices are commonly used. If Level I data available should the deals data still be used or another measures of spot ...
2k views

### IB TWS & API, without IB account?

I'll be starting a MFE grad program in Fall, and some of the classes have a lab that use the IB TWS & API. I'd like to play around with it for fun this summer. Unfortunately, I don't have an IB ...
73 views

Example: ...
171 views

### Are there any good benchmarks for performance of vanilla option pricing code?

I've seen parsec (http://parsec.cs.princeton.edu/index.htm), which has a PDE pricing component, but the distribution is enormous and I haven't bothered to try to download it for review. I'm ...
4k views

### How to adjust local currency returns to US$/EUR return? Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ... 1answer 2k views ### So many volatility models. Any comparisons of them? Are there any papers that make an explicit contrast/comparison of the following (or other) vol models in terms of the suitability for addressing some empirical problem? Wavelet multiresolution ... 0answers 73 views ### Discount of Asian vs European vols I understand the discount for Asian vs. European vol depends on time to expiry and length of averaging period. This makes sense intuitively; a short averaging period far away blurs into a single ... 2answers 779 views ### VaR for portfolio of funds Let's assume we need to calculate a 1-day VaR for a portfolio of funds. Funds are traded, they can be bought and sold every day. We know exactly what the assets in each fund are. What is the right way ... 1answer 1k views ### Replicating strategy in the Black-Scholes model I have a two-asset Black-Scholes model for a financial market:$dB_t=B_t r dtdS_t=S_t(\mu dt+\sigma dW_t)$I introduce a European claim$\xi=max(K,S_T)$with maturity$T$, for some fixed$K. I ... 0answers 130 views ### Optimal mortgage rate strategy When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert. This makes it a secretary problem - in the traditional ... 2answers 4k views ### Is Unexpected Loss ever used in Basel II? In Basel II, EL is useful. It's calculated as $$EL = PD \cdot EAD \cdot LGD$$ in advance IRB (internal rate-based approach), Correlation $$R = 0.12 \frac{1 – e^{-50 \cdot PD}}{1 – e^{-50}} + 0.24 ... 1answer 6k views ### When the Inverse Correlation between the SPX and VIX breaks down As we all know the S&P and its implied vol, the VIX, generally move in opposite direction. To a large extent, the correlations makes sense. IV is one of the main drivers of the price of options, ... 2answers 290 views ### What's the first time-integral of price called? In general I'm wondering about the names of time-derivatives of price. E.g. in physics the first few time-derivatives of position are: f(x) = displacement f'(x) = velocity f''(x) = acceleration And ... 2answers 382 views ### Quality of GAINDATA timestamps Does anyone have a view on the quality of the timestamping of GAINCAPITAL's free historical data. There is non-FX data there and I wonder if the timestamps are in sync? 1answer 262 views ### Desired portfolio volume I am working on a toy model, in part of which an investor has to decide (based on some utility theory) how much money to invest in a given portfolio. For simplicity, assume that the portfolio is ... 1answer 1k views ### R Outputs from Johansen test. Linear combination still not stationary? I am trying to see if house price is cointegrated with interest rate, per capita income and rental vacancy rate and got the following output from ca.jo in R: ... 0answers 177 views ### Exact value of mean reversion rate knowing terminal value of the process Let you have the following mean reverting process: \text{d}x_{t}=a(\theta-x_{t})\text{d}t, where the diffusion term is absent, that is this process is not stochastic. Let you know the value of \... 0answers 195 views ### Is it random walk? I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3):$$ cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0 for all f(\cdot) ... 1answer 221 views ### Add transaction costs to prediction An algorithm predicts price movement by some certainty and it invests proportional to the confidence level. Predictions range from -1 to +1, -1 meaning sell for a value of ... 1answer 563 views ### What are the differences between CFD and SSF? What are the intricate differences between SSF and CFD? The similarities are that both take into account interest and settled daily thus looks more or less the same pima facie. 4answers 2k views ### How to prove that markets are incomplete under the Stochastic Volatility model? Has anyone ever formally proved that Markets are incomplete under the stochastic volatility model? I know that if there are more random sources than traded assets, then the market is incomplete but ... 0answers 212 views ### Market Exposure and Hedging Normally the Market exposure associated with your stock/portfolio is your delta for that stock/ portfolio. Basic idea of hedging involved here is buying/selling respective futures depending upon ... 0answers 165 views ### Overnight Index Swaps Just a very quick general question regarding the OIS market. Is it common place on termsheets to state a PV Notional and additionally a FV notional, if so what is the purpose of this and does market ... 1answer 1k views ### Profiting from price discrepancies between stock exchanges Here is an interesting video by Nanex: http://www.youtube.com/watch?&v=rB5jJuMP84E Perhaps some of you have already seen something similar. It is an animation of the order routing. It shows 1/2 ... 1answer 215 views ### Grokking Stochastic Oscillator for Stocks In software, I'm trying to implement the Stochastic Oscillator (see here), and I'd like to figure out a few things. Let's say I use standard inputs 14, 3 and 3. If my 14 is for intraday ticks, what ... 0answers 148 views ### How to simulate a Geometric Binomial Process with state/tie dependent increments? I want to simulate a geometric binomial process with state/time dependent increments. So the model is given by \begin{align}R_t=\frac{X_t}{X_{t-1}}\end{align} \begin{align}P(R_t=u)=p(X_{t-1},t) \... 1answer 419 views ### Covariance of brownian motion and its time average It's a question pertaining to the correlation of a log asset process (following BM) and its time average, to put it into form, ifX(t)=\mu t+\sigma W(t)$$then$$ \bar{X}(t):=\frac{1}{t}\int_0^tX(... 1answer 664 views ### Distribution of profit/loss for retail traders in FX I've heard that 90% of retail investors in FX lose money. I want to analyze this in more detail. Question: Is there some literature that describes the statistics of profit/loss for retail traders in ... 0answers 93 views ### mean variance minimizer I need to use the lagragian multiplier to find the minimal martingale measure from the set of equivalent martingale measures. i formed the lagragian as L =L(u(t,S(t)),\lambda) = E_\mathbb{P}[\...
437 views

Here I have this question (i) state Ito's formula (ii) hence or otherwise show that $\int^t_0B_s dB_s = \dfrac{1}{2}B^2_t -\dfrac{1}{2} t$ (iii) define the quadratic variation $Q(t)$ of Brownian ...
It's a simplified model. Suppose $U_t$ is a random variables subject to Lognormal($x_1$, $z_1^2$)distribution. $V_t$ is a random variables subject to Lognormal($x_2$, $z_2^2$)distribution. Suppose ...
I would like to estimate Ornstein–Uhlenbeck process' parameters via Kalman filter. My process is the following one: $\text{d}x_{t}=\alpha(\theta-x_{t})\text{d}t+\sigma\text{d}W_{t}$ I'm interested ...