All Questions

Filter by
Sorted by
Tagged with
1
vote
1answer
69 views

Expectations in Infinite Probability Spaces with Sub Sigma-Algebras [closed]

The ideas that need to be proven all make sense to me intuitively, but I just don't know how to go about formalizing the actual proof itself in an infinite probability space. I tried approaching it ...
1
vote
1answer
59 views

Finding Differential and Quadratic Variation Squared Process

A question based from Springer's Stochastic Calculus for Finance II book - I've tried working this out, but keep ending up in circles.
0
votes
1answer
27 views

How can i calculate the yield given price, or price given yield for a callable bond, with several callable dates and strike prices (quantlib)

import QuantLib as ql ql.Settings.instance().evaluationDate = ql.Date(2,3,2020) maturity = ql.Date(10, 5, 2023) coupon = 0.09 issueDate = ql.Date(30, 12, 2019) frequency = ql.Semiannual dayCount = ql....
0
votes
0answers
10 views

How to calculate the net return of each “partner” at different times?

Let's suppose I am starting to manage some money. The money is invested in ETFs, particular de VOO. Let's suppose I have partner one with 1,000 USD, and with this, I can buy 10 shares of VOO at 100 ...
2
votes
2answers
133 views

“The potential gain of a Call Option is always incorporated in the Option's price” - Why is that?

I've heard this but I don't understand why. The demonstration of this is that the Ask Price of a Call Option is always higher than the difference between the Strike Price and the price of underlying ...
0
votes
1answer
56 views

Normalizing with Sum of Zero-Coupon Bond Prices

Suppose you are receiving a payment $K$ at time $t_m$. Let $p(0,t_i)$ be the maturity-$t_i$ zero-coupon bond price at $t=0$. If we consider a discrete time $\{0,...,t_m\}$, what would it mean to ...
1
vote
2answers
33 views

Step-up bonds should be more, not less sensitive to market interest rates, shouldn't they?

I keep reading that "a step-up bond provides more protection to an investor in the face of market interest rate fluctuations", that "a step-up bond typically performs better than any ...
24
votes
10answers
53k views

Exercising an American call option early

I have seen the rationale behind why it is never optimal to exercise an American call option early, but have a question about it. If the option strike price is $E=\$20$ and it expires at $T=1yr$, if ...
0
votes
1answer
59 views

Detect pattern from OHLC data in Python

I'm trying to create a script that, from standard OHLC data, finds patterns. The specific pattern i'm looking for right now is sideways movement after a move up, here is an example: So basically my ...
1
vote
2answers
112 views

Relationship mean variance efficiency and skewness of the return distribution?

I am wondering what the relationship is between skewness, kurtosis and mean variance efficiency is. Is it correct that particular investors are willing to give up mean variance efficiency in return ...
1
vote
1answer
88 views

Implicit finite difference method always guarantees positive and stable price of derivative?

For the following black scholes pde $$ f_t + rSf_S+\frac{1}{2}\sigma^2S^2f_{SS} = rf $$ By denoting $f_{i}^{n} = $ Price of derivative at price node $i$ and time node $n$ and assume uniform grid, the ...
2
votes
0answers
25 views

Finding a PDE for an option $V(t,r(t),S(t))$

I have 2 approaches in my mind for finding a pde of an option that depends both on the short rate as well as the stock price- $V(t,r(t),S(t)$. Are these equivalent? Find a hedging portfolio by ...
2
votes
6answers
393 views

What is the benefit of holding a short option?

I am new to corporate finance and I ask myself why an investor is interested in being short an option? He can only can win a premium but he can lose much more. I understand with being a short, I cap ...
1
vote
1answer
36 views

Why is OLS based spread not reflective of actual difference?

I'm trying to define and track the spread between two time series (data available here), for the purpose of learning pair trading basics. When running a cointegration test the two series seem to be ...
0
votes
0answers
20 views

Detrending market data to calculate expected return (ER)

I'm a complete newbie so please be kind. I'm reading Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David Aronson And I'm ...
-4
votes
1answer
61 views

Resources to quantitatively build an ETF [closed]

Is there any difference between developing an ETF and portfolio construction? Is it possible to use Quantitative Strategies to build an ETF? Do you know of any resources, books, PDFs, websites etc ...
2
votes
2answers
111 views

Effect of correlation on a best-of rainbow option

EDIT 2: I found the problem(s) and the prices seem to behave as expected now. For anyone interested there was a bug when normalizing the dependant ranom normal variates used in the simulation, so ...
1
vote
0answers
33 views

Market impact in optimization objective function

Can anyone help to explain why when the square root market impact model is used in the standard mean-variance optimization, the exponent becomes $\frac{5}{3}$ in the objective function? I suspect this ...
0
votes
1answer
26 views

Covariance Shrinkage in Black-Litterman Framework

Good evening guys I am looking into the effects of covariance shrinkage on the diversification of asset weights for different portfolio optimisations. Initially, I was interested to see how it affects ...
0
votes
1answer
43 views

Do I use the bid or ask time series to build a model to predict forex and for a backtester

In my tick feed I get real-time bid and ask prices like below from oanda. My question is this. Lets assume I build a time series model to buy eur/usd in the Oanda UI manually. If I were to build ...
1
vote
2answers
70 views

Calculate moments given density values

Suppose I have given a finite number of grid values belonging to a probability density function. Moreover, I have the associated values of the density support. For instance: ...
0
votes
1answer
62 views

Extract time and sales from the level 2

I need data to test some mathematical models. So far I have the level 2 over 120 layers, but I can't pay for the time and sales. Is it possible to extract the time and sales from the level 2? By ...
6
votes
3answers
442 views

Convexity of an American put option

Is the price of an American put on an underlying without dividend convex with respect to the strike?
0
votes
0answers
35 views

Is there a way to obtain sectoral data for a specific market?

For a university project, I would like to use a sector performance time series from Euronext to get something like the 'sector performance' page on the FT web site, but I can't find the data on the ...
6
votes
3answers
399 views

What is the Risk Neutral Measure?

What is the Risk Neutral Measure? I don't believe this has been answered on the internet well and with all the parts connecting. So: What is the risk neutral measure/pricing? Why do we need it? How ...
4
votes
4answers
139 views

Eurodollar future vs Eurodollar forward contracts

You are considering two contracts: a Eurodollar futures contract with six months to maturity, selling at 5%, settled on three-month LIBOR, marked to market every day; and a Eurodollar forward contract ...
1
vote
1answer
515 views

Calculating the Macaulay duration of a floating-rate bond

I am new to the pricing of bonds: Suppose that I would like to price a floating-rate bond with par value \$100, with maturity at $T$ years from now, paying coupons semi-annually. Suppose that $r_{n-0....
0
votes
0answers
28 views

Bootstrapping zero curve for obligor creates jumps spikes

I am constructing a zero curve for a super national obligor for the period 2007 to 2015. I am using the universe of bonds available on Bloomberg to construct the zero curve from maturities 3m to 50 ...
2
votes
3answers
92 views

Price of Call Option with or without jumps

Suppose two assets in Black Scholes world have the same volatility, but one has downward jumps at random times. How does this affect the option prices? I would have thought that downward jumps would ...
1
vote
0answers
42 views

Free or cheap data source for the current European Options prices?

Is there a free or cheap (<15$/month) data source for the current (not historical) for European Options? Something like Yahoo Finance option page, with option chain contract prices. It's ok if it's ...
0
votes
1answer
128 views

Interpretation conditional volatility plot

I have plotten the log differences of exchange rates and in the same plot, I show the conditional volatility $\sigma_t^2$. The conditional volatility follows approximately the same path, but is much ...
1
vote
2answers
108 views

cross currency basis spread

Nowadays, most cross currency basis spread (against USD) is negative, while AUD, NZD basis spread against USD is positive. Can someone explain why these two are positive, unlike the rest?
0
votes
0answers
56 views

How to do Monte Carlo simulation given the stochastic ODE of a Brownian motion

I've learn the theoretical basis and lots of Brownian motion in quantitate finance. But i'm wondering how to actually simulate something based on brownian motion and make into something code-able or ...
1
vote
0answers
53 views

Has anyone done the course STATS242: Algorithmic Trading and Quantitative Strategies. Where Can I find the assignments and other resources?

Basically the title. There's a course STATS 242: Algorithmic Trading and Quantitative Strategies offered in Stanford a few years ago. I searched on google a bit for the course website to see the ...
8
votes
4answers
8k views

Where can someone get free (or very cheap) high frequency tick forex data?

I am currently working on a large data set (approx 80 million data points over 10 years). I would like another set of data that has one currency in common. Eg, I have EUR/USD and would like USD/CNY or ...
-2
votes
2answers
96 views

NLP related finance projects

fist of all I do apologize if my question is not fit for this forum, but after much research I didn't find a better place to ask this question. I am a PhD student in mathematics. I do know some ML and ...
2
votes
0answers
48 views

What are some alternatives to Geometric Brownian motion that can be used in the Black-Scholes?

I hear that there are many extensions to the black scholes model to make it more realistic, however, GBM does not account for volatile swings. Is there any sort of alternative approach to use instead?
-1
votes
1answer
35 views

specialization of risk managment or financial math [closed]

I am having a hard decision for choosing which graduate program is more suitable for me: risk management under finance or financial math. I have a bachelor degree of mathematics and statistics. I want ...
1
vote
0answers
25 views

Why is the efficient portfolio assumption necessary for the CAPM model?

One of the main assumption in the CAPM model is that all the investors are rational and they hold the most efficient portfolio for a given level of risk. What difference does this assumption make? ...
3
votes
2answers
81 views

SDE Jump-Diffusion

If you combine the compound Poisson process with the Brownian motion you obtain the simplest case of a Jump-diffusion. Let’s define $$X_t = \mu t + \sigma W_t + J_t$$ where $W_t$ is a Wiener process ...
1
vote
2answers
250 views

Why are interest supposed deterministic for equity?

I don't see why would rates be considered as deterministic when trying to price $\mathbb{E}^{Q} \left[ e^{-\int_{0}^{T_{f}}r_{s}ds} \left( S_{T_f} \right) | \mathcal{F}_{0} \right]$ I would like to ...
0
votes
1answer
43 views

Sampling and cross-validating with tick, volume and dollar bars

Financial data is usually structured with time bars. Other sampling techniques include: tick bars volume bars dollar bars. These are so-called sampling techniques to better identify signals and ...
0
votes
0answers
19 views

Harvesting Bond Term Premium and Roll Yield using curve plays with Oanda Continuous Contracts

Oanda has their own product pricing and method of rollover that stitches the futures contract prices. I was trying to implement a strategy that accesses the bond term premium and roll over yield for ...
1
vote
1answer
21 views

How to evaluate prediction(s) made of the asset return mean?

In finance, it is well-known that the expected value of asset returns, $\mu$, otherwise known as the average return or mean or first statistical moment, is difficult to predict. I think it was ...
0
votes
0answers
14 views

How to annualize skewness and kurtosis of a forecasted distribution

I have a (non-normal) distribution of expected cumulative returns 10 quarters in the future, from which I have calculated mean, standard deviation, skewness and kurtosis. I would like to annualize ...
4
votes
1answer
86 views

Hedging vega risk with varswaps

I have encountered a statement that in summary reads like this: Varswaps became popular after the LTCM meltdown due to high levels of implied volatility the market was seeing at the time. Hedge funds ...
8
votes
2answers
107 views

Improve Finite Difference Scheme

I understand how to derive and implement standard finite difference schemes. I wonder how to improve such a standard FD scheme? For example, when solving the standard Black-Scholes equation, the ...
1
vote
1answer
69 views

Compute the price of a derivative which pays $\log(S_T)S_T$ in the Black Scholes world

Compute the price of a derivative which has pays $\log(S_T)S_T$, you can assume that the Black Scholes model is valid. Using the stock measure we can write the expectation as $$D(0) = S_0 \mathbb{E}...
0
votes
1answer
46 views

Volume bars, dollar bars from low-frequency data?

Financial models by default use time bars of prices/returns for input data. I use time bars to refer to both intraday (high frequency) and interday (low frequency) data since the sampling occurs at ...
3
votes
3answers
250 views

Any portfolio models not based on asset return moments?

The mean-variance model for portfolio optimization minimizes portfolio risk (covariance matrix), which is the second statistical moment of multivariate asset returns, and sometimes simultaneously ...

15 30 50 per page
1
2 3 4 5
316