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1 answer
268 views

How to apply derived beta to daily change?

I've taken three months of price return data for two instruments and calculated a $\beta$ between the two using the formula $\beta = \frac{Cov(x,y}{Var(y)}$ with the goal of estimating what the ...
2 votes
1 answer
287 views

Questions about the replicating portfolio in the binomial model

I'm starting to teach myself quantitative finance and I've got several questions (marked in bold) regarding the replicating portfolio of a security in the binomial model. I'm following, among others, ...
1 vote
0 answers
38 views

How is swap rate calculated for a vanilla swap when there is a lag between the trade date and the start date

Take a vanilla EURIBOR swap and suppose that the start date of the swap is equal to the trade date. To compute the swap rate, you say that the value of the swap at the trade date must be zero, which ...
0 votes
0 answers
9 views

Murex API with python [closed]

please someone know more about API for Murex? someone has an idea of how complex is to build one? I just searched online, but without to find some view about it. thanks
20 votes
1 answer
2k views

What is the most stable, non-trivial dependence structure in finance?

The highest rated answer to the question on What concepts are the most dangerous ones in quantitative finance work? is this one: Correlation Correlations are notoriously unstable in ...
3 votes
5 answers
17k views

Par Yield, Bond Yield and Zero Rate

In the Hull's book, chapter 4.4, it says : The par yield for a certain bond maturity is the coupon rate that causes the bond price to equal it's par value. Then for this question (4.18) : “...
1 vote
1 answer
579 views

Python - yahoo finance options data - volatility smile plot

I have plotted the IV of TSLA options using yahoo options data, but the scatter plot doesn't look right, can anyone advise why the plot looks like this? I would expect to see a vol smile plotted. EDIT ...
1 vote
0 answers
21 views

How to build a HW1F tree for SOFR?

I have previously built a HW1F trinomial tree (following the HW paper), and I manage to calibrate sigma(t) to swaptions and to price some derivatives. I discretise the tree quarterly (LIBOR3M). ...
1 vote
0 answers
34 views

Excess Return Evaluation Bias

Im currently working on a Alpha and Risk Model for constructing portfolios. From what Ive read on books and here, they are constructed in a different way and produce differents results. My Risk Model (...
22 votes
1 answer
977 views

Questions on Kelly criterion

I am new to asset allocation problems and have some concerns regarding the derivation of the continuous-time Kelly criterion (i.e. not the original version destined to discrete sports betting/Casino). ...
30 votes
1 answer
709 views

Is there a relationship between Risk Neutral Pricing framework and Nash Equilibria?

Based on the Fundamental Theorem of Asset Pricing, the risk neutral price of a contingent claim on an asset in a liquid, arbitrage free market can be determined by switching to an equivalent $Q-$ ...
0 votes
1 answer
99 views

TAKE AND ROLL calculate return

You are given a fair 20−sided die and 100 actions in a game. The die starts with upface 1. The two options you can perform are to roll and to take. Performing a roll re-rolls the current upface of the ...
1 vote
1 answer
169 views

How to calculate FX Forward Rate to fit bloomberg

If we take the EUR/USD currency pair, how do we calculate the forward rate to match Bloomberg's FRD function? I assume that if we use both the curve 514 - EUR OIS ESTR and 490 - USD SOFR (vs. FIXED ...
3 votes
1 answer
637 views

VAR-aDCC full ARCH and GARCH parameter matrices in R

I am working with the rmgarch package in R and I estimated a VAR-aDCC model. Is there any way to extract the extended version of estimates (allowing for volatility ...
0 votes
0 answers
40 views

Supertrend Indicator

I'm trying to implement the Supertrend indicator. Unfortunately, I can't calculate the values ​​that my chart software generates. At the moment, I don't fully understand my problem. You can add the ...
0 votes
0 answers
44 views

EURIBOR vanilla swaptions are in fact slightly-mid-curve swaptions

EURIBOR swaptions have their underlying swaps starting 2 business days after the expiry of the swaption, and are therefore slightly "mid-curve". How does the market take this into account (...
5 votes
1 answer
422 views

sub-Gaussian random variables in financial economics

Unlike financial time series that typically possess fat tails, sub-Gaussian random variables have strong decay in the tails of their distribution. do sub-Gaussian random variables or processes appear ...
4 votes
1 answer
2k views

How does yahoo calculate Growth Estimates

Does anyone know how yahoo calculates Growth Estimates for the Next 5 Years (per annum)? For example, I can see 12.64% for AAPL as reporetd in Yahoo finance in https://finance.yahoo.com/quote/AAPL/...
5 votes
2 answers
270 views

Help guessing the solution to an optimal control problem

I am considering an investor facing a discrete-time multi-period minimization problem $$ \min_{\{v_t\}_{t=0}^\infty}\Bigg[\sum_{t=0}^\infty(1-\rho)^{t+1}\bigg(\frac{1}{2}v_{t}\Omega_{t+1}v_{t}'\...
0 votes
1 answer
951 views

Bootstrapping SOFR curve and Swap Payment Lag

Can someone provide me an intuitive explanation of how discount factors are bootstrapped for SOFR when Swaps are trading with payment delay/ lag (e.g. of 2 business days). I can intuitively derive the ...
0 votes
0 answers
17 views

Evaluate the flexi deposits early redemption risk using swaption pricing method

When I use swaption pricing method to evaluate the flexi-deposits early redemption customer behavioural option, I should calculate the spread as a input to the quantlib swaption object. Should I take ...
0 votes
1 answer
104 views

Lognormal-mixture dynamics and calibration to market volatility smiles

Can someone assist me in replicating the code and results from page 11, Figure 3 of the paper 'Lognormal-mixture dynamics and calibration to market volatility smiles' by Damiano Brigo, Fabio Mercurio, ...
0 votes
2 answers
84 views

Different risk neutral measure

I don't understand in the following example how there can be a single risk neutral measure. The risk free asset price $B$ at time $t = 1$ is $1+R$. An other asset $S$ at time $t=1$ can take two values:...
0 votes
0 answers
71 views

FX Option and Greeks Value in Dollars

I'm trying to replicate the Example given in pag. 229-230 of Dynamic Hedging by N. Taleb and I am not sure on how to convert the Greeks in Dollars and how the author is computing the Greeks. Start ...
3 votes
1 answer
5k views

How to compute for basis adjusted forward rate?

To give you a brief background, I'm valuing a fixed-for-float Interest Rate Swap (IRS) using Bloomberg. I put in a notional amount in (USD) and a assigned 6MO USD LIBOR as the reference index for the ...
3 votes
3 answers
11k views

Why doesn't the candlestick bodies align to open/close?

Studying some candlestick theory, I'm repeatedly confronted with pictures where the previous (or subsequent) open/close bodies does not align with what is found before (or following after). This is ...
-2 votes
0 answers
54 views

How are trades settled when one (or both) currencies are non-convertible or non-deliverable [closed]

Suppose I am a business in country X and I need to pay a supplier from country Y. How does this work if capital controls mean that I cannot send currency X out of the country? I guess that I would ...
1 vote
1 answer
459 views

Vega, square root of time, and ATM straddles

Could someone intuitively explain why for say a 1y EURUSD option - If you buy 100 (50/leg of straddle) of 1y at the money EUR vol, that = sq root of 12 x 100 = roughly 350k of EUR vol. If you buy 100 ...
0 votes
2 answers
190 views
+50

Tick data - detection of price moving away

I was wondering if there are any industry methods for detecting short term rapid price movements with L1 tick data for equities. Ideally should be robust/general enough to work for a wide range of ...
-1 votes
1 answer
55 views

How do you calculate the YTM of a multi-currency portfolio?

I would like to know how to calculate the aggregate YTM of a portfolio with bonds of different currencies
1 vote
1 answer
143 views

Pairs trading with 3+ assets

I am trying to understand how you would construct a pairs trading strategy on 3+ assets. In the 2 asset case, assuming zero drift, we trade based on: $$dX_t = \beta_AdS_t^A - \beta_B dS_t^B,$$ where $\...
0 votes
1 answer
193 views

Maximizing the expected log utility

Let's assume that we have a self-financing portfolio made by $\delta_t$ shares and $M_t$ cash, so that its infinitesimal variation is: $$ dW_t = rM_t \, dt + \delta_t \, dS_t $$ We define $\alpha_t$ ...
2 votes
2 answers
5k views

Rolling Calculation of Slope in Python

I am trying to calculate Slope for the rolling window of 5 and 20 periods and append it to the existing data frame. The length of the total dataset would be let's say 30 days. I have two columns "...
0 votes
0 answers
13 views

NASDAQ ITCH Order Executed With Price Message

I'm building a basic feed handler with the NASDAQ ITCH sample data and I'm a little confused on Order Execution With Price. From the decoded sample data I've pulled out message type C (section 1.4.2) ...
2 votes
1 answer
23k views

Margin % Bridge - Effect of Price, Cost, Volume

Given sales and profitability data for two time periods, how would I go about calculating the impact of price, cost, volume and mix margin % (bps)? I can do the analysis as a gross margin $ bridge, ...
0 votes
0 answers
29 views

Extension of time homogeneous short rate model in Brigo Mercurio

Question I am going through section 3.8 "A General Deterministic Drift Extension" in Brigo Mercurio, and in particular section 3.8.4 "The Vasicek Case". I want to derive the ...
0 votes
1 answer
382 views

Cash Flow Hedge Accounting

In the context of hedging a fixed rate foreign currency liability with a receive-fixed pay-fixed CCS is known that in order to assess the effectiveness of a cash flow hedge the ratio of the change in ...
0 votes
0 answers
85 views

Under what circumstances is hedging a portfolio by shorting index futures profitable? (John C. Hull 11e Practice Questions 3.25)

This question is based on a claim made in both practice question 3.25 and section 3.5 of Options, Futures and Derivatives by John C. Hull, 11th edition. The question On July 1, an investor holds 50,...
2 votes
0 answers
123 views

NFT Floor Price

I'm interested in modeling NFT Floor Price. Specifically, I'm trying to answer the question: Given current bid-ask info on an NFT collection, what is the probability distribution of the lowest ask ...
3 votes
0 answers
43 views

Understanding intuition behind in-elicitability "problem" of expected shortfall

Keeping related questions in mind (ES not elicitable), I am trying to understand the intuition behind the "problem" driven by the expected shortfall (ES) not being elicitable with four short ...
0 votes
0 answers
26 views

10D quotes for FX volatility smile calibration

When calibrating fx smile using SABR and Vanna Volga, Are 10D-RR and 10D-BF used? Or 25D and ATM quotes are used only? If 10D is used, which currency pairs use 10D quotes? If I use 10D quote for ...
4 votes
1 answer
332 views

Avellaneda High-frequency trading in a limit order book

From the paper, High-frequency trading in a limit order book, (Avellaneda, 2006), from equations (16) and (17), the reservation price is given by $$ \begin{aligned} \theta_t + \dfrac{1}{2} \sigma^2 \...
0 votes
0 answers
37 views

Seeking Best Methods to Identify and Analyze Sharp Trends in Stocks and Currencies Using Python

I have basic proficiency in Python development and I'm interested in analyzing the relationship between certain parameters and sharp changes in stock and currency trends. What are the best methods for ...
0 votes
1 answer
60 views

Allocation of time to maturity day difference into standard tenor buckets in python

I was wondering if there is a quick way, e.g. via quantlib or any other python package/module, to allocate or to correspond time to maturity day differences to standard tenor buckets. In other words, ...
2 votes
1 answer
371 views

Market impact power law fitting confusion

In many market impact papers such as "Anomalous price impact and the critical nature of liquidity in financial markets" by Tóth et al (2018), there is a standard power-law relation in the ...
1 vote
1 answer
81 views

How to perform volatility arbitrage between two instruments with different prices but the same realized volatility

Suppose We have two assets $S_1$ and $S_2$. They have different price, but share the same realized vol. They have corresponding options $O_1$ and $O_2$. When the ATM IV of $O_1$ and $O_2$ differ too ...
1 vote
1 answer
87 views

Kolmogorov's backward equation with initial value

I am refreshing basic financial mathematics concepts and self-learning from the text, A first course in Stochastic Calculus, by Louis Pierre Arguin. I understand that, the transition probability ...
0 votes
0 answers
92 views

HFT using Pure C [closed]

Coding for HFT (statistical arbitrage engine) without getting involved in C++. Pure C, 8086 Assembly, Python, CUDA. Does it make sense? What is feasible? Will I be restricted when using FPGA or ...
0 votes
0 answers
55 views

Tick bid greater than tick ask (negative spread)?

I am parsing tick data using a Perl script and have come across instances where the BID is greater than the ASK for a given tick. Should I assume this is an error in the tick data (as published) and ...
0 votes
0 answers
41 views

Factor model bond futures

I was reading the Lehman Brother Multifactor Futures Model and there are a few things I don't understand in the way they implement their model. Firstly, they look at the fitted yields. When they look ...

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