All Questions
21,719
questions
1
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0
answers
46
views
When is the Quantlib's C++ to python package faster than just coding natively in python?
Every package I have used of the QL's python package thus far have been slower than my own local python functions. From what I understand, it's running C++ underneath, but if you are running loops/...
1
vote
0
answers
88
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Portfolio construction in the real world [closed]
Good day. I am looking to understand how the portfolio construction process is actually done in the industry. Now, I do not know if there are too many resources on how things are currently being done (...
- 11
0
votes
0
answers
33
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How can we simulate daily return based on multi-factor model?
This is an interesting question for simulation. The question is a bit lengthy but I'm trying my best to make it super clear here.
Now I have some multi-factor model, say some US barra risk model from ...
0
votes
0
answers
42
views
Constraints in a Mean-Variance Optimization Case
Might be a repeat question, feel free to close if it is.
I am trying to perform a mean-variance optimization (maximizing the Sharpe ratio) for lets say 5 assets. Besides the weights of the assets ...
- 559
1
vote
1
answer
69
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How does one calibrate lambda in a Avellaneda-Stoikov market making problem leading to Gueant-Lehalle-Tapia model?
The title is similar to that of the question I was referred to here which has been answered by Lehalle himself!
I'm trying to implement the Gueant-Lehalle-Tapia model which is how I got to this answer ...
- 13
2
votes
1
answer
79
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QuantLib: Pricing BRL zero coupon swap using relevant attributes in Quantlib
I am trying to price the BRL zero coupon swap. As we know that ZC swaps fixed payer pays a single payment at maturity and the float payer pays the interim payments till maturity. So in this case, ...
- 37
0
votes
1
answer
135
views
+50
Calculation of break-even correlation for diversification effect in N-assets case?
I'm thinking about a generalization of the following case: for 2 assets, there is a diversification effect as soon as i obtain a positive weight for the minimum-variance portfolio in the asset with ...
- 543
0
votes
3
answers
108
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Closed form / analytical solution for bespoke (but vanilla) Option
Question:
I want to derive closed form expression (similar to the Black Scholes formula for a call price) for the payoff below. I would like to do it from first principles starting with Expectations ...
- 121
0
votes
1
answer
55
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Tick data-why the ask price and ask volume are 0, but the trade price exists and the trade price is still big? How to understand this?
How to understand the trade price and volume exists when ask price and volume are 0 but bid ones exist? I can't understand what happens under such condition? And also why sometimes bid price is higher ...
- 1
0
votes
0
answers
117
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What is the correct procedure for discounting risky cash flows? [closed]
My apologies if this question is too basic/inappropriate for this venue. Please let me know if so.
I am currently reading Berk and Demarzo's Corporate Finance and am a bit confused about how risky ...
- 115
0
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0
answers
54
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Taking a set of normally distributed random variables as the sample space to fitting an exponential distribution
Disclaimer, this is my first question/interaction in this forum.
Let's assume I have random variables that are normally distributed. Then, say I take the observations that are greater than the mean, i....
- 1
0
votes
0
answers
22
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Instantaneous forward rate function to use in HJM framework
HJM framework uses the instantaneous forward rate $f(t,T)$ in the resulting dynamics and pricing formulas (like in Hull-White or Ho-Lee model).
But clearly market does not have an $f(t,T)$ formula, so ...
0
votes
1
answer
58
views
Latency (market updates) and link to market efficiency
In the book by Lehalle and laruelle - "market microstructure in practice" -
"The trading activity of HFT updates limit orderbooks at a higher rate
than the round trip for any non-...
- 141
0
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0
answers
61
views
Non-zero real-valued function continuous and piecewise $C^1$ that vanishes outside (0,1) with piecewise Lipschitz derivative
In this paper the authors to overcome the presence of microstructure noise which "contaminates" the ito-semimartingale in high-frequency data uses the idea of pre-averaging.
For an ...
- 37
0
votes
1
answer
104
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Senior Preferred vs Senior Unsecured Bonds
What's the difference between Senior Preferred bonds and Senior Unsecured bonds. I understand the difference Senior Preferred vs Senior Non-Preferred bonds. But Senior Preferred and Senior Secured are ...
- 21
1
vote
3
answers
276
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Floor vs Receiver Swaption with Equal Strike
Let's say we have the following two instruments.
A 5x10 floor (5-year floor, five years forward) with a 4% strike on 1-year SOFR and
A 5 into 5 European receiver swaption (right to enter into a 5-...
- 13
0
votes
0
answers
55
views
volatility surface interpolation across expiry
In the usual adjusted Black Scholes world where BS vol varies with strike and with time to expiry as extracted from a market snapshot at moment 0, assuming a certain of interpolation method across ...
- 101
0
votes
1
answer
92
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Risk-neutral option pricing under distribution assumption
For simplicity assume zero interest rates in the following.
Given the price of a (European) put option with strike K and maturity T at time point t. $P_t(K, T)$ for a given underlying S with values $...
- 1
0
votes
1
answer
154
views
Kou model — solving PIDE for European and American options in Python
Toivanen proposed$^\color{magenta}{\star}$ a method to solve the partial integro-differential equation (PIDE) with a numerical scheme based on Crank-Nicolson. In particular, he proposed an algorithm ...
- 21
0
votes
0
answers
49
views
Adjusting the p-value of a strategy for number of parameters
Let's say I have some metric and I'm trying to evaluate whether it's predictive with respect to returns. I plan to only take trades where the value of the metric is above a certain threshold, such ...
- 243
0
votes
1
answer
44
views
Fama-French Regression Output Interpretation (Intercept/Alpha)
I am currently doing a report regarding Fama and French 3 and 5 factors model. I was provided 3 companies with each of its daily stock return from 2015-2020, and the values of all 5 factors during ...
0
votes
0
answers
58
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DV01 of 10-Year vs 1-Year Zero-Coupon Bond at 0% Flat Interest Rate Curve
As the title suggests, what are the DV01s of a 1 million principal zero-coupon bond with 10-year and 1-year TTM with an assumed 0% flat interest rate curve. I understand that the duration for both ...
- 559
0
votes
0
answers
23
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High/Low range under GBM - Analytic solution?
Does anybody know of an analytical solution to the expected high / low range for an asset that follows a GBM process over sampling frequency dt? I have ran numerical simulations and find that the ...
- 749
0
votes
0
answers
47
views
Monte Carlo simulation with SABR model
I have to price European Options using only the classical Monte Carlo method.
The models I have to select are Lévy models and SABR. Consider for instance the simplest Lévy model: a Geometric Brownian ...
-1
votes
0
answers
36
views
how to use ratio spread?
If I sell more options, then my gamma risk will be more difficult to control, but if I sell too few options, then when I judge the wrong direction, I will leave the market with a loss. I try to ...
2
votes
0
answers
55
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Calibration of Levy models and Stochastic Volatility Models - Data used
I'd like to ask a question regarding something I often come across in research papers.
It's about how authors calibrate Levy Models and Stochastic Volatility Models to compare models' performance, and ...
0
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0
answers
53
views
Does arbitrage theory actually help in practice? If so, how?
Am wondering if arbitrage theory (the ones defined "classically" with stochastic processes, martingales, etc.) is actually helpful in practice for an actual trader beyond simply having an ...
- 1
0
votes
0
answers
45
views
Derive the convexity adjustment for inflation YoY swap with unconventional payoff
I'm trying to solve for the convexity adjustment for an inflation YoY swap with unconventional payoff, where $I_i$ is CPI at time i:
$Notional * ([I_i/I_{i-1}]^{Day Count Fraction} - 1)$
In the normal ...
- 1
0
votes
0
answers
13
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Power-utility function for calculating Certainty equivalent
I have a question regarding how i should calculate 3.2-3.4, currently studying for an exam. What i don't get is how to acctually derive the certainty equivalent from the expected utility of gross ...
- 1
0
votes
1
answer
46
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Is sorting stocks into portfolio mandatory in Fama-French model?
I am currently doing a report regarding Fama and French 3 and 5 factors model. I was provided 3 companies with each of its daily stock return from 2015-2020, and the values of all 5 factors during ...
1
vote
1
answer
34
views
What is the meaning of Leverage ratio consuming business
Leverage ratio (LR) is defined by the ratio between Tier-1 capital and total exposure (off and on balance-sheet exposure), which does not consider credit-worthiness.
It is said that:
[loans to] ...
- 373
0
votes
1
answer
48
views
Put-Call Parity; Time Value of Money
The intrinsic value of a call option is found by subtracting the discounted strike price from the current share price:
$IV = S - X/e^{rT}$
Put-Call parity:
$S + p = c + X/e^{rT}$
$c = p + (S - X/e^{rT}...
- 1
0
votes
1
answer
36
views
IFRS 9 PiT-PD model when the lagged dependency exceeds one year
It is a common approach to model the point-in-time PD (PiT PD; meaning that the PD depends on the current or lagged economy) by regressing default rates on current or past macro variables (such as GDP ...
- 13.6k
1
vote
2
answers
84
views
How do we price a Non-USD currency FX Forward pair by using cross-currency basis for each currency?
For e.g., when pricing a GBPUSD FX-Forward we build the USD SOFR curve through which we get USD risk-free rate. For the GBP risk-free rate, we use the sum of GBPUSD Basis and SONIA. However, if we ...
- 11
2
votes
0
answers
58
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Kou model - can't reproduce prices of European Option from Toivanen and Forsyth [duplicate]
I have implemented the Kou option model for pricing vanilla option. I have checked that my program can replicate the price of the option in the original paper of 2002. However, when I use it to price ...
- 21
1
vote
0
answers
52
views
modelling time series using semi-martingale process
During this week lecture my professor said that the semimartingale( brownian motion contamined by noise) is a model in reduced form because we do not specify the dynamic which leads to price ...
- 37
0
votes
0
answers
38
views
Backtesting on factor model residual returns
I've heard in quantitative equity strategies, people backtest signals on residual returns. How does this work in practice? Do people find signals that forecast residual returns and then run the full ...
- 470
0
votes
2
answers
70
views
implied volatility for close to expiry ATM options vs VIX
All throughout my MFE I was told that implied volatility for close to expiry ATM options is a reasonable estimate for current volatility and tracks realised vol pretty well. Then why does VIX measure ...
0
votes
0
answers
22
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Searching for minute binned OHLCV Cryptocurrency data from 5 January 2018 to 7 September 2018
As the title states, searching for OHLCV data (USD) from the dates listed for these coins:
[ADA, BCH, CVC, DASH, EOS, ETC, ETH, LTC, MANA, OMG, BCN, BTC, CND, DATA, ETP, GNT, NEO, NXT, QASH]
I'm a ...
0
votes
0
answers
41
views
How does shorting ZCBs to immunize portfolio work?
Let's say that we have a portfolio of bonds with face value of $1,000,000. The bonds are 3 year maturity with 4% coupon. The yield curve is flat at 8%. We want to create a hedging portfolio which will ...
- 1
1
vote
1
answer
194
views
Why stock beta is not equal to its index weight?
Index is a linear combination of stock prices with known weights. In case index is equally weighted, the weights are fixed. Beta measures stock sensitivity to index - by how much stock moves when ...
- 117
0
votes
0
answers
62
views
Ruin Probability Question
In an insurance company the number of claims are modelled as a Poisson process with rate $\lambda>0$. Assume that the size of all claims is a fixed amount $\alpha>0$, the initial surplus is ...
1
vote
0
answers
52
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Intuition behind the benefits of Stochastic Local Volatility (SLV) models [duplicate]
There have been various posts on this topic, but they don't really discuss the intuition behind the benefits of the stochastic local volatility (SLV) models over normal stochastic volatility (SV) ...
2
votes
0
answers
55
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Reinvesting the dividends of a dividend paying stock
Suppose we have a dividend paying stock that has the following dynamics:
$$dS_t=S_t((\mu-q)dt+\sigma dW_t)$$
With a continuous dividend yield $q$. What is the portfolio $Y_t$ that results out of ...
- 33
0
votes
1
answer
56
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What is the unit of DTS (and why)?
For bonds I've newly seen the measure DTS, spread duration times spread. The pnl is then approximated
$$ V = -DTS \frac{\Delta S}{S}$$
where $S$ the current spread and $\Delta S$ the spread change. My ...
- 147
0
votes
1
answer
138
views
QuantLib: How to price or construct a zero coupon swap using Quantlib
I am trying to construct and price the zero coupon swap. However its giving me the AttributeError: module 'Quantlib' has no attribute 'ZeroCouponSwap'.
Please let me know how to price the zero coupon ...
- 37
0
votes
1
answer
35
views
When you have negative weights in the context of portfolio construction, what is the correct way normalize them?
For context, I am building an eigenportfolio following the conventions of Avellaneda and Lee Statistical Arbitrage in the U.S. Equities Market (2008), and I get negative weights for eigenportfolios 2,...
0
votes
1
answer
50
views
Expected loss of investment over 30 years
Let $V_{30}$ denote the value of my portfolio after 30 years. Each year, I add 1000\$ and rebalance my portfolio such that invest $c_1$ in a risky asset and $c_2$ in a risk-free bond. Denote the ...
- 101
0
votes
0
answers
79
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What will be the payoff equation of a GBPUSD European Exotic option/FX forward with Notional in USD [duplicate]
Given the currency pair , GBPUSD with
spot price as $S_t$ at time $t$, Strike price as $K$, $I$ is an indicator function indicating if GBPUSD is below the "Knock-in-Rate" at expiry, $L$ ...
- 11
0
votes
1
answer
110
views
How to calculate VaR given mean and sd?
Sarah manages a hedge fund with a portfolio valued at \$2,000,000. The portfolio's daily returns have a standard deviation of \$3,000 and an average daily return of \$1,200. Calculate the five-day VAR ...
- 13