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58 views

Counterparty exposure for a swap [closed]

What is the exact details of swap option whose PV gives the counterparty exposure at horizon of t=15months for a payer swap of strike 1% above ATM and length 5y starting at 2y?
0
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0answers
51 views

Excel formula for Laplace distribution

I am trying to create a forecast model, projecting the number of passengers through an airport over a period of time (daily, weekly, and monthly). I've already used Excel's FORECAST and POISSON ...
1
vote
1answer
198 views

Continuous Geometric Asian Options

Assume the risk-free bond $B_t$ and the stock $S_t$ follow the dynamics of the Black & Scholes model without dividends (with interest rate r, stock drift $\mu$ and volatility $\sigma$). Let $c(t; ...
1
vote
2answers
158 views

Why do big financial groups use fx swaps to manage cash?

Can someone help me with the logic that big companies' treasury department uses fx swap to manage their cash? An example would be much appreciated!
1
vote
1answer
32 views

Stressing liquidity (time to liquidate) of a long only equity fund using participation rate or bid ask

My company is looking to launch a new long only global equity fund. The product committee wishes to see a risk analysis covering various risks, including liquidity. The main measure is time to ...
0
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0answers
38 views

Bloomberg - retrieving historical index values

I am looking at a Bloomberg index which goes out into the future (i.e. a mix of past realizations and future projections) - WNDFTTDE Index (Past and future wind capacity in Germany). While this ...
1
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0answers
68 views

How to correctly simulate volatility shocks?

I am working on the comparison of different volatility timing/target strategies on portfolios starting from different conditions (data, asset classes, calculation of realized volatility, different ...
1
vote
0answers
63 views

Why is R^2 negative on random data? [closed]

The introductory book says R^2 is between 0 and 1, but I have two randomly generated sequences and the R^2 is negative. So I read further and now understand the negative value is because R^2 ...
4
votes
1answer
99 views

How do we calcualte $E[W_sW_t|W_s]$

$W_t$ is a Brownian motion. How do we calculate this expectation? there are two cases: $s < t$ $t < s$ Do we have to distinguish the two cases or there is a unified way of calculating it
1
vote
2answers
59 views

Equivalent Martingale (/Risk Neutral) Measure Conditions

I am trying to understand EMM's and wanted to understand why we use EMM's over just martingale measures. The way we define EMM's is (for a simple one period model): Given a probability measure $\...
1
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0answers
58 views

Annualizing Sharpe Ratio using small time frames

I have coded a strategy that works 5m time frame. I know you multiply it by 252 but i am using 5m or sometimes 1h time frame. Which number do i have to chose to multiply? There are 72576 five minutes ...
3
votes
1answer
179 views

Probability Density Function of a Wiener Process Minimum

Let $W_t$ be a standard Wiener process. Find the probability density function of $m_T = min_{t\in [0,T ]}W_t$. I know that it is based of the concept of the reflection principle, but I wasn't too ...
1
vote
1answer
80 views

Estimation of LIBOR 3M periods if the period is not exactly 3M months

When generating dates of interest rate swaps, even without stub periods, we sometimes end up with periods that are less than 3 months (say 87 day). In that case do we have to apply any kind of ...
2
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0answers
47 views

what numeraire is used to price an FX forward contract

By non-arbitrage, it is easy to show the relationship between fx forward and fx spot via the domestic and foreign currency interest rates. I am wondering how we can express this in terms of the ...
2
votes
1answer
74 views

Computing T-Bill Yield across leap year boundary

Consider this T-Bill (912796TE9) that was purchased on 2019-10-30 and matures on 2020-02-06: I'm trying to work through some of the basics of the yield calculation. The days until maturity is 99. (<...
0
votes
1answer
52 views

IRR for multiple series of cash flows

I have a question on how to calculate a single IRR for a group of projects that have different start dates, but have been sold on the same date. This causes the aggregate cash flows to go from ...
1
vote
0answers
26 views

Option Bounds in a risk-averse incomplete market

I was reading the article "On option pricing bounds" by Ritchken(1985). It uses linear programming to determine options upper and lower bounds. Given a single period model, the stock price will have ...
1
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0answers
48 views

Another ZCB calculation

I am not getting the $f(t,t)dt$ term in the last equality when we have $df(t,T)=\alpha(t,T) dt +\sigma(t,T) dW$ and $f(0,t)=f^{*}(0,T)$. Instead I have an additional $\int_{t}^{T}f(0,u)du$ in the ...
1
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0answers
32 views

Are there any known text analysis NLP bots that read 8k filings, news, twits, articles - “understand” them and trade based on their derived meaning?

I want to build an NLP bot that "reads" and understands meaning and sentiment of articles, twits and trades on them. E.g. understand general sentiment of comments under important financial blog posts ...
1
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0answers
42 views

Dollar bars in Advances in Financial Machine Learning book

Does anyone have use the dollar bars for building a strategy? I would like to know what ways you guys might be interested to set the dollar bars' parameter ( the dollar value ). I have thought of one ...
2
votes
1answer
44 views

ARMA moments proof

Consider a standard ARMA(1,1) process such as $$x_t - \beta x_{t-1} = \theta u_{t-1} + u_t$$ where $u_t$ is i.i.d. $u_t \sim N(0,\sigma^2)$. I know how to derive mean and variance with stationary ...
2
votes
1answer
114 views

Efficient frontier using Post Modern Portfolio theory

I have been trying to find a way to create the efficient frontier using Post Modern Portfolio Theory (PMPT), but have failed to come across a source that mentions how to do so. I know PMPT uses ...
3
votes
1answer
114 views

Zero coupon bond calculations

I am given the following forward rate dynamics $df(t,u)=\frac{\partial}{\partial u}(\frac{\sigma^2}{2})dt-\frac{\partial}{\partial u}\sigma dW$ and want to calculate the dynamics of the ZCB $p$ via ...
1
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0answers
31 views

HJM Model proofs

I am looking for a source that possibly has the proofs for the material in the first paper on the HJM model Heath, David, et al. “Bond Pricing and the Term Structure of Interest Rates: A New ...
2
votes
1answer
65 views

Curve building for a swap

I'm a student learning how to build a swap curve, I've deposit 6m rate = 5%, fra 6-12m rate = 5.8% and 12m-18m rate= 6% and swap 2y =7% and 3y swap rate = 7.5%. I get the correct discount factors for ...
0
votes
3answers
145 views

Is EONIA swap rate really credit risk free?

I have a question linked to the EURIBOR – EONIA spread (or OIS LIBOR spread). I understand that the EURIBOR - EONIA spread is a credit risk indicator of the interbank market. There is something I ...
3
votes
1answer
99 views

Different volatility surface ( Local vol, Stochastic vol etc.)

Despite many questions about local and stochastic volatility available on this forum, i still have a few doubts left. Essentially I am seeking validation whether I am interpreting things correctly. ...
2
votes
1answer
52 views

How to test ESG score as a factor against traditional factors

I have created my own ESG scoring system. I would like to test it as a factor against the traditional factors (growth, Value, quality, size etc) In essence a correlation test. Could anyone please ...
0
votes
1answer
102 views

Portfolio rebalancing question

I found this question and am not too sure how to answer it. How would you determine the minimum cash deposit,m, needed to move a portfolio back to it's target weights, given only the following: ...
1
vote
0answers
44 views

Bloomberg C# / CS.NET SDK for STDY Functions

I have downloaded and installed the CS.NET SDK from STDY. I have installed this as admin and had no problems with the install. However, when I open VS2017 (last version supported by BBG) I do not see ...
3
votes
0answers
42 views

Are radial basis functions popular in least squares monte carlo option pricing?

In a Longstaff-Schwarz setting option on several underlyings can be priced using least squares monte carlo. Using suitable set of basis functions, continuation values can be approximated using ...
0
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0answers
10 views

Sample uniqueness and sample weight in AFML book

Are they pointing towards to the same thing? I am confused on the term here. Thanks if anyone could help.
3
votes
1answer
112 views

stochastic dominance displaced diffusions

Suppose I have two processes both satisfying a displace lognormal diffusion: $$ dX(t) = \alpha(t)[X(t) - a] dW(t) $$ $$ dY(t) = \beta(t)[Y(t) - b] dW(t) $$ Note that the processes are perfectly ...
0
votes
1answer
112 views

PCA FOR STOCK PICKING

lets say I am an equity analyst and I want to figure out what fundamental metrics I should use when I am analyzing an industry , I can use pca on a bunch of stocks in an industry using their ...
0
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0answers
35 views

Pca for Portfolio Theory

given the fact that if you take the portfolio returns for different assets in a portfolio the first principle component represents the market exposure of the portfolio and the second principle ...
0
votes
0answers
36 views

Automatically gathering closing prices for stocks listed on different exchanges

I am looking at the holdings for a particular ETF. A lot of the tickers represent stocks on different exchanges. For example for one of the holdings the stock appears on Yahoo Finance, but for another ...
1
vote
1answer
35 views

Is there a quicker algorithm for calculating 'drifted' portfolio weights? (R, Pandas/NumPy, MATLAB)

'Sup, QuantSX. BLOT (Bottom Line On Top): Is there a nice clean algorithm for rapidly calculating portfolio weight drift? In R, Python or MATLAB - I'm not fussed which. Details I'm in the final ...
0
votes
0answers
16 views

How do you find a company average quality of income ratio?

Do you divide the weight average number of shares outstanding basic and diluted/by the net income? Or just add the current year and prior year quality of income ratio divide by two?
0
votes
0answers
45 views

How does this follow from Ito's formula?

Let $S_t$ be a geometric brownian motion and let $M_t = \sup_{0 \le u \le t} S_t$ be the maximum process. Define $X_t = \frac{M_t}{S_t}$. A book I am reading states the following: How does this ...
1
vote
0answers
53 views

What does “first-order effect” mean?

In the textbook Asset Pricing by John Cochrane, on p. 25, it says: "This prediction holds even if the payoff $x$ is highly volatile and investors are highly risk averse. The reason is simple: if you ...
0
votes
1answer
29 views

quarterly S&P price

I need the quarterly S&P price, but only have the daily data. What is the official definition of the quarterly price? Is it just the average or is it the closing (opening) price of e.g. march ...
0
votes
1answer
19 views

Mapping/crosswalk between SIC to GICS industry classification systems

Is anyone aware of a public SIC to GICS industry classification crosswalk? I am aware of a mapping/crosswalk for: SIC to NAICS ISIC to NAICS
0
votes
0answers
36 views

How effective is simplex projection for portfolio sizing? How is Euclidean projection different?

I am looking at a backtesting framework where the authors do a simplex projection to get final long-only weights. They also have a version with Euclidean projection to simplex. I wanted to understand ...
1
vote
2answers
102 views

What duration of treasuries to add to portfolio of stocks

If I have a portfolio of stocks and want to add treasuries would it be better to add very long duration treasuries or a levered position in shorter duration treasuries? Why?
-1
votes
1answer
38 views

Example of an ATMF trade in FX market [closed]

Pls give an example of ATMF and how is it different from a regular ATM trade?
1
vote
2answers
88 views

Instantaneous change in value of portfolio

I am trying to figure out an intuitive explanation for the instantaneous change for the value of a portfolio (essentially I'm creating a self-financing portfolio to replicate a derivative payoff). ...
1
vote
1answer
66 views

Where this HJB equation comes from?

I am reading the paper: "Dealing with the Inventory Risk. A solution to the market making problem", by Olivier Guéant, C.-A. L and Joaquin Fernandez Tapia. On top of page 6, there is a HJB equation I ...
0
votes
1answer
70 views

Prove that the portfolio that maximizes utility lies on the efficient frontier

When maximizing mean-variance utility in a portfolio optimization framework $max \{R - \lambda \sigma ^2\}$ where R is portfolio return, $\lambda$ is a risk aversion parameter, and $\sigma^2$ is ...
1
vote
2answers
50 views

Where can one find the daily prices of commodity futures of multiple maturities and time to expiration of the contracts?

I'm currently working on an algorithm to estimate implied spot prices on commodity futures using a pretty old paper (Schwartz 1997). My algorithm works just fine, I just need to run the data to ...
0
votes
1answer
30 views

What is the meaning of multiplying price of contingent claim with e.g consumption level?

In the textbook Asset Pricing by John Cochrane, on p. 57, a budget constraint of a Lagrange optimization is: $c + \Sigma_s pc(s) c(s) = y + \Sigma_s pc(s) y(s) $ $pc(s)$ is "price today of ...

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