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247 views

20s30s curve convexity

Let’s assume I trade a 20s30s spread on the curve and i’m flat delta (-100k on 20Y swap, 100k on 30y swap dv01). If the market moves, i’m not flat delta anymore. Is there a simple way to estimate the ...
1
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1answer
109 views

Naive question: how do factor models inform portfolio construction?

I have read plenty on the topic of factor modelling, but, in the end, after one has decided upon the factors to include in a model, how do all the Betas how tell one how to weigh each asset in a ...
1
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1answer
3k views

Implied volatility interview question [closed]

If an implied volatility of an out of the money call option goes to infinity,what happens to the delta of the said call option?
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0answers
178 views

SPX/VIX Implied Beta Calculation

In https://globalmarkets.bnpparibas.com/r/Volatility_Express_20171128.pdf?t=BG3REXwMP3NZJRN7wY5Vt&stream=true, it states that 3M VIX/SPX implied Beta = (VIX 3M IVOL*VIX 3M futures)/SPX 3M IVOL ...
1
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1answer
75 views

Compute moments of aggregate loss using Monte Carlo

Spin-off from here. Richard referred to me an article that tells me how to get parameters of a translated gamma distribution to which I should consider fitting simulated aggregated loss values. The ...
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2answers
207 views

Questions on continuously compounded return vs long term expected return

I have reading a paper from Oliver Grandville on long term expected return. I am trying to reconcile what I am reading in that paper vs what I see under "Application to Stock Market" in Kelly ...
1
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1answer
142 views

Historic and future (next) round of machine readable dividend info

Is there a source of historic dividend dates, ex-dividend dates and dividend values? Also, the next dividend date / ex-dividend date. Ideally in a machine readable form? The publically available APIs ...
1
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1answer
248 views

Upper bound option price in volatility dimension

All, I have a theoretical question about the value of an option when spot price goes to infinity as a function of volatility going to infinity. I know that for a call option: The option value ...
1
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1answer
177 views

Compare portfolio variance using different regularizers

I'm given a question like below. Using the 48_Industry_Portfolios_daily dataset: characterize/describe the dataset and focus on the global minimum variance portfolio. Compare the portfolio variance ...
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1answer
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 ...
1
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0answers
229 views

Duration of a FRN in continuous time interest rate model

This question was inspired by my attempt to understand the duration of a floating rate note, or FRN for short. Several answers, like this, say the duration of a FRN is just time to next coupon payment....
1
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1answer
4k views

What is the difference between overlapping and non overlapping returns [closed]

My prof asked me to make an Variance-Ratio test for overlapping as well as for non-overlapping returns. What is the difference between overlapping and non-overlapping?
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1answer
236 views

Result linked to Black-Scholes evaluation

Why does this $$Se^{-D(T-t)}e^{-d_1^2/2} - Ee^{-r(T-t)}e^{-d_2^2/2}$$ equal to $0$? (Where $E$ is a strike)
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1answer
2k views

Understanding how to calculate Accrued Interest of Bonds

When calculating the accrued Interest of Treasury Bonds, how does one set the settlement date? And, is it possible for certain bonds that there are no coupon payments before the settlement date and ...
1
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1answer
457 views

On a FX volatility smile, Is a-delta put volatility equal to (1-a)-delta call volatility?

On a FX volatility smile in terms of delta, If I want 95-delta put vol, Is this volatility equal to a 5-delta call vol, and viceversa? Thanks.
1
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1answer
853 views

Calculating Accrued Interest of Bonds

I am trying to calculate the accrued interest for a set of Treasury Bonds. I am comparing the answer from the code below with that for the 1st Bond(row) over here. In the link the AI is ...
1
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1answer
316 views

Rolling Winsorization for Time-Series

I'm running a multivariate time series analysis and need to deal with some outliers. I'm thinking about using a rolling winsorization (e.g., pull anything above 99.5 percentile and replace with the 99....
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2answers
790 views

Pricing Forward Start Option with PDE

I am looking for references (books and papers) or suggestions on how to price forward starting calls using a PDE approach typically in the Heston model (In the BS world, the computation is trivial), ...
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3answers
788 views

Can a VaR equivalent Volatility (VEV) be negative?

As from title, can a VaR equivalent Volatility (VEV) as defined by KID/PRIIPS law be negative?
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1answer
2k views

Option greeks as dollar P&L

If I write the value of an option as O(S, K, T, V), where S is the underlying price, K is the strike, T is the time to expiry and V the implied volatility, how can I compute the dollar amount that I ...
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1answer
3k views

Calculating portfolio allocation beta with different asset classes?

I'd like to calculate portfolio allocation beta on a portfolio that has different asset classes. The portfolio may be made up of: ...
1
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1answer
112 views

How to measure the practicality of a market portfolio for long-term investment?

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 your stocks. I ...
1
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1answer
100 views

What are the units of the variance of returns?

I am a little confused about the units of the variance of returns. One way to compute that would be to look at the units of returns- $$r=\frac{1}{\Delta t}\ln\frac{P(t+\Delta t)}{P(t)}=\text{...
1
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1answer
221 views

Correct Theoretical Discount Factors from Nelson-Siegel-Svensson?

I am calculating the theoretical discount factors associated with a bond that has 30 months to maturity from today with the parameters below obtained from here using the Nelson-Siegel-Svensson Model. ...
1
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0answers
129 views

AFV Model Implementation for Convertible Bonds

I am reading the original AFV model paper for pricing convertible bonds. https://cs.uwaterloo.ca/~paforsyt/convert.pdf The paper is very technical and I am having trouble finding the actual PDE's to ...
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2answers
143 views

How is the spread between the US-10 T-bond and the Fed funds rate determined?

In 2015 the Fed funds rate was 0.24%, while the US Treaury 10-year government bond was 2.24%. How is the spread determined? Is there a formula to determine the spread of the US-10 T-bond and the Fed ...
1
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1answer
100 views

Variable Loan Interest Question

I have been attempting this question a few times over the past few days but can't seem to make any headway on it. Any help would be greatly appreciated. A loan of €L was to be repaid over a twenty-...
1
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1answer
757 views

Calculating option vega for vanilla call seems to be factor of 100 out

I'm using the following R code to calculate the vega on a vanilla option with the inputs S = 100, X = 100, t = 1, r = 0.005 and vol = 0.5 The vega calculated is around 39.85; I was expecting it to be ...
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1answer
127 views

Calculating historical Bond returns

How would you calculate historical bond returns using bond prices? Would you treat bonds just like shares ? Thanks
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1answer
152 views

What does “1-month horizon” mean in VaR calculations

For a simple equity portfolio, I need to compute historical 1-year simulation VaR with a "1-month horizon". I imagine this means I need to compute the 1-month return of the portfolio at each point in ...
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1answer
88 views

calculation of theoretical value of futures contract [closed]

we form a stock index by using only two stocks in the index. One of the stocks is the Stock-A. The current selling price of the stock-A is 103 dollars and the second stock is the stock-B. The current ...
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1answer
3k views

Given $S$ is a Geometric Brownian Motion, how to show that $S^n$ is also a Geometric Brownian Motion?

Suppose that a stock price $S$ follows Geometric Brownian Motion with expected return $\mu$ and volatility $\sigma:$ $$dS = \mu S dt +\sigma S dz$$ How to find out the process followed by variable $...
0
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1answer
166 views

Modelling limitations and understanding of long term goverment bonds

Been trying to understand the yield curve for a while now. This is what I collected so far, There is a relation between short rates and long rates that goes via the forward rate, and so by the ...
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2answers
771 views

Mark Joshi, Quant Interview Question problem 2.34; replicating a digital option on a 4-step symmetric binomial tree

Question: Team $A$ and team $B$, in a series of $7$ games, whoever wins $4$ games first wins. You want to bet $100$ that your team wins the series, in which case you receive $200$, or $0$ if they ...
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2answers
2k views

30360 Daycount Count Convention to find NPV for Bonds

Using a 30/360 day count convention, how can you value the NPV of these cash flows and the discount factor? I know how to discount cash flows but how does it differ using a 30/360 approach? What is ...
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2answers
872 views

Two-period binomial model with dividends

Consider a two-period binomial model for a risky asset with each period equal to a year and take $S_0 = 1$, $u = 1.15$ and $l = 0.95$. The interest rate is $R = .05$. a.) If the asset pays 10% of its ...
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2answers
2k views

Trinomial tree VBA code [closed]

I am studying binomial trees and I'm implementing them in VBA to see their convergence to the BS model. I searched 3-4 hours in the web; the only good site I know is Volopta. Very simply question by ...
0
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1answer
1k views

How to calculate the annual contribution of a fund to a portfolio of funds?

let's assume I have a portfolio of two funds (call them F1 and F2), where, by convention, there is a monthly compounding of the returns. On a monthly basis, the contribution of each fund will just be ...
0
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1answer
112 views

Bond asset class long term assumptions [closed]

How are long term capital market expectations set in the industry? I'm looking to get some pointers about setting long term assumptions for fixed income asset classes like global high yield credit, ...
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3answers
1k views

Parametric/Analytical VaR

Suppose I want to calculate VaR for a known distribution with mean $\mu$, variance $\sigma^2$ and $\alpha$-quantile as, $VaR_{\alpha}$ = $\mu + \sigma q_{\alpha}$. For a Gaussian distribution it is ...
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2answers
502 views

How is the price of a bond actually determined?

How the price of a bond is actually determined? Is it the supply-demand that determines the price first and then the YTM is calculated on the back of this for that bond. Or is it that the changes to ...
0
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1answer
742 views

Why should we use log returns? Log normality

According to this link, there are some reasons we have to use log returns. But I can not understand the first reason provided in the link: First, log-normality: if we assume that prices are ...
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1answer
75 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 ...
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1answer
155 views

Market, Limit and Cancellation orders

From the paper https://web.stanford.edu/class/msande448/2017/Final/Reports/gr4.pdf page 8, I need at least the limit and market order. I can easily find the full depth from dxfeed or algoseek, but I ...
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1answer
109 views

Is it always better to use the entire distribution of a financial dataset, not just mu and sigma?

In finance models that use historical returns for inputs, including option pricing models, forecasting and portfolio optimization, only the statistical moments of the returns distribution, $\mu$ and $\...
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1answer
2k views

Bloomberg SWPM: Day count to calculate discount factor for US0003M

I'm trying to replicate price I get for CCIRS in SWPM. This is USD3m float vs RUB 1Y. Second leg doesn't matter for my question. Suppose today is 7th of Jan 2019, deal date. Settlement will happen on ...
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1answer
102 views

Is non-linear correlation an issue in portfolio optimization?

Portfolio weights are linear combinations of assets. How can it be true then for there to be, and how can someone prove that there is any, non-linear correlation issues in portfolio optimization? Is ...
0
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0answers
477 views

How can I export intraday stock data into CSV from Interactive Broker or Yahoo Finance?

Google Finance API seems to be down forever. Are there instructions or manuals for downloading intraday stock data into CSV files from Interactive Broker OR Yahoo Finance?
0
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1answer
155 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 ...
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1answer
3k views

Derivation of the Black-Scholes formula [duplicate]

My understanding is that the Black-Scholes formula can be derived via the Capital Asset Pricing Model, I cannot find anything about this on the net. Could someone demonstrate this (in a hopefully not ...

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