# All Questions

1,216 questions
Filter by
Sorted by
Tagged with
1k views

### Applications of PCA to yield curve analysis

One of the applications of Principal Component Analysis in Finance is to analyse the shape of the yield curve. But what conclusions can be drawn exactly from performing this exercise? Does it help us ...
120 views

### Prove Subadditivity - Entropic Value at Risk

Any insight in how to prove the following risk measure is subadditive? $\rho_{1-\alpha}(X) = \inf_{z>0}\{z^{-1}\ln(\frac{E[e^{zX}]}{\alpha})\}$, with $\alpha \in ]0,1]$ I want to prove it is a ...
322 views

151 views

### Possible to use diffusion equation(s) to price derivatives with non-zero boundary conditions?

One of the reason the Black-Scholes can be transformed into the heat equation is that calls and puts have a zero boundary condition on their contingent payoffs. Define the terminal payoff condition ...
146 views

### Calculating units in a cross currency short trade

If I have a forex account with a broker and a balance of 100 USD, and I'd like to short EUR/JPY, how many units can I short? How is this calculated? Which currency pair do I use to translate between ...
460 views

817 views

### Interpretation of an option gamma larger than one

I am working on an option hedging simulation. In this context, I wanted to expand the simulation to include gamma. For testing purposes, I used among others the natural gas futures. When I calculate ...
68 views

### Compute the (Net) Present Value

Let's have a project where we invest 1000 at the beginning of year 1 and 1000 at the beginning of year 2. At the end of year 2 the income is 2200 and the project is closed. Person A discounted with ...
139 views

### Reference for why a derivative is a derivative and not say an insurance contract

I recently spoke to an options trader that tried to demonstrate option pricing by considering a random walk of balls dropping down a lattice so the underlying stochastic process is a simple random ...