All Questions

1
vote
0answers
27 views

Why Jarque - Bera values are so high? Is this normal? [closed]

Please advise whether the following is a normal occurrence: In the above table I have Autocorrelation at lag1, LB, Skew, Kurt and JB test. I have noticed that whenever the value of Kurt increases, ...
2
votes
1answer
28 views

zero-shift SABR vega and re-calibration of SABR

I have a zero-shifted SABR model, where I need to confirm if the model is generating the calibration and vega's correctly. The underlying model is the standard SABR lognormal (there is normal as well)...
1
vote
0answers
21 views

Indian Securities Sector and Industry performance history data [closed]

I am looking for data of Indian Industries and Sector's performance historical data for each and every date for over the last 10 years period of time. If it is not available, Could I get every month-...
2
votes
1answer
64 views

Estimation of Radon–Nikodym derivative from hisotrical returns and option price data

Say we have an estimate of empirical density function $f^{\mathbb{P}}_S(s)$ of historical log-returns on a stock $S$ over a 30-day period under the real-world objective measure $\mathbb{P}$. We also ...
0
votes
2answers
34 views

Construct a portfolio of European call options with a certain payoff function

My question is similar to Replicate a Portfolio with Given Payoff but I am not quite sure how to apply this to my problem. A portfolio of European call options on an asset $S_T$ has a payoff ...
1
vote
1answer
61 views

Looking for a Book

I hope everyone is well. While I was looking for derivations of Greeks I came across part of a book. Could you help me to find its name please ? Here is the link: http://centerforpbbefr.rutgers.edu/...
1
vote
0answers
21 views

TWS API Python_Remaining Positions [closed]

I am trying to get the number of filled/remaining positions using the function orderStatus() under EWrapper class. I tried something like, print(p.orderStatus(orderId=6, filled)), which didn't work. ...
2
votes
0answers
49 views

Dupire Formula question

I want to calculate the local volatility from Dupire's formula: $\sigma _{VL}^{2} (K,T,S_{0}) = \frac{\frac{\partial C}{\partial T}}{\frac{1}{2} K^{2} \frac{\partial^2 C}{\partial K^2}}$ So I use ...
1
vote
0answers
28 views

Poisson parameter in Merton's Jump-Diffusion Model to price call option

I've been taught the following European call valuation formula under jump-diffusion model: \begin{equation} price = E[e^{-rT}max(S_T-K,0)] =\sum_{j = 0}^\infty e^{-rT}P_j(\lambda)E[max(S_T-K,0)|J=j] \...
1
vote
1answer
34 views

How to compute the Net Leverage Ratio for a mortgage [on hold]

In the introduction to the 4th video of lectures series Finance I on MIT Opencurseware (https://www.youtube.com/watch?time_continue=166&v=hyc8h5T76BE), Andrews Lo talks about the net leverage ...
1
vote
1answer
46 views

Asian Options Vs Bermudan Options

Which of these options are more popular in practice/used in industry? And where exactly are they used? Also, I have been searching for listed Asian and Bermudan options, for volume data etc, but have ...
4
votes
2answers
91 views

Implied volatility in Monte Carlo models

Suppose I want to get the implied volatility for a given option, whose process does not generate a closed-form formula. In that framework, how is the IV calculated, given the fact that bisection ...
1
vote
1answer
83 views

Can someone confirm if I am correct about these numbers on companies' financial documents?

I am looking to implement Piotroski's F-score Value strategy discussed in the paper "Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners ...
0
votes
1answer
76 views

How to quantify the coupon effect?

I'm reading Moorad Choudhry's book "Advanced Fixed Income Analysis" The first chapter briefly touches on the coupon effect which I understand from other sources is the effect of pricing an annuity (...
3
votes
1answer
56 views

What happens in the binomial model if the real-world probability is $0$

Consider a binomial model. Suppose we know that the price of a stock will become a certain value at the next timestep. That is, one of the two outcomes has $0$ real-world probability. Then it should ...
1
vote
0answers
58 views

Can implied volatility be 0?

I am calculating IV for intraday options and sometimes I am getting the value as "0"? Is that possible? For example: Strike = 26700 PE Fut = 26962.55 Spot = 26902.55, TimeToExpiry = 797340sec. Price ...
1
vote
1answer
54 views

Formula in Markowitz Optimization Problem (without riskless asset)

(hope this is not too basic, I'm new to this forum) Im struggling to understand the optimization problem (global minimum variance portfolio) formula in Markowitz Theory: $$\arg\ \min\ Var(Return\ x) =...
2
votes
0answers
40 views

Reasonable Minimum Value for Volatility?

I am looking at an implementation of Bjerksund and Stensland (2006), and notice that it doesn't work well for very small volatilities. What is a reasonable minimum volatility to use in an algorithm ...
2
votes
1answer
64 views

Static hedge for up-and-out Digital Call

I am trying to come up with a static hedge for a Digital Call with strike K that knocks out when price > barrier H. I know it will involve non-knockout digital calls with strike K and strike H but I ...
3
votes
2answers
148 views

How to calculate implied correlation via observed market price (Margrabe option)

I can't seem to figure out how to do the following: compute the implied correlation $ρ_{imp}$ by using the observed market price $M_{quote}$ of a Margrabe option, and solving the non-linear equation ...
1
vote
0answers
69 views

R Equilibrium FX using VEC or Behavioural Equilibrium Exchange Rate (BEER)

I dont have much experience with R. I would like to do create model for FX Equlibrium using VEC or BEER. I already know what variables I want to use in model: trade differential between UK and the ...
1
vote
1answer
75 views

VaR equivalent volatility meaning

I have a hard time with interpreting VeV. I mean - I see its just standard deviation derived from Cornish-Fischer VaR, but I don't really know how to interpret it. The formula for VeV is: ...
6
votes
3answers
139 views

Copula Correlations

It seems that the sample linear correlation coefficient $\hat{\rho}$ of samples generated by a copula that is parametrized by $\rho$ is unequal to $\rho$. For example, I construct a Normal copula with ...
2
votes
1answer
82 views

Quantlib CDS model

I have started working on CDS model using Quantlib and as a starting point, utilized code provided in GitHub Quantlib/Python examples with modifications in initial code as given at the end and have ...
-1
votes
2answers
97 views

What is the best GARCH model for forecasting daily stock return and why?

If I want to forecast daily stock return let say Apple what would be the best GARCH model and why? (ARCH, GARCH-M, IGARCH, EGARCH, TARCH etc)
1
vote
0answers
23 views

Give the formula for following resulting portfolio process

Consider the continuously sampled a derivative security with payoff function $V(T) = \frac {\int_0^TS(u)du}T -K$ but assume now that the interest rate is $r=0$. Find an initial capital $X(0)$ and a ...
1
vote
1answer
38 views

Basic CDS terminology

new to CDS. Few basic questions on terminology and conventions: If I look at a Sovereign 5-year Chinese CDS then the graph shows a CDS value of 42.520. (Source). Is this 42.52 basis points? Is it ...
1
vote
1answer
63 views

Hull white model Monte Carlo simulation Zero Coupon Bond

I am trying to use Hull White Model to price a zero coupon bond by Monte Carlo Simulation. The basic idea is under this equation: Under Hull White Model, I want to generate every short rate (r) and ...
1
vote
1answer
56 views

Short rate models

On the short rate model in Wikipedia https://en.m.wikipedia.org/wiki/Short-rate_model Why is the first function, the P(t,T) given? This is not the short rate model this is generating prices for a ...
2
votes
0answers
82 views

Understanding the link between inflation and credit spreads

I found a paper which uses inflation as an independant variable for credit spread. Unfortunately, the relationship is not explained in this paper. Further research got my to the paper of Kang/Pflueger ...
4
votes
0answers
61 views

Numerical simulation of Heston model

I am trying to simulate on Python random paths for a general asset price as described by the Heston model: \begin{equation} \begin{aligned} dS_t &= \mu S_t dt + \sqrt{\nu_t} S_t dW^S_t \\ d\nu_t &...
1
vote
0answers
20 views

QuantLib - Asset Swap Cash Flow Final Period

I am comparing CFs of asset swaps in QuantLib to the asset swap screen (ASW) in Bloomberg. I noticed that the final payments of both swap legs do not include an interest payment for the final period. ...
1
vote
0answers
57 views

Rare Events in Normal Multivariate distributions

I don't work in finance, but I've stumbled upon a problem that you guys may have to deal with in your jobs. My problem is a random walk in high dim spaces ( > 100), in which I'm looking for vectors ...
1
vote
0answers
15 views

fiscal period end date

If a quarterly report is released tomorrow, is there any way to figure out the date the quarterly period ended without manually researching? Such as an API? I think there is a deadline of 35/60 ...
1
vote
1answer
32 views

Funding Treasury net basis trades and balance sheet

I am trying to extend my understanding of Treasury futures net basis trading by understanding the funding markets. If net basis is cheap, an investor can buy the basis. This means that the investor ...
0
votes
0answers
28 views

Need help figuring out probability that price will be touched in a specific time period

I have a formulas for figuring out probability the price will be struck within T days. Now what I need help with is figuring out the probability price will be stuck with in a given (T) minutes, or (T) ...
1
vote
2answers
48 views

Compare ex-post Sharpe ratio of multiple portfolios?

Say I want to compare the Sharpe ratio of two portfolios, is it necessary to look at the excess return? Or can you just compare their average return divided by their standard deviation? So basically, ...
1
vote
0answers
62 views

Logic behind calculating a Carry Multiple associated with Startup Valuation [closed]

I'm reading a book called "The #1 Guide to Startup Valuation: How to value your startup in 12 easy steps" (p. 22-23) by Joachim Blazer. As one of the building blocks, namely "Return", the Carry ...
4
votes
1answer
72 views

Metric for measuring the “spread” of a copula

I am fitting copula to log returns data for my undergraduate thesis, and comparing the quality of the fit with AIC. One interesting thing that I found is that the Clayton copula, which has negative ...
1
vote
0answers
42 views

Compute the VaR from NPV (Net present value)? [closed]

A client is evaluating an investment in Indochina requiring an initial expenditure (period 0) of 10,000, and which then in periods 1 and 2 gives a benefit V1 and V2. Assume that the discount rate to ...
1
vote
1answer
53 views

Achieving desired fx exposure with using minimum pairs possible

Let say my algorithm tells me to get the following positions through opening fx positions: CUR NET POSITIONS GBP 236.96379 USD -310.58000 CHF 0.02000 There are 2 ways to achieve this: Long ...
2
votes
0answers
65 views

Zero Coupon Volatility data

I am trying to construct a Black-Derman-Toy trinomial tree as explained in Espen Haug's Complete Guide to Option Pricing Formulas, chapter 11. Where do I get the Inputs (table 11-2) from if I wanted ...
4
votes
2answers
145 views

Factor model and trading strategy in options market

We all know that there are many factor models (CAPM, Fama-French 3...) and trading strategies (momentum trading...) in equity market. I wonder whether there are any analogous factor model and momentum ...
2
votes
1answer
65 views

Mean-variance maximization

I denote by $W_0$ and $W_1$ the wealth of an investor at $t=0$ and $t=1$, respectively. Let $r_f$ be the risk free rate, $r$ the vector of returns of the risky assets in excess of the risk free rate, ...
4
votes
1answer
89 views

American put option. Exercise time is a random variable, calculation of expected payoff

I got an American put option, where the payoff is $V_\tau = \max(K - X_{\tau}, 0)$ and $X_{\tau}$ is the price of an underlying at the stopping time $\tau < T$. The underlying follows a standard ...
4
votes
1answer
57 views

How to prove that the expected squared error associated with the optimal combination weight is smaller than the minimum of 2 forecast variances?

I am looking at linear combination of two forecasts (Bates and Granger, 1969). I would like to understand how to prove that the expected squared error associated with the optimal combination weight is ...
4
votes
1answer
44 views

Why is there no parameter for the estimated economic growth of a company in the option price model

Can someone explain me why the economic growth of a company is irrelevant in determining the option price. Especially for options with a long maturity e.g. 5 years it seems to me that for a high ...
2
votes
0answers
38 views

Vega for long long-term ATM call and short short-term ATM call

You are long a long-term ATM call and short a short-term ATM call. The ratio is adjusted to make the total vega zero. If before expiry of the short-term option, spot is again at the strike price. ...
1
vote
2answers
60 views

Strategy if dividend is lower than expected

Here is a question I encountered: In 2009, a trader believes that dividends for a stock in 2011 will be lower than expected, what is the best strategy among: long/short 2010 forward, long/short ...
4
votes
0answers
63 views

Feynman-Kac to derive stochastic representation

$u_t + \frac{1}{2}\sigma^2x^2u_{xx} - \alpha + \lambda((K_d - x)^+ - u) = 0$ with terminal condition $u(T, X) = (K_m - X(T))^+$ $dX = \sigma X(t)dW_t$ $\alpha$ and $\lambda$ are constants Ok so ...

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