All Questions

1
vote
1answer
70 views

Black Scholes- Options and OIS

I have 2 questions. In the Black Scholes formula for currency options, where does forward premium come in? Volatility will be a historic parameter, so which component considers fwd premia. Typically,...
2
votes
1answer
36 views

Determine the maximum arbitrage profit from the given contracts

I really have tough time trying to figure this out. An investor observes the following prices in the market: Euro-Stoxx-Future DEC 148.02-148.03; Euro-Stoxx-Future Call-Option DEC 148.00 1.13-1.15; ...
2
votes
0answers
25 views

QuantLib XL Swap Valuation Fixing Dates

I want to rate IRS Swaps on an specific Valuation Date using QuantLibXL. Everything works fine besides the last Index Fixing before the Val Date. After using SwapLegAnalysis I saw that the Index ...
1
vote
0answers
30 views

Running regression to analyse how leverage changes around

I am running a single variable regression with BHAR returns as independent variable and Leverage as dependent variable. I would like to analyse does the leverage 1 year prior to IPO and 1 year after ...
1
vote
1answer
52 views

Annualising standard deviation (monthly, quarterly data)

The question I have refers to annualised standard deviation. For example, I have various funds monthly returns data for the period 1980-2019. Some of them report data for e.g. 13, 19, 43, 56 months ...
0
votes
0answers
8 views

How to plot the last values of a dataframe on boxplot? [migrated]

I have a 2*4 box plot, each contains 21 boxes. For each of them, I would like to plot the last value of each dataframe column. A closer look at one of them: ...
1
vote
1answer
86 views

How to compute the Carry + Roll-down of a bond with QuantLib?

I’m new using QuantLib (I have no idea how to use it) and I would like to know how to calculate the C+R of a bond, say the current 30Y. The textbook definition of C+R is the P&L due to the ...
1
vote
1answer
44 views

How to understand firm option expiration cycle?

Here I am trying to understand the firm option expiration cycle: When I read Investopedia, it says: Most of stock options are on one of three expiration cycles, which consists of one month per ...
2
votes
1answer
130 views

What is the fastest common moving average?

I am trying to find what standard moving average would give me the fastest adjustment or strongest weight to most recent data, but without changing the number of periods. Here is some sample data and ...
5
votes
1answer
91 views

Pricing in the Heston Model

The dynamics of the Heston Model is \begin{align*} \frac{dS}{S} & = \lambda \sqrt{\nu} d W^S \\[0.5em] d \nu & = k (1- \nu )dt + \epsilon \sqrt{\nu} dW^\sigma \end{align*} where $\lambda$...
3
votes
1answer
70 views

Difference between tree and lattice approach

Is there any difference between the tree and lattice approach for valuing derivatives? I was under the impression that both are the same.
1
vote
0answers
46 views

Replicating PNLS of FX Portfolio [closed]

I need to enter a USDCHF position and the size is 1000. However I want to replicate the same portfolio pnl by using USDEUR and EURCHF. I know that due to triangular arbitrage USDCHF=USDEUR*EURCHF as ...
2
votes
1answer
93 views

IPO Valuation: Share Pricing and Number of Shares

Does the number of shares matter for a company to go public? Suppose a company ABC went public and the initial valuation of the company shares to be sold stands at \$5000. Now, it can sell 1000 ...
1
vote
0answers
38 views

Applying portfolio variance weight based on logarithmic returns?

The expected logarithmic return of a portfolio is calculated as : $$𝐸_p = \log\left(\sum_i w_i e^{R_i}\right)$$ Therefore, I was wondering that how can I apply weight to use with the variance based ...
3
votes
1answer
79 views

Strategy for implied volatility

I encountered this question: "A trader observed that the implied vol of OTM calls and puts are higher than that of ATM option, what is the best strategy among: Calendar Spread, Bull Spread, Bear ...
5
votes
2answers
114 views

Do correlated assets affect the price of a portfolio of derivatives?

I need to compute the value at risk of a given portfolio as an exercise for a class at university but I have trouble understanding how correlated assets affect the price of the portfolio. Could you ...
2
votes
0answers
143 views

Information Driven Bars (Advances in Financial Machine Learning)

My team and I are busy coding up a python implementation of the information driven bars (imbalance and run bars) mentioned in Chapter 2 of the text book Advances in Financial Machine Learning. There ...
2
votes
1answer
81 views

Convert Geometric Direct Alpha PME to Arithmetic Excess IRR (PME Alpha / Implied Private Premium)

As a followup to this old question, Private Equity: Direct Alpha vs Excess IRR, I have a new one. In automating PME calculations, the Direct Alpha (DA) approach is computationally simpler and ...
0
votes
1answer
58 views

Papers on synthetic options

I'm looking for some scientific papers to get a better grasp of synthetic options mainly the valuation, eventual time decay etc.. I've looked in my university library and only but I only found obscure ...
-2
votes
1answer
88 views

Why is Plain-Vanilla Bond most common bond in the market? [closed]

I have very straigtforward question (in my perception): Is there any study/research/evidence that provides insights on the following question(s): Why is plain-vanilla most common bond in the market? ...
4
votes
0answers
58 views

Avellaneda-Stoikov empirical estimation verification

The solution of the model contains constant: $k = \alpha K$, it relates to: (i) probability of getting a fill ($\alpha$) and (ii) market impact ($K$). Estimating (i). The author proposes that the ...
1
vote
1answer
56 views

Efficient computing of stock returns taking dividends into account

I have two DataFrames as follows: Dividends: ...
2
votes
0answers
35 views

Optimal stochastic control for geometric brownian motion with numerical solution?

Does anyone know of a Avellaneda and Stoikov alike model for geometric brownian motion which also has easy to read numerical solutions for the bid/ask prices?
1
vote
1answer
35 views

Function price output hops around sometimes due to rounding

Say we have a function for estimating the fair price of a security. The function gives outputs rounded to the nearest 0.5 (that is, the raw output is not a rounded float, but can have a decimal part ...
1
vote
0answers
34 views

Change of measure from physical to risk-neutral under Radon-Nikodym and Girsanov Theorem

Given a stochastic process, how do we prove and generate the change-of-measure? I have been trying to prove the change-of-measure as under the Radon-Nikodym theorem and Girsanov Theorem, but ...
3
votes
1answer
91 views

Expectation in a stochastic differential equation

I'm new to stochastic calculus, I want to find the mean of $X_2$ with $X_t = \exp(W_t)$, with $W_t$ a Wiener process. I used Ito's Lemma is arrive at the SDE: \begin{align} d(X_t) = \frac{1}{2}X_t dt ...
3
votes
3answers
61 views

Calculation for WACC for commercial banks

Commerical banks have a large weightage of debt from deposits, which has a very low interest rate. This caused our calculated WACC to be very low. Is this correct? https://docs.google.com/...
4
votes
1answer
82 views

Introduction of a stochastic discount factor in martingale pricing

The example below is taken from Björk (2009). Let Radon-Nikodym derivative be $$L=\frac{dP}{dQ} \;\; \text{on} \; \mathcal F$$ or written analogously $$P(A) = \int_AL(\omega)dQ(\omega) \;\; \text{for ...
1
vote
1answer
37 views

Generalization of Macaulay/modified duration under non-parallel shift of spot curve

The generaliztaion of Macaulay duration (which is defined in terms of yield to maturity) is known as Fisher-Weil duration. How is Fisher-Weil duration or modified duration defined under non-parallel ...
1
vote
1answer
66 views

Distribution of simple returns vs logreturns

I understand that stock prices are conditionally modeled using a log normal distribution by the relationship $ y_t/y_{t−1}∼logN(μ_{daily},σ^2_{daily})$ $y_t∼logN(log(y_{t-1})+μ_{daily},σ^2_{...
0
votes
0answers
16 views

Why inflation is still reported low? [migrated]

Recently I heard from Richard Koo's video, that central banks have injected so much money to the banking system. There is enough reserves in the U.S. banking system to increase money supply 16 times. ...
1
vote
0answers
50 views

SABR for swaptions

We calibrate SABR on each expiry and tenor combination using market data. (e.g. 1mx10y, 3mx10y etc.) Then how about the non-standard expiry like 2.5mx10y? Do I linear interpolate the alpha, beta, rou ...
-1
votes
1answer
61 views

How to get historical daily index values from Bloomberg Terminal?

I found a lot of questions asking about index returns and index constituents, however, i'm looking for just daily closing values for certain Total Return indices. (FTSE/MSCI/BBBarclays) - these are ...
1
vote
0answers
47 views

Some basic examples for Granger causality

I have two time series, X and Y. The number of observations in each time series is the same and the variables would be price(logged). The goal of my research is to analyze if one variable X follows ...
1
vote
0answers
33 views

Gaussian copula: contract price

The hazard rates for A and B are 1% and 2% respectively. A contract pays you $1 if A defaults earlier than B. What is the correlation that minimizes the price of the contract? I have not studied the ...
1
vote
0answers
20 views

Bloomberg - Index Constituents over a period of time

I basically require a list of the FTSE 350 constituents from 02 Jan 2002 (this is as far back as BB has for member data) to 31/12/2017. I tried to create this dataset using the spreadsheet builder ...
1
vote
1answer
40 views

Quarter-end repo spike (Why not lock in longer repo)

There has been a lot of discussion regarding quarter end repo spikes as dealers reduce their balance sheet. I've been reading it all over Bloomberg and I saw overnight GC as high as 3.6% on my screens....
3
votes
1answer
55 views

Is there such a thing as resonance in economic underliers?

In physics the occurence of resonance is explained and widely understood in its linear form and subject to research in nonlinear resonance. Example for instance are resonant frequencies of objects. ...
1
vote
0answers
33 views

CFD broler spread as indicator for stock market

Retail trader on stock market has very limited ability to accomodate huge amount of information, it leds me to idea of using behavioir of more informed players - CFD brokers - spread of their CFD ...
2
votes
1answer
83 views

Short time to maturity behaviour of implied volatility

There are several perturbative expansions in derivatives literature on the short-time to maturity behaviour of implied volatility. When it comes to implied volatility in (local) stochastic volatility ...
1
vote
0answers
51 views

Credit default swap replication by corporative bonds

I want to get literature or information related with the topic of CDS replication for those counterparties that do not hold. But that have traded bonds (with different degree of liquidity). What could ...
3
votes
1answer
43 views

How are asset backed cryptocurrencies priced?

I am trying to understand the pricing of crypto currencies. Assuming there is a fictional cryptocurrency that is pegged (say) the Chinese Renminbi and the price of Wheat (the relation being the ...
1
vote
0answers
64 views

Performance Call on a Futures

I'm not a 100% on when a margin call is on a group of future contracts... The contract attributes were: ...
1
vote
0answers
49 views

Pricing Knock Out Barrier Options by solving Black Scholes PDE (MATLAB)

This question is based on MATLAB functions. Suppose there is a stock S following the process $dS_t=(r-q)S_tdt+\sigma(S_t,t)dW_t$ r - risk-free rate, q - dividend yield, W - Weiner process The ...
1
vote
1answer
71 views

Interest rates, effect on call price

Generally, we assume that an interest rate increase makes the call price more expensive. From my understanding it is because the expected return on the stock price increases. However the interest rate ...
1
vote
0answers
54 views

spline Interpolation on volatility surface not smooth

I am testing spline interpolation for volatility surface with Matlab griddedInterpolant function with spline as interpolation and extrapolation method. Here is the original data I used to do ...
1
vote
0answers
15 views

RUGARCH (output) and Residual Resampling using GARCH(1,1)

I try to replicate the methodology proposed by Freedman and Peters (1984a, 1984b) which was applied in the famous paper by Brock, Lakonishok and LeBaron (1992) to generate many artificial log return ...
0
votes
0answers
58 views

Can I make the simple moving average less lagging by this method?

I have (T+3) predicted prices for a stock. Let us assume that the predicted prices are going to be very close to the actual prices. can I alter the formula of simple moving average for 20 days like ...
1
vote
0answers
31 views

Calculating YTM, OAS, etc. in QuantLib with given bond price [duplicate]

I am attempting to use QuantLib to calculate several bond metrics such as yield to maturity, option-adjusted spread, etc. The catch is that I am already given a market price and thus have no need to ...
2
votes
0answers
94 views

Black-Scholes equation to Heat equation .(Boundary conditions)

I have been given a problem to code the heat equation which is transformed from B-S equation (European call option) . Now the boundary conditions are for European call option: $$C(S,T)=\max(S-K,0)$$...

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