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41 views

What market conditions are attributable to prolonged instances of triangular arbitrage opportunities?

I am investigating the potential for intra-exchange triangular arbitrage opportunities for the Cryptocurrency market. I believe that due its immaturity, relatively low volume and high volatility that ...
2
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1answer
60 views

Difference between Risk Premia, Alternative Risk Premia and Factor Investing?

I'm reading about this three concepts but still can't see the difference between the three of them, can someone please explain the main difference between three of them ? Thanks
0
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1answer
36 views

In FIX protocol, how to identify if the trade being submitted to foreign country?

In FIX protocol, how to identify if the trade being submitted to foreign country ?
0
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1answer
84 views

Calculating risk free rates from risky options using put call parity

My questions relates to this post Implying risk-free rates using Put/Call parity , but I am using a different approach. Given: ODAX (Options on "DAX") Settlement prices across different maturities ...
1
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0answers
26 views

Is the value of an Asset-Swap (Underlying + Swap) the same value as a floating-rate bond with the same issuer, maturity, etc.?

I am trying to evaluate the impact of switching an Asset-Swap Package (fixed bond + Swap) into a floating rate bond of the same issuer with the same notional and maturity. My intuition would tell me ...
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0answers
27 views

Bond New issue swap pricing

Hi Im trying to understand the different part of the pricing of swaps for an issuer who want to swap his issuance, resulting in the swap dealer paying fixed. Im a little confused as to how it works, ...
1
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0answers
42 views

Risk-Neutral covariance matrix of arbitrage-free Nelson Siegel

For my thesis on a Bayesian sampling routine for a modification on arbitrage-free Nelson-Siegel I came across an equation that involves a matrix exponential within an integral, i.e. $\int_{0}^{\Delta ...
1
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1answer
109 views

Identifying “logical” segments on trading charts

The chart below is the 15-minute EURUSD from earlier today. The blue lines represent dividers between three subjective but reasonable segments that can easily be made out by the eye. I would ...
1
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2answers
81 views

Black Scholes PDE boundary conditions

So I'm trying to solve the black scholes equation using a finite difference model, but I'm getting a answer that's off and I'm having trouble understanding why. This is the result for a option with K ...
0
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1answer
58 views

Butterfly spread calls and puts

I am trying to understand the butterfly spread. My book (ASM Study Manual for SOA Investment & Financial Markets (IFM) Exam) says one of the ways to write it is: Long put, strike $=K-c$ Short ...
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0answers
43 views

How to code Heston’s Square-Root Volatility Model?

I’m currently trying to code the Heston square-root volatility model with the aim to sample from its posterior with MCMC. However, I couldn't add the lagged volatility term, that is, $\sqrt{V_{t-1}}$ ...
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0answers
23 views

relation between duration and credit risk

I am curious if there is a relation between duration and Credit risk measure for callable bonds. I recall seeing it somewhere but can't find the details. Credit risk measure would be sensitivity of 1 ...
1
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1answer
73 views

Balance Sheet and income statement inconsistency across tickers

I assumed the SEC filings for balance sheet or income statement should follow a standard format across companies. If that is the case, why is some important fields absent for certain companies? For ...
0
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0answers
26 views

How to find the derivative for a multi-factor geometric brownian motion model

Does anyone know how to find the derivative for a multi-factor geometric brownian motion model $ \frac { dS_{i}}{S_{i}} $. I have seen solutions for the standard GBM model however I suspect that the ...
1
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1answer
58 views

Properties of integrated GBM

(I asked this question on MSE but I think it might have more success here) Good day, I was going over some exercises and I stumbled upon a question that, for its solution, requires me to find/...
0
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0answers
15 views

Jarrow-Yildrim like model with G2++

I would be interested in if there exists a Jarrow-Yildrim like model, but based on two factors like the G2++ model. If there is no particular description available yet, would it be possible to extend ...
0
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0answers
10 views

Monte carlo error and minimum variance hedge ratio

So I was running a monte carlo simulation for two assets and a portfolio consisting of 1 quantity of the first asset and short a fraction x of the second asset to hedge, where the fraction is ...
0
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0answers
19 views

is it possible to have a leverage ratio of less than 1?

I know you can leverage to be greater than 1, but is it possible to have less than 1? Like 0.5 for example? So that this scenario could be realized? ...
1
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1answer
42 views

Why is CBS (Currency Basis Swaps) added to Interest Rates?

We are trying to analyze an algorithm (internal to our company) to calculate currency option pricing using the Garman and Kohlhagen model. Our internal algorithm calls for CBS (Currency Basis Swaps) ...
1
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1answer
60 views

Do Institutions (large trading firms) use market orders?

It is well known that Institutional traders (Large trading firms, market makers) most of the time use LIMIT orders or Hidden limit orders. My question is, do they ever use market orders in their ...
0
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0answers
32 views

Discounted Cash Flows in Excel

I'm taking an online class on stock valuation. In my class, the instructor calculated stock intrinsic value using XNPV function in Excel. While I understand this part, I don't know why it gives a ...
0
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1answer
41 views

Stochastic Interest Rates in Option pricing

My lecturer has written the slide below. The function B^T(t) is a zero coupon bond. I don't understand how V(t) can be a negative integral from 0 to ...
-1
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1answer
35 views

Why Bond pricing formula is changed? [closed]

When I first learn about finance, a bond with continuous yield was priced via $$Z = e^{-rT},$$ where $r$ is the yield, $T$ the time to maturity. But, when I learned about stochastic interest rate ...
0
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1answer
53 views

How to detect price anomalies in HFT?

Let's say I'm developing an HFT application and seeking arbitrage in futures markets between MAY contract(M) and JUNE contract(J). In this strategy, my spread is ...
0
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0answers
18 views

How can I find the exit equity value from my dataset (please read description and see screenshot below)

I am investigating the returns of private equity using a public market equivalent (PME) and have been given a dataset from the that has provided us with the deal level IRR, the entry equity data and ...
1
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1answer
31 views

Accrued interest on yearly compounded instrument after less than a year

I am reading a book on fixed income instruments and don't quite understand one of the examples on compounded rates. Let's say the investement is compounded yearly at rate $r$. Then after $T$ years, ...
0
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0answers
51 views

Market neutral without short selling

Would it be possible to design a market neutral strategy without short selling? According to Investopedia: Market-neutral strategies are often attained by taking matching long and short ...
0
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1answer
41 views

Valuation of a REPO

I thought I had a pretty good grasp on how to calculate this but I'm getting questioned on it and just want to be sure I'm not getting it mixed up. In my notation you enter into the repo contract at $...
0
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1answer
62 views

Compound the monthly returns to make them quarterly [closed]

How can someone make the Kenneth French library data returns quarterly from monthly? Since they are not loq returns, then you need to compound returns rather than summing them up. I want to make the ...
0
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1answer
89 views

Computing covariance matrix with historical data

I have been reading Active Portfolio Management by Grinold and Khan. In the chapter about risk, they mention, "The third elementary model relies on historical variances and covariances. This ...
1
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1answer
46 views

Why does Implied volatility fall when the options market shows an upward trend?

While reading How does implied volatility affect option pricing by Investopedia, it states the following in key takeaways When options markets experience a downtrend, implied volatility ...
1
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1answer
58 views

Do all stochastic volatility models capture volatility smile?

I started reading SABR model recently. In Wiki page, it states that the SABR model can capture volatility smile in derivative market. However, I do not see how it does so.
0
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0answers
11 views

A bounded random variable is sub-Gaussian, thus financial returns are not bounded?

Bounded random variables are sub-Gaussian, yet I, intuitively, assume financial returns are bounded random variables; however, they are not sub-Gaussian. Am I wrong to assume financial returns are ...
2
votes
1answer
126 views

Python libraries for bloomberg?

I am very new with python, and I am used to work with bloomberg formulas for excel. I am starting to use a lot more python in my analysis, is there any library that performs same functions as bdp, bdh ...
0
votes
1answer
24 views

Minimum Variance Hedge Ratio and Risk Capital Relation

So I understand that the minimum variance hedge ratio minimizes the second moment of the portfolios. My question is how is it related to the size of the risk capital (which is calculated as the Value ...
1
vote
1answer
64 views

Determining Value at Risk of a Poisson distribution

If my discrete random variable had a poisson distribution with both moments say equal to 10, how can I find the Value at Risk for a 95 percent confidence interval? I have seen that I need to ...
2
votes
1answer
51 views

Brownian motion and Stochastic Integration

I have two questions relating stochastic integration which perhaps could be answered together. First question: First of all, I don't really understand why we can't use Riemann-Stieltjes integration ...
0
votes
1answer
50 views

How can I combine traditional trading patterns and machine learning algorithms to produce a trading system?

Traditionally, retail traders have leveraged on price patterns discovered by applying graphical tools such as flags, fractals, pennants, heads, shoulders, etc. However, while this method has been ...
0
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1answer
77 views

Monotonic Cubic Spline interpolation QuantLib python

I am new to QuantLib-Python and I am trying to replicate the implementation of a Dual Curve bootstrap using QuantLib-Python. I have followed the steps in Chapter 9 of the QuantLib Python Cookbook. ...
0
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0answers
16 views

Fixed rate bond historical simulation

I am using the QuantLib library to determine the historical simulation prices of a fixed rate bond. The idea behind my simulation is to use the spot curve as driver of the bond price. Let $\{y^{j}(t)\...
1
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0answers
46 views

How do I maximize my expected utility of wealth?

Suppose I have a utility function say $U(p)=p^{1/2}$ and I bet on a basketball game. I have my initial investment, payouts and probabilities of winning, how can I determine the maximum I need to bet ...
1
vote
1answer
82 views

Relation of risk-neutral probability measures to arbitrage opportunities

Could someone describe how risk-neutral probability measures are linked to arbitrage opportunities and also to whether or not a market is complete? I've been asked this question and am unsure how to ...
1
vote
1answer
17 views

Citation for the definition of Return on Investment

I am writing a paper in an area where the concept of Return on Investment may not be clear. Is there a definitive source for its definition I can cite?
0
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0answers
24 views

Forecasting accuracy in one month and hedging

I am working on predicting the daily data of a financial time series $[Y(t+1),...Y(t+j)]$ =$f(X_1(t),...X_1(t-i),.....,X_n(t),...X_n(t-i))$ where $Y$ is a commodity price $X_i$ are predictor variables ...
0
votes
0answers
7 views

Risk Capital and Minimum Variance Hedge Ratio

I understand that the minimum variance hedge ratio minimizes the second moment of the portfolios. My question is how is it related to the size of the risk capital (which is calculated as the Value at ...
0
votes
1answer
25 views

How can a stock have negative returns but positive 3-factor alpha?

I've come across a research paper where for a specific period of time, the portfolio has negative returns (or roughly flat returns). During this same period of time, the portfolio's Fama-French 3-...
1
vote
1answer
69 views

vol swap and vol of vol

why people say vol swap is short vol of vol? Say we consider a simple vol swap with 3% strike with two days maturity here: scenario1: realized vol is 2% on day1 and 4% on day2 scenario2: realized vol ...
0
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1answer
54 views
0
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0answers
46 views

What are the best metrics to evaluate an ML algo backtest, other than the nominal returns?

I have designed an algorithm that uses Support Vector Machines to classify the next day's price movement for several prominent cryptocurrencies on a ...
0
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0answers
22 views

Minimal bounds to enclose most sample paths of a GBM (Geometric Brownian Motion)

For a (generalized) Brownian motion $Y = F(t,W)$, starting at $InitialValue$ and running for a total of $T$ time, if I want to "enclose" (in a visual way) "most" of the possible sample paths, I could ...

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