All Questions

0
votes
2answers
118 views

Factor-Based Equity Investing [closed]

What is the simplest way (process) to develop a factor-based investing strategy with STOCKS? ...
0
votes
0answers
43 views

What exactly does shifting a barrier in a barrier option mean and how does it hedge delta?

How exactly is shifting the barrier to hedge delta implemented in case of barrier options. Is it just changing the barrier, if so, how does it hedge delta or is it making the barrier a range like a ...
3
votes
1answer
110 views

CVaR formulation

I am a research intern and I am working on a topic about a profit maximization of a risk-averse newsvendor by using Conditional Value-at-Risk.The problem is that I found different expressions of CVaR. ...
0
votes
0answers
42 views

Anyone need a daily Ticker to CIK mapping?

Since I've seen several "Ticker (symbol) to CIK" mapping questions over the years, thought I'd put this out here. I had a need to map this myself for another project. I finally have a baseline that ...
1
vote
0answers
55 views

Correlation between Two Factor Gaussian Shortrate Model and Black Scholes Model

I want to implement a two factor Gaussian Shortrate Model \begin{align} r(t) & = x(t) + y(t) + \phi(t), \\ dx(t) & = -ax(t)dt + \sigma dB_1 (t), \\ dy(t) & = -by(t)dt + \eta dB_2(t), \end{...
0
votes
0answers
37 views

Fractional derivative returns on a VWAP series?

In Marcos Lopez De Prado's book, Advances in Financial Machine Learning, the author explains the method of fractional differentiation as an alternative to calculate returns. The method basically ...
0
votes
0answers
40 views

Calculation of IRR Given Stage Assumptions

I am trying to replicate Union Square Ventures Fund #1 model. A number of assumptions are given and the outcomes are listed. I have copied these into google sheets. I am not sure exactly how IRR is ...
0
votes
1answer
47 views

Condition expectation calculation examples and theory [closed]

I want to ask you an advice about reading theory and examples of conditional expectation and conditional variance. I want to have my understanding deeper, because sometimes I can't understand ...
0
votes
0answers
59 views

What are the go-to textbooks for advanced quant finance topics? [duplicate]

Credit risk, interest rate modelling, volatility modelling. What are the go-to books for each of these 3 topics in quant finance? The target audience should be someone who understands the basics of ...
0
votes
0answers
35 views

Calculating historical volatility and returns from bond yield

I am interested to calculate the historical volatility and returns from a time series of US 3m T-bill yield (see screenshot below), for portfolio optimization. I am not too sure how to bridge the idea ...
-2
votes
0answers
73 views

Greek gamma theta vega

I have a question concerning the greek. Can some one explain to me why vega, theta and gamma are extremum when the spot is equal to the strike price ?
3
votes
4answers
167 views

Value of a European Call option with Infinite maturity

It is a job interview question. So, what's the value of a vanilla European call option of infinite maturity, and a given strike, vol, interest rate, spot price. I think, the answer should be "zero". ...
1
vote
1answer
111 views

How to verify sticky delta property on a stochastic volatility model

Given a stochastic model for the evolution of St, with a given SDE for its volatility, how can you tell if the given model satisfy the sticky delta (or the sticky strike) property? Is it possible to ...
0
votes
0answers
48 views

Sticky Delta Property - Heston Model

Given the model in the picture, how can you verify the sticky delta property without any computational methods? I was told that it is possible to deduce it just looking at the model but frankly i have ...
4
votes
1answer
169 views

Expectation of $\frac {S_{T_2}} {S_{T_1}}$ at $T_0$

Is my below computation correct (assuming flat volatlity Black Scholes model, flat interest rate curve): $\mathbb{E}(\frac {S_{T_2}} {S_{T_1}}| \mathcal{F}_{T_0})$ $ = \mathbb{E}{\frac{S_{T_0}e^{(r-\...
0
votes
0answers
40 views

How can I graph futures options profit/loss when the options have different underlyings?

Consider a portfolio of vanilla SPX monthly options that consists of two components, a SEP 2019 3000 Call and a DEC 2019 3000 Call. It's easy to graph these as they both share the same independent ...
1
vote
0answers
51 views

Why quote call options in terms of implied volatility of the Black-Scholes model?

I came across this seminal paper on SABR model where the value of the call option is computed (eq. A.52). After the dollar value of the option has been derived, a lot of effort is being put to ...
1
vote
0answers
28 views

Pair trading: Hege ratio by price ratio or by regression on the stocks

So I feel things like this question do exist on the site however I failed to form a conclusion based on what was written, so I decided to formulate my query as exactly as possible and hopefully anyone ...
1
vote
0answers
20 views

Joint time series model of dividends and stock returns

Dividends on stocks are typically paid quarterly. Is there research on bivariate time series models of quarterly stock returns and dividends? Corporate management has discretion over dividends, and ...
0
votes
0answers
39 views

Barra Equity Risk Model Methodology

I am interested in learning about the Barra's Equity risk model methodology. When I google, this is the first file that comes up: http://www.alacra.com/alacra/help/barra_handbook_US.pdf However, it ...
0
votes
0answers
33 views

How to work with vine copula in R?

I have returns of 4 stocks: stock1, stock2, stock3, stock4. And I use R and library(VineCopula) to do: ...
1
vote
1answer
63 views

Delta hedging theta pnl

Say I sell a swaption and delta hedge it, and the breakeven daily move in the underlying is $x$ bps. Then if on any given day the actual move in the underlying is $y$ bps $( y <x)$. Then I, as ...
0
votes
0answers
35 views

Parameter estimation and calibration

I am not sure if I understand calibration correctly. Consider a CIR model, suppose I want to estimate the parameters $a,b,\sigma$, I can use a method such as this. However I understand that ...
0
votes
0answers
34 views

Fitting to Market Data in Extended Vasicek / Hull White

I need your help for my task. I need to calibrate to the market data for Hull White model for Zero Coupon Bond Price. I refer to John Hull and Alan White paper. I want to ask you a few questions and ...
0
votes
0answers
38 views

Issue involving arbitrage conditions

In my book it's written that if one of these two conditions is verified then you can make an arbitrage. The two conditions are: $$1) \left\{ \begin{array}{c} \mathbf{q} \bullet\mathbf{n} \le0 \\ \...
0
votes
0answers
31 views

Extreme Value Simulation from Copulas with Monte Carlo

I'm trying to simulate the tail values from a multivariate distribution using copulas. I'm using Vine Copula package of R to derive the suitable copula for my data and I generate random samples out of ...
0
votes
1answer
47 views

Correlations between different baskets of assets

Struggling to see the answer to the following problem - Assume you have $N$ different assets, and all pair-correlation coefficients $\rho_{ij}$ between them are known. If you now form two arithmetic ...
0
votes
1answer
96 views

Ito formula (lemma) problem

I am trying to solve this problem Consider the following one-dim. stochastic process $$dX_t = b_t dt + \sigma_t dW_t$$ where $W$ is a one-dim. Brownian motion. The above SDE is well-defined. ...
0
votes
2answers
104 views

Why are FRA/futures convexity adjustments necessary?

This would be my explanation for the reason that convexity adjustments must exist: Futures are margined daily, such that if a trader is paid a future and rates goes up then money is paid into their ...
0
votes
0answers
26 views

Filtrations and the different “kinds” of pre-knowledge

I am searching for a reference I think I saw in a book by either Shreve or Oskendahl. I am struggling with a theoretical question. As I recall how it was posed, the idea of no prior information (or ...
1
vote
0answers
32 views

Wheres is this method/notation of option portfolio payoff design from?

The "desired position" in the image is a set of slopes $(0,1,-1,0)$, and a set of strike prices between these slopes $\mathbf{K}=(98,100,102)$. The payoff is then designed by finding the positions $...
0
votes
0answers
61 views

Predicting time series using Jump Diffusion model and Neural Networks

I am trying to understand the difference between using Jump diffusion model and Neural Networks or more precisely LSTM to predict time series data regardless what that data contains for example a ...
0
votes
0answers
17 views

Preference Shares and free float

I am calculating the free float of shares included in an index, would the preference shares be counted as part of free float?
0
votes
0answers
27 views

Floating coupon rate based on sales?

Just a quick question, can a floating coupon rate be tied to SPV daily revenue? My client want to issue an ABS bond, and its coupon would be (0 + 2% of the daily sales) Would it be admissible? or ...
0
votes
4answers
145 views

Portfolio calculation for 20 currency pairs

I'm trying to find a way to compute an optimized basket of n currency pairs based on 2 properties. Let's say i have 50 pairs * 2 (long/short) = 100 possible items. A basket has 2 properties to ...
0
votes
1answer
34 views

Stochastic solution (mean, variance) to lognormal drift and normal volatility

I have trouble deriving the state equations for a mixture of normal/lognormal stochastic differential, namely for its a) expected mean, (b) variance, and (c) drift adjustment for LMM - libor model I ...
0
votes
0answers
51 views

Real World pricing of a Constant Notional Cross Currency Swap

I have a question about Cross Currency (XCCY) Swap pricing in the real world. There are plenty of papers going nicely into detail, how XCCY Basis Swaps and XCCY Constant Notional Swaps work. Also ...
1
vote
3answers
202 views

What stochastic process produces Student's t-distributed returns?

If I think daily log returns have a normal distribution, I can simulate intraday log returns as normal, because the sum of normal variates is also normally distributed. What if I want to simulate ...
3
votes
1answer
95 views

What's Hedge Curve Template

what's a Hedge Curve Template (HCT)? How does it help value a bond? It appears to me it normally is used together with another curve where x,y-axis being maturity dates and discount factors ...
0
votes
0answers
15 views

Heteroskedasticity-Consistent Covariance Matrix Estimation [R] [migrated]

I would like to ask about the difference between the vcovHC and vcov in R. The former is described as the Heteroskedasticity-Consistent Covariance Matrix Estimation. What is the difference between ...
0
votes
2answers
49 views

From risk limits to pnl projection?

As a fresh risk manager, today I got an assignment to check whether our risk measurements / limits are setup properly (whether the limits are so tight that affect our p&l) . Better if I can ...
0
votes
0answers
23 views

Risk neutral interest rate calibration

I've only worked with RW model before but not RN interest rate models, so I'm looking for some practical insights on how RN calibration is done for interest rate models. Let's say I want to start ...
0
votes
1answer
37 views

Relationship between tick size, tick value, and contract size?

For many options and futures I can see that Contract Size = Tick Value / Tick Size Are these values always related like this, and if so what does the relationship mean?
1
vote
0answers
44 views

How should one hedge option positions on the date of expiry?

Let's say we are looking at a non-liquid equity ticker and a slightly OOM option on it. The problem is that if we buy delta to hedge it, it could move the underlying market and push the option to be ...
-1
votes
0answers
30 views

FORECAST-Diabold-Mariano TEST

how can I interpret the test of Diabold-Mariano, here ar my results from R-STUDIO: ...
0
votes
1answer
51 views

Vasicek and Extended Vasicek Model

I want to ask about basic reasoning in Vasicek and Extended Vasicek model. Why $P(T,T) = 1$ for non arbitrage model? Can we place $P(T,T) = 10$ or other numbers? Is it correlated with The Law of ...
0
votes
0answers
26 views

Solving the sde under the Bates Model

Can someone please help me to find a way to simulate or find an approximation for the sde? So far, I've come across some research papers that use the 'Markov Chain Monte Carlo' method. But are there ...
1
vote
1answer
34 views

Do companies' Reuters Instrument Codes (RICs) change over time?

I am merging two datasets: 1) One which includes Reuters US companies' RICs and the number of news linked to each company; 2) Compustat US, taking data from 1996 to 2018. I have few questions: ...
0
votes
0answers
34 views

Problem in copula fitting

I have returns of 2 stocks: stock1 and stock2. And I want to fit pair copula. I use this libraries library(VineCopula) library(copula) then I select an ...

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