# All Questions

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421 views

### Determining bet sizes given odds

Recently, I was asked the following question in an interview with a prop trading firm. You are given the opportunity to make money by betting a total of 100 bucks on the outcome of two simultaneous ...
121 views

### Price a contingent claim with payoff $(S_{1T}-S_{2T})^+$ at time $T$

Two stocks are modelled as follows: $$dS_{1t}=S_{1t}(\mu_1dt+\sigma_{11}dW_{1t}+\sigma_{12}dW_{2t})$$ $$dS_{2t}=S_{2t}(\mu_2dt+\sigma_{21}dW_{1t}+\sigma_{22}dW_{2t})$$ with $dW_{1t}dW_{2t}=\rho dt$....
22 views

### Can someone please suggest good books for Rates Structuring? [duplicate]

I am interviewing for with a bank for their Rates Structurer. Can someone please suggest literature I can go through.
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115 views

### Bumping forward rates in Quantlib for Bartlett SABR greeks

This might be a naive question, but in order to compute the Barlett vega: $$\frac{d\sigma}{d\alpha} + \frac{d\sigma}{dF}\frac{\rho F^\beta}{\nu}$$ (for forward rate $F$, implied vol $\sigma$, and ...
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34 views

### Asian option equation

Im trying to find an equation for the discrete geometric asian option put price and are seeing a lot of differencies. Any recommondations for good papers?? I also tried to proof the call price from ...
1 vote
105 views

### Find the right module for CDI DI BRL swaps valuation Quantlib

I'm trying to find a way to price BRL CDI Swaps with Quantlib but I can't find any solutions so far - so I was wondering if anyone encountered this issue: I don't see any solution on Quantlib. I ...
1 vote
41 views

### How to adjust an assets position to target volatility in a long-short portfolio?

I have a portfolio of weights $\mathbf{x}$ where some positions in $\mathbf{x}$ are short s.t. $\Sigma_i x_i=0$ (dollar neutral). The standard way to estimate the volatility contribution per asset is ...
1 vote
32 views

### What is the meaning of the asset risk contribution in a long-short portfolio?

If I have a portfolio of weights $\mathbf{x}$ and the covariance matrix of asset returns $\Sigma$ then the volatility contribution per asset is given as standard $\mathbf{x}' \Sigma$. For a standard ...
54 views

### Fitting volatility using SABR

I have been working on generating a volatility surface for options on SOFR futures with the help of the SABR model. I am running into some trouble for low strikes in particular, in that I cannot seem ...
31 views

### ConstNotionalCrossCurrencyBasisSwapRateHelper in QuantLib doesn't give expected result

I'm trying to bootstrap to get discount curve based on cross currency basis swap using ConstNotionalCrossCurrencyBasisSwapRateHelper in QuantLib. As a test, I tried to bootstrap the discount curve ...
53 views

### futures exposure targeting (spot vs futures price)

I'm confused over if I should use spot or futures price when targeting a certain exposure. There are many websites that state you should use the contract size * futures price. Other websites, however, ...
84 views

### What do the existence and parameters of an efficient investment tell you about the value of a risk-free return?

I'm working on an unassessed course problem, Consider the following risky investments \begin{matrix} \text{name} & \text{expected return} & \text{standard deviation of return} \\ A & 9\% &...
1 vote
26 views

### I am trying to compute the the tail of a future roll using the ratio of forward dv01

I am trying to compute the the tail of a future roll using the ratio of forward dv01, per the link CME: Calendar Spreads with Tails : I am trying to compute the the tail of a future roll using the ...
75 views

### Calculating Ex Post Sharp Ratio's for decile portfolios

Dear Stack community, I hereby would like to ask what the correct calculation is for calculating Ex Post Sharp Ratio's. If I am correct, I already know that I am supposed to divide the average excess ...
21 views

### Why does swap fair rate not change 1:1 with shifted curve? [duplicate]

I'm trying to calculate things like dv01 for OIS interest rate swaps by shifting the swap curve (by 100bp say) and revaluing swaps on the shifted curve. However, I noticed that the swap rate (QuantLib'...
1 vote
99 views

### Why is Feynman-Kac formula applicable in Burgard-Kjaers PDE paper?

In the paper Partial Differential Equation Representation of Derivatives with Bilateral Counterparty Risk and Funding Costs by Burgard and Kjaer, they say we may formally apply the Feynman-Kac theorem ...
59 views

### Determine expected geometric return from Sharpe ratio

I'm trying to calculate the expected annual geometric return, given that I'm provided with an annual Sharpe ratio (0.5), the yield on a 3-month T-Bill (5%) (using this yield as a proxy for the risk-...
37 views

### Predict a company business classification

I am trying to predict whether companies belong to a universe considered by an index provider for a particular thematic index using natural language processing techniques. In this particular example, ...
37 views

### If investors are risk-neutral, should the (equity) risk premium be zero?

I looked up ChatGPT and they stated that the (equity) risk premium should be zero for a risk-neutral world. The definition of a risk-neutral investor is that one is indifferent between additional or ...
39 views

### Order book question

This is a really simple question but I can’t figure it out. I was given this definition for trades in an order book. “A bid and an offer whose prices are the same or cross will pair, resulting in a ...
1 vote
66 views

### Calibration of $\rho$ in the heston model

When calibrating the Heston model, the gradient of the price of the call/cost function wrt $\rho$ (correlation between $S$ and $V$), is a lot less than the other parameters like $v_0$ and $\bar{v}$. ...
36 views

### Vasicek model calibration to bond prices or rates (no swaptions)

I need to calibrate Vasicek's model $dr_{t} = a(\theta - r_{t})dt + \sigma dW_{t}$ in a market with no swaptions. I was thinking in estimating $\sigma$ with historic data, but I'm in the doubt with ...
33 views

### Estimating implied probability based on prediction betting odds

I am attempting to estimate prediction betting market efficiency for a project, and I am hoping for assistance with a couple of questions. The prediction market makers add a commission to the betting ...
1 vote
67 views

### Hagan's 2002 SABR paper "Managing Smile Risk" on Dupire local vol model

I'm reading Hagan's 2002 paper Managing Smile Risk originally published on the WILMOTT magazine, and got something confusing on his comment on Dupire's local volatility model. The set up: Consider a ...
1 vote
71 views

### SOFR futures options margining

If we consider quarterly (or serial, or mid-curve) SOFR options, traded on CME. Are those options subject to margining? It is clear to me that their underlying (say, 3M SOFR futures) is margined as ...
1 vote
78 views

### Climate Models in Banking - what modeling are banks currently doing?

I'm mostly interested in knowing what banks are doing in Ireland and other Western European countries. I know, from Google searches, that banks are currently doing climate risk stress-testing, but I'm ...
139 views

### Is Bloomberg's global equity data sufficiently high quality that it can be used for backtests?

I have used other data sources like CIQ, CRSP / Compustat, and Refinitiv. While each has issues, the data were sufficiently high quality that reasonably reliable backtests could be run. I may need to ...
1 vote
80 views

### Efficient Method of Moments(EMM) for Stochastic volatility model

We are attempting to calibrate the parameters of the Heston model via EMM on historical stock price returns. However, we are first trying a simple stochastic volatility model using EMM. We have come ...
22 views

### How to obtain a complete list of US stock tickers using Alpha Vantage?

I am trying to obtain a complete list of US stock tickers using the Alpha Vantage API. I have obtained an API key from Alpha Vantage, but I am unsure of how to properly make the request to get the ...
1 vote
I'm reading Hagan's 2002 paper Managing Smile Risk originally published on the WILMOTT magazine, and got something confusing. The set up: Consider a European call option on an asset $A$ with exercise ...