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429 views

What is the proportion of aggressive orders vs passive orders executed by different types of traders?

It's clear that each aggressive order (or market order or limit crossing BBO) is matched against the same volume of resting limit order(s). I'm interested in statistics per different types of ...
96 views

Why use sovereign default risk to determine equity risk premiums?

Damodaran's paper "Equity Risk Premiums..." (2016) discusses the standard of using various measures of sovereign default risk (e.g. Moody's ratings, bond default spreads, CDS spreads) to estimate ...
367 views

Cleaning correlation matrix, Bun Bouchaud Potters (2016) method

Stock returns correlation matrices are notoriously hard to estimate, especially when the number of assets $N$ is large with respect to the size of the readily available historical returns $T$. Many ...
253 views

pricing option with two stocks

Let $\left(S_t^{(1)}\right)_{t\ge0}$ and $\left(S_t^{(2)}\right)_{t\ge0}$ be the price processes of two stocks with dynamics  \begin{align} & dS_t^{(1)}=\sigma_{11}S_t^{(1)}dW_t^{(1)} \...
200 views

Pricing interest rate options in emerging markets

I've been thinking how to price the early payment of mortgages in banks from emerging markets, where swaptions/caps/floors aren't available, and how to hedge this kind of options. At first I thought ...
183 views

What are some standard software stacks for financial data collection, storage and visualization?

I'm looking for the fastest way to get up-and-running collecting time-series data (mainly through scraping and through 3rd party APIs), storing it and visualizing it on a dashboard with graphs. I'd ...
214 views

Quantitative approaches to measuring the effectiveness of a Stock Option Pricing Model?

My question contains many parts, but I will try to keep it somewhat focused. I am primarily looking for a framework to evaluate the accuracy of a stock-focused Options Pricing Model. One of the ...
160 views

Interplay of statistical factors (PCA) and market factors (value, momentum, low vol, …)

Is there any research done on the interplay between statistical factors (as a result of principle component analysis PCA) and the market factors (especially value, size, low vol, momentum, quality)? ...
785 views

I want to estimate delta, vega and gamma for a basket option. This option is a European Call option. The underlying is $S=\omega_1 S_1 +\omega_2 S_2$ Where: $S1$ = stock price of asset 1 $S2$ = ...
84 views

How to price lookback american option when its payment is distributed during its life

I would like to price a floating strike american lookback with a particular feature: I don't want to charge upfront the client, rather I would like to insert a "running fee", some sort of a dividend. ...
2k views

A model to stochastic hazard rate and CDS spread term structure

I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at $s$, maturity $T$ and recovery function \$...
414 views

Calculating volatility of inhomogeneous time series

I am reading an article by Zumbach and Müller whose name is Operators on Inhomogeneous Time Series. This is interesting in general, but my main goal is to learn a good and efficient method to ...
337 views

Algorithmic Trading Model Calculation and Stale Data

I'd like ask everyone a more concurrency programming but definitely quant-finance related question. How do you deal with staleness of data in market hours as quote ticks are streaming and your model ...
1k views

Fitting Student t-distributions to log-returns

It seems that some tail-risk centric groups are bent on using Paretian and t-distributions to account for tail risk when fitting log-returns. It has been observed, however, that with and without ...
165 views

Dividend Index Futures

My question is dealing with the proportionality between Dividend Index Futures prices and Index prices. Indeed, we in the past we used to do a simple regression between these variables and use the ...
262 views

LSM American Option pricing with dividends

Under the Longstaff-Schwartz LSM method for an American call, how should I account for a continuous dividend paying stock? I assume that it'll needs to be accounted for when simulating the underlying ...
131 views

Risk neutral measure in exponential levy model

Is there a method of finding a risk-neutral measure for assets driven by the levy process? I understand there is the esscher transform but I think it tends to transform the processes into ...
130 views

Optimal mortgage rate strategy

When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert. This makes it a secretary problem - in the traditional ...
311 views

EUR/PLN and EUR/USD delta-term-vol surface quoting convension

does anyone know for sure what is the FX market convension to quote delta-term pairs for EUR/PLN, for EUR/USD. I know that for EUR/PLN it should be delta p.a forward, for EUR/USD it should be delta ...
302 views

Estimation of ranks of log-returns via copula

I have successfully chosen and estimate a copula for the ranks of the log-returns of my actions. My question is, since I have worked with the ranks instead of directly the log-returns (in order to be ...
422 views

Analyzing the angle between vector of weights and vector of returns in mean-variance optimization

I am using the paper "A Sharper Angle on Optimization" by Golts and Jones (2009) as a basis for my (minor) masters thesis in mathematical finance. The paper focuses on the mean-variance analysis of ...
678 views

VaR backtesting with overlapping time intervals

Of course the issue here is dependence: can it be removed or accounted for (in independence tests too, which of course would be troublesome)? There's a lot of literature on regression in this setting, ...
197 views

Is it more accurate to analyze returns on a calendar day basis than a trading day basis?

I'm rather new to the actual practice of this kind of analysis, but it just seems wrong to me to throw Mondays' returns in with the rest without accounting for the passage of time on the weekend when ...
565 views

Pricing with collateral

I have been confused about many things concerning the princing of securities with collateral. We can prove that today's price of a security( fully collateralized and within the same currency) is the ...
154 views

Are there canonical test cases for testing of pricing engines

Short intro: We are developing pricing engines for the calculation of market risk in a Solvency II solution, including bonds, callable bonds, cds, options, futures and so on. Are there any canonical ...
1k views

Hasbrouck's information share

Given a cointegrated set of price series, I am trying to compute the Hasbrouck's information share, as described in page 12-13 of this article. page 7-8 of this article I have the vector error ...
215 views

Use of Local Times in Option Pricing

I know two applications of local time in option pricing theory. First, it allows a derivation of Dupire's formula on local volatility in a neat way (i.e. without resorting to differential operator ...
189 views

Benefits of Diversification and Rebalancing with negatively skewed leptokurtic return distribution?

I am missing tools to investigate this issue. I am trying to solve this question here. What kind of issues should you acknowledge over the naive diversification/rebalancing with normal distribution? ...
1k views

How to compute the realised intraday volatility?

I'm in the position to calculate a non-parametric volatility estimator for 15 and 30 minutes intervals of the SPY. I got data sampled on second resolution. However, I checked plenty of papers but, as ...
117 views

What type of interpolation should be used in key rate perturbation models?

When perturbing a key rate in order to assess sensitivity of portfolio value, what sort of interpolation is standard? A book I am looking at says linear, but this seems pretty unrealistic to me--and ...
39 views

Modeling regulations of middlemen

I am searching for some paper that models the regulations of market makers in stock or OTC markets. Is there anybody who have seen some marekt microstructure paper for modeling regulations and what ...
47 views

Libor Market Model with SABR Calibration

What is the industry practice in calibrating SABR Libor Market Model? Do you first calibrate the SABR model using market data and then implement the libor market model with the calibrated parameters? ...
69 views

Why are negative option prices possible for callable US treasury bonds?

I am not familiar enough with the theories of option pricing to understand how negative option prices are possible. I found two research papers indicating that negative option prices are indeed ...
49 views

Realized Volatility of Volatility versus VVIX Index

Hello people of the internet I am doing a little experiment where I want to examine how well the VIX predicts the realized volatility, and how well the VVIX (Volatility of VIX Index) predicts the ...
93 views

stochastic programming book recommendations

Hi: Can anyone recommend an introductory book on stochastic programming ? There are obviously so many books on Amazon but I can't tell easily which ones could be useful. It would be good if it had ...
141 views

Hedging XVA sensitivities and funding risk

FVA is a hot topic today and I've been thinking on how its managed inside a treasury department. Although the pricing/calculation is well covered in academic material and there is some sort of ...
184 views

Which finance models have enjoyed particular success in recent years?

I am looking for a list of recent developments of models in mathematical finance. By recent, I mean this last decade. Which models have been developed and introduced during this period, being met ...
50 views

Are radial basis functions popular in least squares monte carlo option pricing?

In a Longstaff-Schwarz setting option on several underlyings can be priced using least squares monte carlo. Using suitable set of basis functions, continuation values can be approximated using ...
501 views

Bloomberg Ticker mapping with Reuters RIC

I am trying to map Bloomberg ticker into Reuters one. For example this one: EDZ3C 96.625 COMDT Few years ago aforementioned BBG ticker would be mapped to Reuters ...