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33 views

Non-Trivial ATM Volatility in Vol smile construction from Market data on US Equities

have 2 quick questions please help. Constructing vol smile (OTM puts & OTM calls) from US equity market data. for Parabolas fit or other methods, the choice/method for ATM vol is non-trivial, ...
3
votes
1answer
139 views

Is scaled Sharpe ratio a t-statistic?

I was just reading Quantitative Trading: How to Build Your Own Algorithmic Trading Business and it suggests annualizing Sharpe ratio in order to compare performance of strategies: $$\text{Annualized ...
1
vote
1answer
103 views

Is there a ZABR model on Quantlib XL

I am relatively new to QuantlibXL and would like to build a ZABR model in excel. But I cant find much help online. Any help would be appreciated
0
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0answers
38 views

Cumulative returns from ROI of individual trades

I've a series of ROIs: $R(n) = [r_1, r_2, ... r_n]$ generated from taking $n$ trades. Each ROI value is in percent $[0, 1]$. How do I generate cumulative return $C(n)$ from this data? My understanding ...
3
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0answers
71 views

$\frac{\partial C_{BS}}{\partial T}$ in local volatility derivation in terms of implied volatility

In Gatheral's book, in the derivation of local volatility in terms of implied volatility, we use the regular Dupire formula $$ \frac{\partial C}{\partial T} = \frac{1}{2} \sigma^{2}K^{2}\frac{\partial^...
-2
votes
0answers
54 views

Interest Rates and Present Value Calculation [closed]

I'm trying to answer the hypothetical question posted below but I'm very confused about its wording regarding the interest rate. If I assume that the interest is compounded monthly (I'm guessing this ...
2
votes
0answers
47 views

How to find the risk-free rate and dividend rate for S&P 500 index options?

I'm currently working on a project using S&P 500 index options(European) data. I haven't done any empirical experiments before, so I'm confused how to find the corresponding risk-free rate and the ...
0
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0answers
30 views

problem with calibration of Levy models [closed]

Hey I try to calibrate different Levy models (VG, CGMY, Meixner,Kou,Merton) by minimizing RMSE but the result are very strange and unsatisfactory (I use COS method). For calibration I use OTM call and ...
1
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1answer
63 views

question about leverage

I think that I understand how leverage works if one had a long strategy in equities and had some (roughly) fixed market value invested over time. Suppose that an investor has 10 million invested in ...
0
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0answers
32 views

How does the real market calculate the option prices when strikes are very small?

I'm working on the S&P500 European index options data(call options). On 2017-10-23, we have the closing price as 2564.98, and risk free rate is 1.09%(3 months treasury bill). If I choose the ...
0
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1answer
81 views

Are there any public LIBOR Data sources?

I am looking for 1 and 3 month LIBOR rates available through an API. I am familiar with the rates available on FRED, but they are only available with a 1 week lag. Unfortunately, I'm looking for no ...
0
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0answers
26 views

PCA on mixed types of returns

I'm looking for some resources on how to use the PCA technique in the case of mixed return types, i.e. lognormal (say for FX, equity indices) and normal (rates). The idea is to create a factor model ...
1
vote
1answer
145 views

How to perform Monte Carlo simulations to price a Forward contract under the Schwartz mean reverting model?

Objective: (1) Implement the Euler Explicit Method for solving the PDE for option prices under the Schwartz mean reverting model. (2) Compare with a Monte Carlo simulation. I'm stuck with point 1 (...
0
votes
1answer
51 views

How to get exposure to realised volatility while being vega neutral?

Let's say I am predicting the realised volatility of a stock index. I am buying or selling straddles based on whether the predicted vol is higher or lower than the implied ATM volatility for the ...
2
votes
0answers
63 views

Brownian function and Clark's formula

I was reading a paper (link) from Richard Bass about Brownian functionals, and came across the following passage : Let $X_t$ be a Brownian motion, $F_t$ its filtration and $g$ a real-valued function. ...
0
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1answer
41 views

Number of days between two dates based on a given a calendar

I wanted to calculate the number of trading days between 2 given days. There is a discussion in https://stackoverflow.com/questions/62292979/using-quantlib-in-python-how-do-i-get-the-number-of-days-...
2
votes
1answer
153 views

Do stock returns show positive skewness?

Do highly liquid (blue chip) stocks exhibit positive skewness more than negative skewness? If so, would positive, rather than negative, skewness be an appropriate and intuitive prior when modeling ...
0
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0answers
14 views

Real-time stock data/15 mins quotes for US stock exchanges? [duplicate]

I am trying to figure of if there are free sources or inexpensive sources to get this type of data. I see sites using BATS data, but BATS seems to have been bought out by CBOE and doesn't seem to have ...
3
votes
1answer
255 views

Clarification on Deriving Ito's Lemma

The classical approach to deriving Ito's Lemma is to assume we have some smooth function $f(x,t)$ which is at least twice differentiable in the first argument and continuously differentiable in the ...
0
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0answers
38 views

Carr and Madan algorithm to avoid arbitrage in oprion prices

Hey in this text (https://arxiv.org/abs/1107.1834) in section 7 is described an algorithm which can delete options which generate an arbitrage. $C_ij$ is call option price with strike $K_i$ and ...
-2
votes
0answers
92 views

Would betting on network node traffic or behaviour be considered illegal in the US?

While taking this intro Coursera class https://www.coursera.org/learn/financial-markets-global. There was a student which asked the professor if anyone can start an exchange and whether it would be ...
0
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0answers
139 views

Portfolio Optimization via Entropy Pooling in R (Meucci)

does anybody have experience with the Entropy Pooling Approach by Meucci in R? I am currently trying to do a portfolio optimization with Stocks & Bonds, where a 101 example would be very helpful. ...
0
votes
1answer
60 views

Why are model-free implied volatility indices (like VIX) only available for large indices and a few large stocks?

The CBOE VIX (i.e. model-free implied volatility) is only available for larger stock market indices and a few large stocks (see the CBOE website). As I am currently working on deriving VIX for a ...
1
vote
0answers
36 views

How to prepare data for calibration

I want to calibrate different models by minimizing RMSE. When I use data from Schoutens (2003) everything is OK i.e I get reasonable parameters. The problem appears when I try to calibrate models to ...
3
votes
0answers
132 views

Solve the Schwartz mean reverting PDE for option pricing using Euler explicit method (matlab)

Objective: Implement the Euler Explict Method for solving the PDE for option prices under the Schwartz mean reverting model. The price evolution of a commodity can be described by the Schwartz SDE $$...
1
vote
0answers
42 views

garch(1,1) Annualised Volitility with python

I am trying to calculate the annualized Volatility of given returns for a stock with Garch(1,1) on python using a code I found online. The value I should be getting is around 27, but the value I am ...
-1
votes
0answers
26 views

Early Exercise Premium representation of the value function [closed]

I'm dealing with the perpetual American option in Finite Time Horizon and we know that there the value function is given by $v(t,b(t)) = K-b(t)$ = sum of the European Option with maturity $T-t$ and ...
0
votes
0answers
19 views

Vertical Spreads : Long/Bull Call vs. and Short/Bull Put?

I modified Kevin Ott's Call Debit Spread and Put Credit Spread payoff graphs that appear similar. 1. Doubtless I can see that the former debits you, and the latter credits you. But how else do these ...
0
votes
0answers
19 views

Using sec reports scores to predicts company's performance

I'm a software engineer trying to learn some new stuff using stocks analysis as my learning project. I'm trying to do sentiment analysis to predict better stocks prices trends. the first step I'm ...
0
votes
1answer
79 views

Hazard rate and Term structure model

About the paper of Pan and Singleton 2008 “Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads”, once the lambdas (hazard rates) for the different tenors of the term structure ...
0
votes
1answer
52 views

Is there any way to avoid using Handle

I was trying to replicate one example from http://www.bnikolic.co.uk/blog/ql-fx-option-simple.html In QuantLib general practice is to use Handle to manage change in ...
-1
votes
1answer
40 views

Is a company's exact debt structure publicly available to investors?

I am relatively new to investing and would like to look into some of the details of a few companies. As one example, we can use DAL. To assess the financial future of the company, it would be ...
1
vote
3answers
68 views

Where can one find implied OIS and Libor interest rates in Bloomberg?

I am struggling to find future interest rates for various tenors: **EUR: Eonia OIS rates: O/N (fixing), 1W, (2W), 1M, 3M, 6M, (9M), 12M Euribor rates: 1W, (2W), 1M, 3M, 6M, (9M), 12M, 18M, 2Y NOTE: ...
0
votes
0answers
53 views

Need help with Pairs Trading Performance Calculation

I currently write my master thesis about pairs trading. I am now stuck at calculating the performance of my pairs correctly: In my first column, I have got the current position in the market (0=...
1
vote
1answer
53 views

Forward Swap Rate calculation using Quantlib

Here, we have an example for the calculation of Forward Swap Rate - How to compute forward swap rates? Below is my Forward Swap - ...
3
votes
1answer
56 views

Vertical Spreads : Short/Bear Call vs. and Long/Bear Put?

I modified Kevin Ott's payoff diagrams from Call Credit Spread and Put Debit Spread that appear identical. 1. Doubtless I can see that the former credits you, and the latter debits you. But how else ...
1
vote
0answers
34 views

Cumulants of Meixner distribution

Hey characteristic function of Meixner distribution is: $$\Phi(u)=\left(\frac{\cos(\beta/2)}{\cosh((\alpha u-i\beta)/2}\right)^{2\delta}$$ I need to calculate the first, second, and fourth cumulant of ...
3
votes
0answers
68 views

Why a model like GARCH is only good for daily volatility and not for intraday volatilities?

I´m currently looking to implement an intraday volatility model and I´m new at the quant world and I learned how superior is GARCH family is for daily volatilities, but in the research stage I found ...
1
vote
0answers
40 views

Size Option in Vanilla

How to compute the price of a vanilla option (or a forward starting option) if there is extra optionality to change the Notional by a pre-determined percentage ($a%$, say)at some future time $t$ ...
1
vote
0answers
78 views

Can arbitrage arguments be rearranged to avoid selling? (Hull, Chapter 5)

Suppose forward contracts are traded on a consumption asset, so there aren't necessarily people ready and willing to sell the asset to jump on an arbitrage opportunity. Suppose the asset has no yield, ...
2
votes
1answer
84 views

forward contract on a defaultable zero-coupon bond

I'am trying to calculate the price of a forward on a defaultable zero-coupon bond. It is also true that the price will be given by Price a forward contract on a zero-coupon bond ? I guess the ...
3
votes
2answers
667 views

Why there is no Bid Ask Spread in Futures Markets?

I heard that there is no bid-ask spread in futures markets. Could anyone explain why there would be no difference between the selling and buying price of a futures contract? Thanks in advance!
0
votes
0answers
52 views

Behavior of Vega PnL for 6 month ATM S&P500 option

I am interpolating the vol surface for 6 months maturity from price data for S&P500 options. For this vol smile I compute the ATM strike. I then assume I can buy a call option at this strike, ...
1
vote
0answers
70 views

Counterparty Risk [duplicate]

I am looking for some good text books for Counterparty risk management and measurement with many working examples. Could you please suggest few such books. Thanks for your help.
2
votes
1answer
78 views

Setting up arbitrage strategy in R

I am trying to construct an arbitrage portfolio $\textbf{x}$ such that $S^T\textbf{x} = 0$ and $A\textbf{x} \geq \textbf{0}$, where $A$ is the payoff matrix at $t=1$ and $S$ is the price at $t=0$. I ...
1
vote
1answer
48 views

Calculating Dollar-Neutral Strategy Net Return

An example in the book, Quantiative Trading, the net return of a dollar neutral strategy of IGE and SPY is calculated. ...
2
votes
1answer
97 views

Calibrate Stochastic Volatility Model

For stochastic volatility models, and any vol model I know, it seems the standard approach is to calibrate the model from option prices. As other user said, this seems a chicken egg problem - how do I ...
0
votes
0answers
14 views

Call options data from 18 April 2002 (Schoutens 2003)

Hey I would like to calibrate different models to call options prices from 18 April 2002. Schoutens used this data for calibration but unfortunately he write only months (screen). What can i do in ...
0
votes
2answers
55 views

Can repos be exposed to FX Delta risk?

I am a beginner to Repos. In the place I work there are multiple risks (FX delta, IR delta, etc.) listed under Repos. However, one of my colleagues told me to ignore "FX delta" risk for ...
0
votes
1answer
37 views

Trading butterfly a long vol or short vol [closed]

Sorry for what could be a naive question. When is the right time to trade a butterfly i.e. (buy 10d call and put vs sell atm all notional flat) is it when implied vols are high or low (relative to ...

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