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1answer
93 views

CDS - IR currency for conversion between upfront and conventional spread

I was looking at a set of CDS quotes from Markit, for USD denominated CDS, for a reference entity whose standard contract currency is EUR. The quotes were for 6 Nov 2020. Markit provide three quotes, ...
1
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0answers
151 views

1 Factor Hull And White Swaption Calibration

I'm trying to calibrate a Hull and White model with constant volatility, mean reversion and theta such that the model can reproduce the initial Term Structure. I'm using this python code adapted from &...
1
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0answers
46 views

Why does higher volatility for ATM Call Option lead to a lower risk-neutral probability of expiring ITM?

This is a follow-up question on the discussion in the thread here, from which I borrow the graph below depicting $N(d_2)$ (i.e. the risk neutral probability of a Call option expiring in the money) ...
0
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1answer
43 views

Valuation of Floating Rate bond

Let say, I have some floating rate bond where the coupon depends on 6-month Libor with semi-annual payments. In a typical text-...
0
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1answer
46 views

QuantLib Bond Yield

I think I have the same question as was asked here but I still haven't been able to resolve my issue: Excel YIELD function equivalent in python Quantlib I am trying to calculate the yield on a bond ...
1
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0answers
24 views

Appropriateness of the Bloomberg CLO Cashflow Generator

Since CLOs seem to gain in popularity because of the COVID-19 crisis, I came across the possibility in Bloomberg to generate cashflows for newly issued CLOs through the function "weighted average ...
1
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1answer
53 views

ICVS 133 Bloomberg Curve

This could be a very dumb question but as I'm making my debuts as a Quant and some things have to be clarified as I'm mostly on my own and no way of asking questions to more experienced quants. I'm ...
1
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1answer
49 views

IFRS9 - Lifetime Expected Credit Losses (ECL) Probability of Default (PD) - how do they get distributed in quarters?

Let's assume we calculate a Lifetime ECL of 5 years. How do we then distribute the expected losses in each of the following 20 quarters? Do we just divide the lifetime ECL by 20 and calculate the ...
0
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0answers
36 views

Any experience with synchronization of time series to adjust for daylight saving time?

I am currently working on a trading project where I essentially have two time series. One is high frequency intraday trading data that does not take daylight saving into account. The second one is a ...
-1
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0answers
37 views

How rising inflation translates into negative interest rates? [closed]

Anders Aslund in his famous and well-received book on Global financial crisis in the Baltic countries "How Latvia Came Through the Financial Crisis" writes: None of the big banks received ...
0
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1answer
29 views

Entropy pooling multiple views on same asset faliure

I have implemented Meucci’s Entropy pooling model in Python. Well the codes run very well until I find out that when I apply two side views on the same asset, the scipy optimizer would report a ...
0
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1answer
43 views

Trying to understand brazil derivatives market

I am trying to get a better understanding of brazil's market, specially derivs. I know they have certain instruments such as "Convertibility" (based on the yields spread between onshore and ...
0
votes
1answer
48 views

How USD indexed bonds work and what is their relation to USD futures?

I am reading about the Brazilian real devaluation crisis in 2013 around the QE3 taper announcement. As far as I understand, capital flows went back from emerging economies like Brazil to developed ...
0
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0answers
6 views

Per-user pricing / overlapping pricing

I am releasing some educational software that can track student progress. I am having trouble coming up with a good pricing scheme. I do not want it to be too cheap for single users as there is a lot ...
2
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0answers
78 views

Adding credit spread to Hull-White PDE for callable bond

I need to add credit risk (deterministic) to an already implemented rate PDE: $$\frac{\partial V}{\partial r_t}(r_t, t;T) \cdot (\theta^{\mathbb{Q}}-\alpha^{\mathbb{Q}}r_t)+\frac{1}{2}\frac{\partial^2 ...
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0answers
32 views

Entropy-implied volatility requires itself to be calculated?

\begin{align} H &= \frac{1}{2} \ln (2\pi\sigma^2) + \frac{1}{2}\\ &= \frac{1}{2} \ln (2\pi e \sigma^2) \end{align} is the analytical solution for the entropy of a Gaussian random variable, ...
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0answers
19 views

Seed Values guaranteed convergence of Implied Volatility Calculation

Looking for good seed values for Newton Raphson to guarantee convergence of implied volatility calculation for a few models, all of which are for equities that have divs. 1) Bjerksund-Stensland 2002; ...
1
vote
1answer
65 views

How to calculate theta/rho for interest rate derivatives?

For interest rate derivatives priced with the Black model, we calculate some sort of forward rate that can be inserted into the Black formula. Calculating the greeks of the Black formula is easy ...
0
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1answer
56 views

Constructing zero-curve for discounting from Coupon OIS Swaps

There are some questions and answers on this site which touch upon this topic, but none actually show step-by-step on how to bootstrap a coupon OIS Swap curve to construct a zero-curve for discounting....
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0answers
24 views

What is the market convention for the stub floating payment on a vanilla swap?

Let's say I have a plain vanilla "broken date" swap (Annual fixed, 6m float) that I enter into today (10th Nov 20 for settle T+2, 12th Nov 20) and which ends on 16th August 2023. The swap is ...
2
votes
1answer
114 views

Discounted price process - martingale

I have a process $S_{t}=S_{0}e^{\left(r-q\right)t+mt+X_{t}}$, where $X_t$ is a Levy process and I want to check for which $m$ the process $e^{-(r-q)t}S_t$ is a martingale. The third condition of a ...
1
vote
1answer
116 views

Probability of an Option maturing In-the-money vs. Volatility

How will the probability of an option ending up in the money change if the volatility of the underlying stock increases? Intuitively, I think the answer to this is that if volatility goes up the ...
0
votes
1answer
59 views

Do I break any law/agreement by answering/asking question on how vendors (Murex,Sophis,etc) do pricing? [closed]

I doubt it is legal, as I never saw any open access information about any vendor. But, maybe somebody can pinpoint me to some clear answer. Thanks!
0
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1answer
19 views

Do all inflation swaps reference the non-seasonally-adjusted index values?

Inflation CPI values (typically published monthly except Australia) are typically published in both SA (sseaonally adjusted) and NSA (non-seasonally adjusted) variants. Inflation swaps reference the ...
1
vote
1answer
69 views

QuantLib - Calibrating Hull White one-factor on negative interest rates

I have been working with the QuantLib Python package for some days now. Currently, I am working on calibrating a Hull White one-factor model for short rates. I am calibrating the model on the yield-...
1
vote
1answer
93 views

Newbie question on volatility surface building

I am trying to build a prototype equity volatility surface for pricing european call options, as a way of learning a new programming language that I am looking at. Is there anything wrong with the ...
1
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0answers
44 views

Concentration of measure phenomena in financial mathematics

Concentration of measure is a small area of statistics and probability theory that proved inequalities regarding the statistical properties of sets of random variables that exclude one of those random ...
0
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0answers
15 views

Poisson distributed claim in non life insurance mathematics

I am struggling with the following problem. I assume that there is a single claim number $X$ with corresponding heterogeneity parameter $\theta>0$. I assume that $X$ given $\theta$ is Poisson ...
1
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0answers
36 views

How to link market risk and the transition to the new risk-free rates?

I'm a market risk analyst intern and I've the opportunity to do a project related to it. So I would like to move towards SOFR and €ster transitions, I have seen quite a lot of documentation on this ...
0
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0answers
21 views

Reproducing a short put position using known binomial option tree

Suppose a put option follows prices according the the binomial tree I've made and posted below and consider writing a put ($S$ is the stock value, $P$ is the put value, obviously). I want to find the ...
0
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1answer
75 views

Sharpe Ratio Graphed Over Time

I looked and could not find a suitable answer to my question already, so: What is the best way to calculate the Sharpe Ratio over time, given I have about a decade's worth of 1-minute candlesticks? I ...
1
vote
1answer
57 views

sub-Gaussian random variables in financial economics

Unlike financial time series that typically possess fat tails, sub-Gaussian random variables have strong decay in the tails of their distribution. do sub-Gaussian random variables or processes appear ...
0
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0answers
17 views

Difference between alpha and ROI ratios?

Given the intuitive definition of "alpha" as the percentage advantage of a portfolio over its benchmark market, what is the difference between ratio (%) of ROIs and alpha? What I mean by &...
0
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0answers
18 views

Is it possible to compare Forex data to similar random time series to measure how predictable it is?

In relation to my previous question (Who influences Forex prices and by how much?) I have an raw idea how to determine how much is Forex influenced externally and how much is its behavior given by its ...
0
votes
1answer
89 views

Factor investing and PCA

I'm struggling to understand how Principal Component Analysis (PCA) is used in Factor Models of returns. For example, in the JPMorgan paper (p.19) the authors write: In a multi asset portfolio, factor ...
0
votes
1answer
45 views

Covariance matrix for historical series w/ different start and end dates

I am trying to compute the variance-covariance matrix of my portfolio composed by some shares of different companies. I would select a time horizon of two years but for some shares of one company I ...
1
vote
1answer
41 views

Model Validation Aggregation Documentation (Binomial, Hosmer-Lemeshow, Tolerance) - Credit Risk et cetera

I came across some document that says for a PD (Probability of Default) model in order to assess its accuracy you need to first look at the Binomial Test, then the Hosmer-Lemeshow Chi-square test, ...
0
votes
1answer
55 views

Sensitivity to changes in the volatility

I have a sample payoff function shown below: How do I find a formula which gives the sensitivity to changes in the volatility of the underlying stock. In other words, I want to find a formula for $\...
1
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0answers
26 views

Continuity of a portfolio with two options with respect to the strikes

Consider the covariance, evaluated at time $t$, between two call options written on two different but not independent underlyings $S_1$ and $S_2$ defined on the same (filtered) measure space $\left(\...
0
votes
1answer
35 views

Term Structure of Corporate Bond

I am looking for some clarity on data for Corporate Bond term structure based on Credit Rating. Let say, I need to get the Term ...
0
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0answers
25 views

Simulating two correlated time series using GBM [duplicate]

My situation is the following: I have two time series TS1 and TS2, whereas TS1 is a stock price. According to literature, TS2 is positively correlated to TS1. Furthermore, since TS1 is a stock price, ...
0
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0answers
34 views

Chinese Stock Exchange Indexes data and descriptive statistics

I am trying to reproduce the following paper: https://link.springer.com/chapter/10.1007%2F11600930_48 In this study, daily prices from January 4, 2001 to December 31, 2004 for Shanghai Stock ...
0
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0answers
44 views

Derivative Pricing of an Asset

The Stochastic Differential Equation that models the change in an asset price is $$ dS = (12S-sin(S))dt+\frac{\sigma S}{S^2+1}dX $$ where dX's are random variables drawn from standard normal ...
1
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1answer
58 views

Probability of Default calculation

I am looking for some good resources with handful of workout examples, on the modelling of the Probability of Default under IFRS9...
0
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0answers
35 views

Path dependency for Delta hedge value

This is actually a follow-up questions for the two threads below - value of a delta hedged option: Delta hedge value formula Continuous delta hedge formula My question is that how the drift (mu) ...
0
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0answers
31 views

Comparing curve fits

I am experimenting with building a forward curve. I have a piece of code which constructs my prototype curve. I've got a curve sample which was constructed manually and I use it as the baseline - the &...
0
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0answers
45 views

Escape Dynamics in financial economics or time series

These slides describe escape dynamics to be a type of, or having some relation to, rare event(s). Black swan events in business cycles was also included under the definition of rare events. My guess ...
3
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0answers
111 views

Large deviations theory in finance

In probability theory, the theory of large deviations concerns the asymptotic behavior of remote tails of sequences of probability distributions. A related post says: Large deviations theory is ...
0
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0answers
19 views

How is the following realized-price related quantity called?

Let's say we're given a stock $S$, and let's denote by $S_t$ the market price (the last price at which the stock was traded, generally not equal to the midprice) of stock $S$ at time $t$. Is there a ...
0
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0answers
65 views

Portfolio of American Binary Option and Knockout Option

Assume I have a portfolio where I long an American Perpetual Binary option (that pays 1 if S>=K and 0 otherwise) and I short a knock out barrier option. This ...

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