# All Questions

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26 views

### Index CDS - trade between EDD and auction date

The ISDA CDS standard model examples document here outlines the calculation of accrued on single name CDS for defaulted entities i.e. where the Trade Date is after Event Determination Date but before ...
79 views

### Correlated Wiener Process

I am in trouble with a task: I have a portfolio of 5 assets, and I Have the correlation among them, with a 5x5 matrix. Since each asset follows the BS formula: , I need to perform a montecarlo ...
95 views

### Calibration of Heston model with stochastic short rate

I have following Heston model with stochastic short rate: \begin{eqnarray*}dS\left(t\right)&=&r\left(t\right)S\left(t\right)dt+\nu\left(t\right)S\left(t\right)dW^{S}\left(t\right)\\dr\left(t\...
34 views

### Convert stock symbols so that they are useful for Yahoo Finance (yfinance)

I am working on my first investment algorithm, and I am using the following list of stock symbols and company names: https://public.acho.io/embed/...
67 views

### Market neutral strategy with quarterly futures and perpetual swaps?

What is a "perpetual swap"? In cryptocurrency exchanges, there is a financial product called "perpetual swap". (It is also called as "perpetual futures" or "...
31 views

### How to understand “OAS assumes the recovery rate of the bond is 0” and “OAS” does not include credit risk?

My confusion is, the OAS comes from Z-spread with adjustment on option value. Does it mean the z-spread is assuming that the bond never defaults so that it does not include the "credit risk"?...
37 views

### How to convert CDX spread to price?

Example: assume the current HY CDX is with 5% coupon. The spread is around 300bps, with a duration of around 4 years. Would you pls help me to understand why we can proxy the HY CDX price as 100+4*(5%-...
103 views

### Can you perform covered interest arbitrage when the forward rate is too low?

In covered interest arbitrage, if the forward rate is too high, you can (i) exchange domestic for foreign currency today (ii) invest at the foreign deposit rate (iii) exchange back to the domestic ...
376 views

### what does “p&l leak ” refer to in finance?

I have saw "p&l leak" in book/paper more than once, especially when talking about hedging, etc. what does "p&l leak" exactly refer to? Thanks
32 views

### Derivation of the distribution for a CIR process

Where is it possible to find a complete derivation of the distribution of a CIR process? There is a number of papers that claim that it is a noncentrical chi-squared distribution. However, I cannot ...
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### In Pairs Trading: How can high volatility in spreads be explained when there is a market shock?

In my project I tested a Pairs trading strategy in the US equity market for data of 10 years. These 10 years include the financial crisis (2007-2008). The strategy follows a Cointegration approach. ...
338 views

### Differences between main classes of interest pricing derivatives models

There seems to be 3 main classes of interest rate pricing models: 1) Short rate models, 2) Heath Jarrow models and 3) Libor Market Model. My book doesnt seem to explain why we need all these different ...
19 views

### How to decide which sentiment analyzer is the better model?

Assume one has trained different sentiment analysis models that assigns sentiment scores to the financial news or documents. How would one should approach testing the different models and decide which ...
85 views

A well known broker quotes cap/floors as spot premium for ATM straddles but forward premium for the skew, given that the difference between spot premium and forward premium is that the option is not ...
57 views

### Topics for a 5 ECTS point project in a Msc Applied Math prorgram [closed]

I need 5 ECTS to complete my education (Msc in applied math, finance track). A statistics professor have agreed to do a project with me but I need to come up with the topic myself. Can you reccomend ...
57 views

### No-arbitrage bounds on Implied Volatility under Black-Scholes

Suppose the overnight (1-day) at-the-money implied volatility is X% and the two week (14-day) at-the-money implied volatility is also X%. How would I go about finding the upper and lower no-arbitrage ...
57 views

### Is Gregorian Calendar Ubiqutous in quant finance?

I'm curious to know if there are any organised exchanges where the Gregorian calendar is not used for valuation or as a settlement calendar? Islamic and Hebrew calendars come to mind, but I wonder ...
136 views

### For what options does the “delta hedging rule” apply?

I'm reading Shreve's Stochastic Calculus for Finance, Volume II. In chapter 4, he derives the "delta hedging rule": $$\Delta(t) = c_x(t, S(t)) \text{ for all } t \in [0, T)\text{.}\tag{1}$$ ...
107 views

### Finding optimal calendar spreads and diagonals

I am looking for some pointers on risk/return profiles of calendar spreads and diagonals with different strikes and expiration dates, preferably based on historical backtests with SPY options. Please ...
21 views

### Marginal contribution to tracking error in excel

Given a portfolio of 10 funds and a benchmark of 10 indices, I am looking to calculate the marginal contribution to tracking error. My confusion is about what excess returns to use, should this be ...
130 views

### How to evaluate Asset Allocation skill?

There have been studies that show that Asset Allocation can explain 90% of the variance of returns on a portfolio. If true and Asset Allocation is the primary driver of return risk, how can you ...
44 views

Hi so I'm trying to figure out how to adjust for the coupon value in the Z-Spread of a given bond. For example we can take UKRAIN 9.75 11/28. The coupon is 9.75 which is quite a bit higher than the ...
93 views

### USD Swap curve prices do not line up with inputs

As mentioned in the title, i'm having trouble with pricing USD swaps in quantlib. I wanted to take some inputs (Prices of swaps in the market) and be able to construct a yield term structure that ...
78 views

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### Starting out with back testing

I am new to quant, but have skirted around the various competencies required. I have a couple of engineering degrees; a masters in finance, and I also work as a relationship director in a commercial ...
496 views

### Term structure of Equity returns

What is the meaning of term structure of equity returns. I know what term structure of interest rates means, but somehow i cant seem to relate them. Also, how would we measure them? Also in this paper ...
102 views

### Put-Call Parity for Long Time Frames

Suppose we're dealing with European call options and put options on stocks (say Berkshire Hathaway, that pays no dividends and is unlikely to for the foreseeable future), and assume that the current ...
49 views

### Backtesting a permanent portfolio

I'm looking to backtest this portfolio: Global Bonds, gold, Global Stocks, short-term t-bills (1/4 each) from 1990 up to this year, rebalanced monthly. Then take a variety of statistics on the time ...
69 views

### How to price a call option with long maturity (5 to 10 years)

I am trying to find the industry accepted method on how to price a long term American call option (maturities 5 to 10 years) on an underlying which is an accumulation fund (so no dividend payouts) ...
38 views

### How do I have to calculate the risk free rate of my two asset portfolio?

Good afternoon everyone! I have a question regarding the risk free rate of my two asset portfolio. For my course, we have to create a two asset portfolio with the time frame of 2015-2020 with monthly ...
98 views

### FX Options price vs implied vol

From the screenshot below, what is the difference between the option price by strike in the table versus the implied volatilities by delta in the chart at the bottom? https://www.investing.com/...
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### FX Hedging costs when using 3m FX Fowards vs XCCY swaps for an IG Bond

Suppose I want to hedge the FX exposure of an USD Corp Bond(held to maturity) to GBP and I can choose between rolling 3m FX Forwards and XCCY swaps. How can I estimate the difference in the hedging ...
25 views

### Derivation defaultable bond price in Leland 1994 (Merton)

Consider the model in Leland (Journal of Finance, 1994). The partial differential equation that describes the price of the (perpetual coupon defaultable) bond is: \frac12 \sigma^2 V^2 F_{vv}(V,t) + \...
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### Understanding Spread, SOFR - US Treasury [duplicate]

I am reading about USD LIBOR transition to SOFR (Secured Overnight Financing Rate). Here, I was reading about key differencies between both rates. I would like to bettter understand relationship ...
20 views

### LSM Python Implementation Undervaluation Problem

I am trying to implement the LSM method in Python. My implementation leads to American put prices lower than those as reported in Table 1 of the Longstaff-Schwartz paper and in some cases they are ...
For each variable $(S,T,K,r,q,\sigma)$ in the Black-Scholes formula, how many times can you take a partial derivative? Adjacently, is the nth order greek for some variable a constant? Thanks