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4
votes
1answer
656 views

Integrating log-normal

The usual log normal model in differential form is: $dS = \mu S dt + \sigma S dX$ where $dX$ is the stochastic part, so $\frac{dS}{S} = \mu dt + \sigma dX$ (1) and we normally solve this by ...
1
vote
1answer
625 views

Unsystematic/Idiosyncratic/Firm-specific volatility/variance in the market model?

I was asked to use idiosyncratic volatility as a regressor in a cross-sectional regression upon cross-sectional returns as the dependent variable. Returns can be thought of as the raw log stock return ...
5
votes
0answers
651 views

VaR backtesting with overlapping time intervals

Of course the issue here is dependence: can it be removed or accounted for (in independence tests too, which of course would be troublesome)? There's a lot of literature on regression in this setting, ...
8
votes
2answers
3k views

Comparing MVO with Resampled Efficient Frontier

My question: How can I compare the Resampled Frontier (REF) to the standard MVO frontier when I have been provided with $\mu$, $\Omega$, and don't have access to true future data to test real out of ...
1
vote
1answer
399 views

equity linked notes (bull/bear equity performance bonds)

I have to price what my lecturer calls "Bull and Bear Equity Performance Bonds". Basically there's dates $t_i \in [0,T]$, where $t_i - t_{i-1}$ is the same for all choice of $i$. On each date the bull ...
0
votes
1answer
614 views

S&P 500 P/E percentile

I am researching the past five year return for the securities in the top and bottom 10 percentile of the S&P 500 on date 5 years ago. I used Bloomberg to get this data. When I searched for the ...
6
votes
5answers
3k views

Fastest solver possible for portfolio optimization

I am using quadprog in MATLAB for very simple mean-variance optimization, with less than 100 assets. It is quite fast but if I run a strategy with daily ...
8
votes
2answers
4k views

Strategies for Liar's Poker

This question is only tangentially related to quantitative finance. Scott Patterson's book The Quants describes how a quant at Kidder Peabody figured out a strategy to playing Liar's Poker in the late ...
7
votes
1answer
4k views

What happens if a custodian bank defaults?

This question follows up my answer and the related comment to this post and in general relates to counterparty risk. When you buy a financial asset, this asset goes in your account at your custodian ...
8
votes
4answers
413 views

Government bonds with negative yield

In the recent time-series of bonds issued by (for example) Germany, Austria and France we see an unfamiliar phenomenon: negative yields. This is mainly the issue on the short end of the yield curve. ...
11
votes
4answers
7k views

Library of basic indicators

I am looking to start developing a trend following strategy and have been looking to do something in either C# or Java and wondered if there was a library or framework out there that would make ...
1
vote
2answers
238 views

Trade Count Time Series

Is historical information on the counts of trades in single stocks, futures, options etc. available somewhere for download or purchase? If not, which ways can you think of to gather it?
5
votes
6answers
772 views

Encyclopedia of Statistical Tests

I am aware of: Encyclopedia of Chart Patterns, Encyclopedia of Technical Analysis. Question I'm wondering if there's something similar, but in the form of: "Encyclopedia of Statistical Backtesting ...
2
votes
1answer
695 views

normalized accumulation distribution

I am looking for a way to take an accumulation/distribution indicator and normalize it so I can compare a bunch of stocks with stock prices that have no relationship with each other. EDIT: This ...
5
votes
1answer
349 views

Average beta of index consitutents w.r.t. the index is 0.60

I have 1 year time series data of 300 constituents of the Australian All Ordinaries index (which is composed of 491 firms). The missing firms are mostly smaller firms. I run the market model $R_{it} =...
15
votes
3answers
13k views

Why does the adjusted closing price take into account dividends?

I'm trying to get an intuition as to why the adjusted closing price includes a dividend adjustment: \begin{equation} 1 - \frac{dividend}{close} \end{equation} I understand why the adjusted closing ...
3
votes
1answer
566 views

How would you hedge this structure?

I have a contingent claim and I want to find out what is the best structure to meet the continent claim, how to price it and how to hedge it. I am looking more for a qualitative answer. Suppose I ...
21
votes
1answer
16k views

Discrete returns versus log returns of assets

There have been similar posts here already but nevertheless I find the question worth posting: why do some people claim that log returns of assets are more suitable for statistics than discrete ...
8
votes
3answers
1k views

Using QuickFIX in a C project

QuickFIX is a well-known open-source implementation of the FIX protocol. This library has been ported to numerous languages, though for the moment I am concentrating the on C/C++ implementation. ...
3
votes
1answer
84 views

Accounting for Withdrawals

I am trying to wrap my head around the proper way to do this. I would like to simulate the portfolio value adjusted for inflation with a fixed withdrawal rate. To simulate withdrawal rate, I will ...
6
votes
2answers
2k views

Code for Evidence Based Technical Analysis

I recently purchased http://www.amazon.com/Evidence-Based-Technical-Analysis-Scientific-Statistical/dp/0470008741 Is there an open source repository that contains (or contains as close as possible): ...
2
votes
1answer
4k views

What does this formula (to derive annualized volatility from VaR) mean?

I'm faced with the formula shown in the image below, which I just don't understand, in part because I've no grounding in stats, and in part because I don't even understand the notation: What's going ...
5
votes
3answers
507 views

How do you handle Calendars in a .NET quant system?

I have developed an analytic platform in .NET, but I now have to tackle the problem of data cleaning which first starts by finding holes in time series, before actually looking to find inconsistent ...
2
votes
0answers
242 views

Modeling asset performance to Bitcoin revenue

I'm attempting to model asset performance to Bitcoin revenue, which is a driving force in the Bitcoin community. Question Is there any model, or research being done that tracks "hashes per second" (...
2
votes
1answer
298 views

Fastest algorithm for extracting 25% and 75% marks

I'm hand rolling some visualization algorithms. Extracting the min/max of a time series is $O(n)$, for n entries. If I want the 25% and 75% mark, I could use an $O(n \log n)$ time sort, then get the ...
3
votes
1answer
684 views

Unsystematic and systematic risk of a portfolio

I have 8 country stock indexes and 1 world stock index. I do not actually have time series data but I'm given the following data: $\mu$, the vector of expected future returns for all 8 country ...
8
votes
4answers
5k views

Markowitz mean-variance optimization as “error maximization”

I hear it said a lot that standard MV optimization "maximizes errors". But I can't find a good explanation for what exactly they mean by this "maximization" of estimation error. I understand that if ...
4
votes
1answer
138 views

Aftcast Generation

Aftcast is a way of simulating equity curves for different start years, usually from a large sample data ~100 years. Its kind of like start date sensitivity testing but in my case, I incorporated ...
3
votes
1answer
4k views

Calculate the “ten year zero rate” given two bonds with two prices

I have a little question and need some help with the notation. So, the question goes as follows: A bond with a maturity of ten years that pays annual coupons of 8% has a price of \$90. A bond with ...
2
votes
2answers
738 views

What is the instantaneous P&L of a Variance Swap?

What is the instantaneous P&L of a variance swap. Is it $(\sigma^{2}_{t}-\sigma^{2}_{implied})dt$?
2
votes
2answers
1k views

Does amortization of bond start accumulating on trade date or settlement date?

I am sorry if this is not appropriate here. We are building a wealth management system and I really would like to know whether amortization of bond start accumulating on trade date or settlement date ...
4
votes
1answer
2k views

Modelling VIX Futures for risk management

I would like to model VIX futures. The aim is not pricing but risk management. Thus I want to get risk measures like volatility right and be able to accurately calculate correlations when the VIX ...
2
votes
2answers
622 views

Evaluating forecasting algorithm

I am trying to evaluate a forecasting algorithm for stock price prediction. However, the performance of the algorithm may be very much tied to the trading strategy. Is there a systematic way for ...
4
votes
1answer
916 views

mortgage prepayment model

I am trying to develop my own MBS prepayment model. I am confused by the terms SMM and CPR. Are they estimates/models in themselves or are they ACTUAL data for the MBS pool. where can I find actual ...
2
votes
1answer
2k views

Portfolio Greek Exposure Equations

What are the calculations for calculating greek exposures in a portfolio of equities and equity options? I think I have them but I want to be sure. Are these correct (for vanilla options)? ...
10
votes
1answer
4k views

SP500 sector weights - how do they change?

The weights of the nine S&P equity sector indexes vary over time. One can find measures of them in a number of different formats: S&P 500 Sector SPDRs - historical sector weights Here's ...
2
votes
0answers
114 views

Textbook / Reports on Alphanomics

Look at ACCT 340 @ http://www.gsb.stanford.edu/research/courses/acctg.html I've read some of the research papers written by the Professor, and the material is very interesting. However, I'm looking ...
2
votes
2answers
171 views

How can I estimate the parameters of an option value model of retirement?

I am modelling an option value model of retirement, see for instance Stock and Wise (1990). I am however not sure to which class of problems this model falls into and hence which optimization method I ...
13
votes
1answer
571 views

Can Hurst exponent be used to characterize nonlinear dependence in time series?

It appears to me that the answer is no, because Hurst exponent measures persistence in terms of autocorrelation, which is a linear measure. So even if a time series of asset returns is driven by ...
3
votes
4answers
1k views

How to compute interest rate futures spread ratio?

I am confused on how to compute the spread ratio. For example, this is example I came across with my broker - Consider 2 contracts Bobl and Euribor. The DV01 of Bobl i 44.8 and Euribor is 25. To ...
3
votes
1answer
805 views

Does Ito/Malliavin calculus have any applications helpful for direction based trading?

I'm an aspiring computer scientist who want to move into algorithmic trading at some point. At the moment I'm mostly focusing on courses in machine learning/data analysis etc. but I've noticed that ...
3
votes
1answer
214 views

Historical data on short rates

I would like to backtest a short-equity strategy. I'm looking for historical data on the availability of shares and cost to short certain stocks. Does anyone know of such data being available anywhere?...
2
votes
1answer
207 views

Observed market price for the August-Greece-paid bonds were the NPV of the bond or of an option?

The bonds which Greece has paid had been valued by market as junk once, just before their payment. Given that the observed market value is the net present value of the instrument, why were they so low?...
5
votes
2answers
3k views

Computing FX forward delivery dates

I'm looking for a precise definition of how FX outright delivery dates are computed. Chapter 1 of the book 'Foreign Exchange Option Pricing: A Practitioners Guide' (this chapter can be found here) ...
2
votes
1answer
981 views

Question on OptionMetrics: “Strike Price times 1000” differs too much from Index price

I have a question regarding the strike price that is given on OptionMetrics. My goal is to primarily retrieve options prices of a specific maturity with strike prices that are 20% in-the-money, at-the-...
7
votes
1answer
490 views

NYSE Early Close Rules (July 4th and Dec. 25th)

Does the NYSE provide a list of rules for determining when to close at 1:00 for a holiday? I have found a list of upcoming half-days here but I would like to know the rules so that I don't have to ...
8
votes
2answers
9k views

Interpolating FX forward points

When computing an FX forward rate for an expiry that is not explicitly quoted, it seems to me that a reasonable way to do it is log-linear interpolation of the two nearest outright forward rates, ...
14
votes
8answers
24k views

Data source for historical Share Outstanding totals for individual stocks?

Data is normally adjusted for splits/reverse splits, etc. The current shares outstanding is usually available. Is there a data repository that captures the shares outstanding for any point in the ...
4
votes
2answers
3k views

ROC: difference between discrete and continuous?

Using the ROC function in the R package TTR, there is a choice between continuous (the default) and discrete, but with no guidance on which you choose when. In the code the difference is: ...
6
votes
2answers
5k views

How to define the objective function for a custom optimization problem?

I would like to find the allocations that would minimize some user-defined metric (Sortino, minimum drawdown, etc) for a portfolio of assets. How would one go about formulating the objective ...

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