# All Questions

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47 views

### Implementation of Stratified Sampling in Monte Carlo

Background I am trying to implement Monte Carlo Simulation with Stratified Sampling for barrier option under Black Scholes Model. I understand there is an analytic formula for this instrument and we ...
26 views

### Vasicek credit loss for real portfolio

Consider the Vasicek limiting distribution for losses of a loans portfolio. Now, consider a real portfolio, made of 10 loans each with a different rating class; eg: LN#1 - rating A+ LN#2 - rating BB ...
96 views

### Are mean-variance efficient portfolio weights random variables with probability distributions?

The mean-variance model outputs a portfolio weight vector whose elements are individual asset weights that sum to 1. Regardless of which portfolio along the efficient frontier is being solved, the ...
25 views

### Alternative Hurst Exponent methodologies?

The theory behind the Hurst exponent is that every instrument exhibits a certain mix of trending and mean reversion, where Hurst values closer to 1 represent a higher likelihood of trending and Hurst ...
18 views

### What are different types of response variable we can consider while developing quant model

I was trying to understand the response variables used in the quantitative trading/investing model development. This question may not look good but I searched on google and could not find results. ...
15 views

### How to combine different strategies in a backtest (and IRL)

I am trying to combine long and short strategies into an L/S strategy in my backtesting program. The way I have my backtester set up is it takes a signals object (...
61 views

### Over-night Black-Scholes

I have a question for Black-Scholes. It is a continuous approach, but the real market closes every day. So for the Black-Scholes, how do we count the time effect of during the time when the market is ...
52 views

### Market Maker option's pricing with reference spot

When a option's market maker receives a quote from a broker, usually the underlying spot prices is locked with a reference. Let's suppose the following example: Broker: "Buy 10k call 2800 of ABC ...
37 views

### ZigZag Indicator in Python [closed]

I would like to reply a Metastock Formula (ZigZag based on Close Price) I had some similar results but not the right ones! Formula: ...
41 views

### Can a down-and-out barrier call option be priced using the Black & Scholes formula or should it be approximated?

I am trying to price of a Down-and-Out Barrier call option with leverage. When the price of the underlying asset hits a certain barrier (B), the option becomes worthless. The issuer of these options ...
36 views

### What put options would the Universa Tail Fund have bought?

According to this Bloomberg article, Universa was up 3,600% in March 2020, by hedging with extremely out-of-the-money puts: https://www.bloomberg.com/news/articles/2020-04-08/taleb-advised-universa-...
13 views

### Selecting the correct MaxLag for Granger's Causality

I have a developer who has created a python script to determine the granger's causality of several datasets that are approximately 3 years worth of daily data (approx 1100 data points for each time ...
25 views

### how to interpret the results of a GARCH model fit R/python

I have got the following output from a gjrGARCH model, and I need help to interpret it in order to decide whether it is already a good model and proceed with the forecast. ...
56 views

### How is CAPM used to price an asset once it has been used to derive the assets expected return?

As I understand it (correct me if I'm wrong) the theoretical price of an asset should be the present value of all future cash-flows that it is expected to yield, discounted at the risk-free rate. I am ...
36 views

### Difference between Vasicek and Gordy models

I'm trying to understand what Gordy [1] added to Vasicek [2] model (the core of the IRB formula of Basel Accords). Is it correct to say the Vasicek shows that the portfolio loss conditional on $Y$ ...
149 views

### Simulating covariance matrices with nonzero correlation

How would you simulate a covariance matrix of 1,000 stocks where each pair has nonzero correlation? I have literally no idea how to start with this. Any suggestions?
15 views

### In fix protocol, what's complianceId (tag 376) used for?

In one of my projects, I noticed it's saved into a database as a global_order_id, and that made me wonder if it's used as a unique identifier to follow a trade flow?
125 views

### Strike Arbitrage

In Stochastic Volatility Modelling, Chapter 2, the author derived the Dupire equation $$\mathbb{E}[\sigma_T^2|S_T = K] = 2\frac{\frac{dC}{dT} + qC +(r-q)K\frac{dC}{dK}}{K^2 \frac{d^2C}{dK^2}}.$$ The ...
37 views

### What currencies has LIBOR historically been offered in?

The Wikipedia article on LIBOR says: In 1986, the Libor initially fixed rates for three currencies. These were the US dollar, British pound sterling and the Deutsche Mark. Over time this grew to ...
49 views

### Quantlib: How do I price a bond after having built a term structure

I below are my codes using QuantLib to build a term structure What I would like to do is use that to price any hypothetical bond lets say startdate : 8 Feb 2016 end date : 8 Feb 2021 coupons : 10% ...
91 views

### Can alpha be positive if cumulative returns underperform the benchmark?

According to my portfolio analysis program (pyfolio), the alpha of the following strategy is .17 (I am assuming 17%). [Based on pyfolio documentation, alpha here is the "annualized alpha".] ...
33 views

### Black Scholes model calibration

the only parameter in the Black Scholes model that needs to be estimated is the volatility. Which approach is correct: Estimation of volatility from daily log returns Estimating volatility by ...
58 views

### How Are Option Model Assumptions Justified In Practice

I am reading this article, and I am wondering how comments like there may be a 50/50 chance that the underlying asset price can increase or decrease by 30 percent in one period. are reconciled with ...
37 views

### What's the difference between ATM Vol vs ATMF Vol?

May I ask what's the difference between At-the-money volatility vs At-the-money foward Vol?
31 views

### Predict option IV volatility when I have stock price and previous and next day price

If I have data for IV for the previous day the next da and the stock price in intraday format , can i calculate the option price in intrday format?
16 views

### Price of Call & Put Spreads as Volatility Tends to Infinity in Bachelier Model

In the standard Black Scholes model, as we take volatility to infinity, the price of call spreads goes to zero and the price of put spreads goes to the difference in strikes. I ran a simulation using ...
31 views

### Is there a noticeable difference in making scatter plots and regression models with tick-data or with candle data?

I am asking this question because I want to research some variables. An example is the RSI where the current RSI is updated every tick. This means that the value of the RSI is fluctuating a lot inside ...
59 views

### Expected Option Payoff equal to 0 [closed]

How much would you sell an option whose expected payoff equals 0?
37 views

### sensitivity of american digital (binary) options to changes in volatility skew

i am trying to think what is the sensitivity of american digitals (henceforth binary or one-touch (OT)) options to a) implied volatilities between atm and the barrier (henceforth ITM vols), b) implied ...
44 views

### Change of Measure for Jump Process with Drift and no Brownian motion

If on $(\Omega, \mathcal{F},\mathbb{P})$, $r>0$ is a constant and $Z_t =\sum_{i=1}^{N_t} Y_i$ where $Y_i$ are i.i.d with $E[Y_i]=L$ denotes the size of the jump and can have distributions like ...
27 views

### Complexity of using balanced-tree to model order book

I have bene researching on the best data structure to implement a limit order book. Some of the most common implementations include arrays and balanced trees. This link has a good set of references. ...
50 views

### Can you simulate an option position at a strike when that does not exist

Is there any way to simulate buy an option at a pric of x when that price is not available to buy ? If x-3 and x+3 exists, how do I buy it at price x?
79 views

### Variance-Covariance Matrix under $\mathbb{P}$ and $\mathbb{Q}$

I'd like to understand why $\Sigma$ is the same under both measures $\mathbb{P}$ and $\mathbb{Q}$. Is it an assumption or a general fact based on theoretical concepts?
52 views

### Optimising PnL on an interest rate swap

I recently just got asked the below question. Please help. "You are about to execute a zero fixed rate vs. Float rate swap under daily cash margining with a client in a normal swap rate curve ...
80 views

### Why is diversifiable risk unrewarded?

I am currently looking through some actuarial study materials (CM2, formerly CT8) in which models of asset returns are being discussed. One such model is the market model (A.K.A The single-index model)...
62 views

### What can the area under a GBM jump curve tell you

So I used matlab and simulated stock prices with the Merton diffusion model. Now I want to take the integral of the area. Now would there be any financial insight by taking the integral of a stock ...
29 views

### Can someone explain how the evaluation and execution through to post-acquisition portfolio management?

I am looking into Private Equity. As the topic says. I'm trying to understand the process behind the evaluation and execution through to post (and pre? if there is some) acquisition portfolio ...
51 views

### How to compute returns from cumulative returns in Python? [closed]

If X is a $T\times N$ pandas DataFrame of multivariate asset returns, the cumulative returns can be computed in python as (1 + X).cumprod() - 1 How can I reverse this operation so that I go ...
26 views

### Question on money-weighted return or IRR [closed]

At the beginning of Year 1, a fund has \$10 Million under management; it earns a return of 14% for the year. The fund attracts another \$100 Million at the start of Year 2 and earns a return of 8% for ...
40 views

### Has AlphaVantage stopped NSE stock quotes data? [closed]

I have been using AlphaVantage to get the historic data for NSE stocks (NSE= National Stock Exchange of India Ltd.). But since past 1 month the API has stopped returning data for NSE stocks. It ...
225 views

### Market price of risk on two assets

Under the assumptions of the Black--Scholes model, I read that the market price of risk of two assets $S_1$ and $S_2$ are the same, if they both follow Geometric Brownian motion driven by the same ...
16 views

### Agency Fixed Rate RMBS Yield Decomposition

I'm trying to find the best way to decompose the yield on an index of fixed residential MBS securities and want to open up the question to the community. The goal is to look at this from a ...