All Questions

1
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0answers
48 views

Pairs trading strategy: Portfolio returns and NAV

Currently trying a pairs trading approach using cointegration. Tried both formations: $$log(P_t^A)=log(P_t^B) \hat{\gamma}+\hat{\mu}+\epsilon_t \hspace{0.5cm} (1)$$ $$P_t^A=P_t^B \hat{\gamma}+\hat{\...
0
votes
0answers
42 views

Historical intraday data [duplicate]

I have been researching on the current APIs that I can request for the most detailed historical end of day intraday quote and trade data available in an easy to use format for research, backtesting ...
2
votes
1answer
60 views

What is the benefit of High-minus-Low as in Fama French model?

Can anyon explain the concept of using High-minus-Low in finance literature.
1
vote
0answers
15 views

Benchmark values for exotic options with highly nonlinear boundaries

I have created some modifications of least squares monte carlo algorithm for pricing american options which gives me lower and upper bound. Now I want to test how good it works for options with highly ...
-1
votes
1answer
33 views

Hong Kong stocks and HSI - Turnover and market cap in HKD?

Hello sorry newbie questions - HSI (Hang Seng Index) and stocks under it, dividend,Turnover and Market Cap always in USD or in local currency HKD? This is actually a broader questions for Asian ...
1
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0answers
43 views

Bimodal option pricing based on P.D.F

is there any literature on option pricing given the pdf of the underlying asset - e.g. i am interested in seeing how prices for a range of strikes ought to compare based on, say, a simple normal ...
1
vote
2answers
102 views

What is the economic reason for the equality in value of an American call and European call?

In a previous question this question came up. In my mind, if I'm holding an option at time t, then there are possible future price paths where at t+k the option will be ITM but at T the option will ...
0
votes
0answers
26 views

Could option gamma be larger than option nominal value? [duplicate]

Assume FX Option giving a right to buy/sell some notional value in currency. Could it's gamma be larger than its notional value? Gamma achieves its maximum value at maturity. How can I rigorously ...
3
votes
1answer
74 views

Limits of integration when applying stochastic Fubini theorem to Brownian motion

I'm looking at the solution below from Quantuple, it's a nice, succinct solution but I'm confused about how the limits of the integrals in the second line come from. Could someone please elaborate on ...
1
vote
0answers
29 views

Is it possible to estimate the average convenience yield on brent crude oil for 2018?

If it is possible to estimate it, how does one do this, and what is it?
1
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0answers
78 views

Holding Period Return abnormally high

I've been doing my Dissertation and I was told to create a value - weighted portfolio on the 1979's 200 largest cap corporations (based on Market Value). I was also told that the correct way to build ...
1
vote
0answers
42 views

Binomial Model Implementation Trouble - American and European options come out equal

I'm Trying to implement the binomial option price model in python and get reasonable performance by using memoization. I checked the output against a black and scholes model and for European options ...
1
vote
1answer
36 views

Cross Product Ratio Analysis

Can you please advise? I have been recently trying to sort this out for couple of days but cannot get the same numbers as previous authors: The equation is shown in Agarwal and Naik Multi-Period ...
3
votes
1answer
175 views

statistical arbitrage using PCA

While reading the paper Statistical Arbitrage in the U.S. Equities Market by Marco Avellaneda and Jeong-Hyun Lee on statistical arbitrage using PCA I realized that the author sums the residuals of ...
1
vote
0answers
30 views

How to count [and report] the values of significance at 1% and 5%?

I am slightly confused with this: I have calculated the Chi square for the number of funds and the methods description tells me that if the values I have calculated are greater than 3.84 (6.64) that ...
0
votes
0answers
30 views

Correct way to calculate overall CAGR of trades of different lengths?

Let's say you bought 5 stocks on the same day and they performed like this: Symbol Return CalDays BP/Day CAGR AAA 7.4% 42 17.6 86% BBB 5.1% 41 12.4 56% ...
0
votes
0answers
43 views

Change of measure price put option

I hope you can help me out. I'm really stuck understanding this. In my lecture notes we calculated the price of a put option (maturity m,with strike price $(1+i)^m$, where i is some interest rate) as ...
0
votes
0answers
18 views

Developing market equity / bond prices [duplicate]

I am looking over the ability to access the daily eod stock prices for various stocks in developing markets. I also need potential access to bond prices of various issues in developing markets. The ...
1
vote
0answers
30 views

Is there a quantitative definition of a Quiet, Moderate or Accelerate market conditions?

i know the StdDev price technical indicator which is the standard deviation but this one has an absolute value. The market conditions are: Quiet: lower oscillation of price around a constant ...
0
votes
0answers
39 views

Rolling forecast using GARCH model

EDIT This is not a duplicate of my original question linked, since I have since overcome that problem and have posted an answer. Since solving the previous problem, I have run into the problem ...
0
votes
1answer
44 views

Single vs Multi factor interest rate model

How do we explain the difference beween a single and multi factor interest rate model. Short term interest rate is one of the factor which is used in drift and vol calculation but what are other ...
1
vote
0answers
33 views

explanation of factor tilts that uses mathematical notation

Can anyone provide a definition of "factor tilt" that uses mathematical notation? Let's say that our returns vector $\mathbf{y}_t$ can be expressed in terms of a market return $x_t$: $$ \mathbf{y}_t ...
1
vote
0answers
19 views

Monthly Discount Rate in NPV Calculation [closed]

I have been offered 2 payment methods as I was buying some tools for a company I work for. I need your help to assess the best method. Here it goes, Total cost is $100 and I don't want to pay it all ...
1
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0answers
50 views

When does funding cost of a portfolio enter into the portfolio's present value?

This question comes from some confusion when reading Hull's book and from the general concept of no-arbitrage/self-financing portfolios in stochastic finance books. I am not fully seeing the ...
1
vote
0answers
23 views

Value function does not converge when applying the general value iteration adaptive dynamic programming [closed]

Recently,I am trying to control a marco traffic system with the general value iteration adaptive dynamic programming algorithm.However,the results do not reach my expectation. Here is the pseudo code:...
1
vote
0answers
43 views

Creating yield curve from exchange-listed products only?

For use in subset of my thesis, I’ve been given some exchange market data for several exchange-listed products, including Eurodollar rate futures as well US treasury futures and Fed Funds futures. I ...
3
votes
0answers
42 views

Expected turnover from rebalancing

If you have a target weights for N assets with monthly returns that are drawn from a multivariate normal distribution with known means and covariances, is there an exact or approximate analytical ...
2
votes
1answer
44 views

Question about inverse leverage etfs

https://www.math.nyu.edu/faculty/avellane/LETFSlides.pdf This shows that when that the inverse fund grows assuming zero volatility at $e^{r(1-b)}$ where $b$ is the leverage used and $r$ is the ...
2
votes
0answers
47 views

Black-Litterman proof with P=I and Omega=tau*Sigma

Elsewhere on this site (link), Richard notes that \begin{equation} \Pi_{BL} = \frac{1}{2} \Pi + \frac{1}{2}Q, \end{equation} so long as we set $ P = I $ (where $I$ is the identity matrix) and $\Omega ...
0
votes
1answer
48 views

Is the market portfolio i found desirable or practical as an investment?

Question i'm asked: Do you believe that the composition of the market portfolio that you have found is a desirable or practical one as an investment? Explain why or why not, based on the positions of ...
4
votes
0answers
47 views

What are the trade offs when choosing a long term bond future to trade?

It seems that when trading long term bonds *** and choosing between the two offerings on CME one is presented with a Scylla and Charybdis decision. 1. VOLATILITY CONSISTENCY: Ultra U.S. Treasury Bond ...
3
votes
1answer
42 views

GARCH Parameters Standard Errors

How do you compute the standard errors of a GARCH model estimated with MLE ? This paper references a method by Bollerslev-Wooldridge: [...] and computed standard errors using the robust method of ...
0
votes
1answer
92 views

Trading against a loser flow

Let's say we are getting a trade stream(instantaneous) of a group of traders that lose money. If we trade on their opposite side in a broker, is it guaranteed that we make money? Intuitionally it ...
1
vote
0answers
51 views

Black Scholes Replicating Portfolio Riskfree Asset

Im having a question about this standard derivation of the Black-Scholes formula: http://www.soarcorp.com/research/BS_hedging_portfolio.pdf The paper states $$C=\Delta S+B$$ and finally $\Delta = ...
0
votes
1answer
44 views

How to calculate Market Capitalization weights for portfolio which has different currencies as assets?

I am implementing Black Litterman portfolio optimization on currency assets. But am not able to calculate market capitalization weights for currency. Please give some suggestion ...
3
votes
1answer
63 views

Pricing an Asian style forward contract with early exercise feature

Is there an analytic way to price or approximate a contract with payout $A_t - K$, where $A_t$ is the running average price of the underlying asset from $[0, t]$ and $K$ is (fixed) strike. If this ...
2
votes
0answers
26 views

Can you use GARCH-MIDAS for intraday data?

I'm working on a project to forecast volatility and I'm using intraday data (1 min). I want to include exogenous variables to the model that have daily frequency. I was wondering if GARCH-MIDAS can be ...
2
votes
0answers
35 views

How to normalize and select technical indicators for Artificial Neural Network

I study on algo-trading for a while and I use technical indicators. I started to learn Machine Learning (Neural Network) and want to use technical indicators in this approach. However, I am not sure ...
2
votes
2answers
34 views

Are Credit Default Swaps used by B2B Service providers or Vendors?

I understand CDS's are often employed in trading strategies between institutions - That is well publicized. What isn't as publicized is how other customers might look to use a CDS. I work in an ...
-1
votes
2answers
71 views

How to calculate risk of portfolio in last part [closed]

Investment decisions are not taken in insolation; investors have to consider market dynamics and firm level factors to choose among various available securities. Among different factors affecting the ...
3
votes
4answers
310 views

Bond ETF vs Bond Future for longer term holding

How would a long term investor go about evaluating the prospect of investing in a bond ETF vs a long position in a future of equal duration? Let’s asume this investment is in a taxable account. Let’s ...
3
votes
1answer
86 views

Good References for Treasury Futures Spreads

I’m reading the excellent Treasury Bond Basis by Burghardt. I was wondering if there’s a similar quality book/paper about Yield curve spreads using treasury futures (i.e. NOL, NOB, FYT).
1
vote
1answer
67 views

Retail Algorithmic Trading

Is it possible for the retail algo traders to take the same approach to risk management as the larger quant funds? is there a risk management budget imposed on the trader beyond that which they impose ...
1
vote
0answers
39 views

Position sizing for a mean reversion strategy

I have a model that returns z scores for a mean reversion strategy where z score is the current price minus average and divided by vol. At the moment, positions are sized inverse linear to the z ...
3
votes
1answer
49 views

How can I approximate the hedge ratio for Inter Commodity Treasury Spreads?

Looking at the excellent CME Treasury Analytics tool, I can see that the hedge ratio for spreads betweend diff treasury futures is derived from the DV01 of each leg. I can get treasury futures data ...
2
votes
1answer
84 views

European put options

Why is it that for European Puts on Non-Dividend-Paying Stocks, the lower-bound for price is $$p=Ke^{-rT}-S_0?$$
2
votes
0answers
28 views

Stochastic Differential equation: CAPM

Let $R=(R_1, \dots ,R_M)$′ denote a vector of excess returns of M assets observed at $n$ time points, $0<t_1<t_2< \cdots <t_n<T$, within a time span $T>0$. We wish to explain the ...
1
vote
0answers
32 views

Log likelihood function, GARCH(1,1) with asymmetric term

I am modelling a GARCH(1,1) and a GARCH(1,1) with an asymmetric term. $$h(t)=\omega+\alpha\varepsilon(t-1)^2+\beta\sigma(t-1)^2$$ and $$h(t)=\omega+\alpha u(t-1)^2+\beta\sigma(t-1)^2 + \gamma (u(...
3
votes
0answers
49 views

Intuitive description of the Spillover Index by Diebold and Yilmaz

I am struggling to grasp the steps outlined in the 2009 paper by Diebold & Yilmaz, which introduces the framework for a spillover index. The final expression for a spillover index for a two ...
3
votes
1answer
45 views

Why Quantlib Option NPV does not change when repricing?

Trying to learn Quantlib with Python, please have a look at below code: ...

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