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0answers
56 views

How to shock the IV surface w.r.t VIX and keep AOA

I have to compute the sensitivity of a set of option prices on a single sotck (range of tenor is over the whole surface) to an increase of 100% in the VIX.. and I am trying to get to the most ...
2
votes
0answers
70 views

Does an option need to be tradable for Black Scholes pricing formula to hold?

Given the classic Black-Scholes model, e.g. $dS(t)/S(t)=rdt+\sigma dW^{\mathbb{Q}}(t)$ with $S(0)=S_0$ and $dB(t)=rB(t)dt$ with $B(0)=1$, whereby $r$ and $\sigma$ are constants and $\mathbb{Q}$ ...
1
vote
0answers
33 views

Long Basis Trades - advantage if Fed cuts aggressively

If I enter into a basis trade where I buy the cheapest to deliver security and fund it in term repo until the last delivery date, while simultaneously selling the futures contract, do I simply earn ...
3
votes
0answers
45 views

What models are used for pricing cliquet options (esp. for Asian Equity underliers)? How good is Bergomi model?

What are the most common models, actually used by trading desks for Asian underliers, for pricing cliquet options? I would like to know both - (1) the production model used for daily P&L, and ...
1
vote
1answer
46 views

Calibrate a model parameter with an error function

Suppose I want to find the implied volatility using an option model from market prices. Surely I can find the implied volatility for each strike price ($k$ different strike prices) for a given ...
1
vote
0answers
16 views

Regression Assumptions for Fama French 3 factor model and Carhart 4 factor model?

i want to run regression for Fama French and Carhart model for my thesis. so, should i check all the regression assumptions or only multiocolinearity.?
1
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0answers
33 views

Stochastic discount factor for factor research

Often, after presenting a new factor technique, the paper calculates an SDF by doing $\Sigma ^{-1}\mu_F$ i.e. mean variance optimization on the factors. What is the significance of doing this ?
2
votes
0answers
31 views

To price Municipal Bonds and risks I want to know the percent of unfunded pension liabilities ($3.8T) to total state and local gov liabilities

Unfunded pension liabilities keep growing and this seems alarming to both pension holders but also Municipal Bond holders. I would like to know how large this problem is to better price Munis and ...
1
vote
0answers
69 views

Can variance change over time?

I'm working on a toy project that involves fantasy basketball, I know this is the quantitative finance stackexchange, but it seemed like the best place to ask this question. My goal is to make ...
3
votes
3answers
251 views

Compute the price of a derivative

Consider the payoff function \begin{align*} f(x)=\begin{cases} 3 & \text{if }x\leq 30, \\ 33-x & \text{if }30<x<35, \\ -2 & \text{if } x\geq35. \end{cases} \end{align*} How would I ...
2
votes
1answer
69 views

What is FX theta in linear products?

While I understand theta (time decay) in options, I often see theta being computed for linear products as well (outright FX forwards). What is theta in this case then? And how is it different from the ...
0
votes
0answers
35 views

Option arbitrage on two correlated or cointegrated underlying assets

If two indices are highly cointegrated, does it allow for some set of statistical arbitrage strategies for european options for which those indices are single underlyings ? Does answer change if ...
1
vote
1answer
66 views

Required adjustments for stressed yield curves

I was looking at Basel proposed interest rate shocks. Using the standard US Treasury Yield Curve for the period starting from September 2017 to August 2019, I was able to construct Steep and Flat ...
2
votes
1answer
48 views

Calculating “annualized” standard deviation from monthly returns and the different month lengths

I have the monthly returns and want to estimate an "annualized" standard deviation. An industry-standard way seems to be the following: $$ \sigma_a = \sqrt{12} \sigma_m, $$ where $\sigma_m$ is "...
0
votes
1answer
45 views

How to calculate yield from holding companies like BRK?

We know Buffett's Berkshire doesn't pay dividends. But Berkshire owns many companies that pay dividends, say Wells Fargo and BofA. If one day, BRK decides to pay dividend, would their yield be around ...
0
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0answers
41 views

Perfect Negative Correlation - Returns and Risk

In the famous article of Sharpe "Capital Asset Prices: A theory of market equilibrium Under conditions of risk", he studies the behaviour of allocation between an asset $i$ and an efficient ...
3
votes
1answer
132 views

Portfolio optimization w.r.t. value at risk: introductory or survey references

I am looking for references introducing the problem of portfolio optimization when the target characteristic is value at risk. A textbook treatment would be great. Surveys on the topic are also ...
2
votes
1answer
59 views

Arbitrage-free IV surface definition vs. real arbitrage process

In the context of BS implied volatility surface fitting. In the literature, it seems that conditions for arbitrage are defined in a way that assumes that options can be traded at the same price for ...
1
vote
0answers
40 views

Extract list of tickers bloomberg api [closed]

Does anyone know what is the python equivalent to the BQL.Query/BSRCH functions from the Excel API? I am essentially trying to get a list of tickers for all government bonds from a certain country ...
0
votes
0answers
17 views

What is the best method to factoring/calculating pre and post event volatility? Such as for company earnings

What is the best method to factoring/calculating pre and post event volatility? Such as for company earnings.
0
votes
1answer
49 views

Event Occurs Almost Surely

Consider an uncountably infinite space, an infinite coin-tossing. Let $(\Omega,\mathcal{F},\mathbb{P})$ be the probability space. If a set $A\in\mathcal{F}$ satisfies $\mathbb{P(A)=1},$ then we say ...
0
votes
1answer
78 views

Is the european put option an increasing function?

My question is to show that the function $K \rightarrow p(T,K)$ is increasing. T being maturity time,K being any strike and $p(T,K)$ is a european put option. My only approach to this question has ...
0
votes
1answer
85 views

Finding todays price of a derivative

Today's market prices for European call options $c(T;K)$ and put options $p(T;K)$ with maturity T and any strike K. Let $B_t = e^{rt}$ be the price of the risk-free bond and St the price of the stock. ...
1
vote
1answer
33 views

Why do some mutual funds or indexes have an average effective maturity that is way larger (2-4 times larger) than the average effective duration?

I would like to know if this difference occurs when the coupon payments are very large and/or if there are other reasons.
1
vote
1answer
50 views

How to build a loop function for out-of-sample backtesting?

Many statistical libraries in R offer the possibility to fit a model and then use the results of optimization to predict values some periods ahead. However, many do not have the possibility to ...
1
vote
1answer
104 views

Market Making independent of outside market price

Is it uncommon to provide liquidity in an asset without consideration of an outside market price? In other words, a market maker would set their bid ask quotes as a function of only their own ...
2
votes
3answers
68 views

Use cases for calibrated IV surfaces

What are common applications of a calibrated options IV surface when trading vanilla options only? Thank you!
1
vote
1answer
37 views

How to derive Balck Scholes from the Binomial Model?

The book gives the following recipe, but no further details: Do a Taylor series expansion of $$V = V(S,t)$$ Do a Taylor series expansion of $$V^{+} = V(u \cdot S, t + dt) \hspace{5mm}:\hspace{5 mm} u ...
1
vote
1answer
40 views

Covariance - Negative Portfolio

How do you calculate the one day standard deviation (in dollars) for a portfolio that is short $30,000? How do you calculate the weightings to use? I already have the necessary covariance matrix.
0
votes
0answers
16 views

How can I download quarterly fundamentals of listed companies for the last 10 years+ using Python without charge? [duplicate]

There is a package in Python called yfinance which allows me to download the fundamentals of listed companies from yahoo for the last 5 years (Annual). However I would like to have data over a longer ...
0
votes
0answers
29 views

Short Interest for CBOE

Does anyone know why websites (yahoo finance, morningstar etc) do not show short-interest for CBOE after Sept 14th 2018?
1
vote
0answers
18 views

PortfolioAnalytics: Training window based on entire history before rebalancing in 'optimize.portfolio.rebalancing'?

I am fairly new to PortfolioAnalytics and R in general. I am trying to do some backtesting of a minimum variance portfolio. I have weekly, monthly, quarterly and yearly return data of 3 selected ...
1
vote
1answer
72 views

Portfolio Optimization and Global Minimum Variance Portfolio (GMV)

I have few questions about classic mean-variance-optimization in general. I have a series daily returns of 15 assets and I want to combine these assets in a portfolio. 1) Do you think that 1 year of ...
1
vote
0answers
50 views

How can I get real-time CDOR rate, swaps, and options pricing data refreshed on a daily basis in Excel?

I'm currently using "Bloomberg Anywhere", which is the same as Bloomberg Terminal except account-specific rather than PC/hardware-specific. I currently have to refresh the rates every morning at ...
1
vote
1answer
65 views

Nelson & Siegel model (Fixed Income Securities)

I am well aware of the basic model formula and for what it is used, theoretically speaking, however I cannot find any concrete, problem solving exercises. Soon, I will have to deal with this problem ...
1
vote
0answers
42 views

One day standard deviation of a portfolio (long/short, different scalars)

I am attempting to calculate the expected one-day standard deviation of a portfolio in dollars. In other words, I am looking for the following: "I expect my portfolio to move _______ dollars on ...
1
vote
1answer
46 views

What are the drawbacks and advantages of fitting a GARCH model with mean equation equal to zero?

I fitted a standard Garch model. The mean equation has no AR or MA terms. All the coefficients in the variance equation are significant at 5%. However the mean equation has a constant term equal to ...
1
vote
1answer
63 views

Marginal contribution to Tracking error

I'm trying to calculate Marginal contribution to Tracking error. I would use the following formula: MCTE(asset i)=TE(excess return asset i vs.benchmark)* Beta(excess return asset i vs. benchmark AND ...
2
votes
1answer
71 views

Stochastic Processes (Applying Ito's Lemma on Ho-Lee Model )

I seek a basic form (SDE) to understand the Ho-Lee model. I already understand the models from Vasicek, Merton and Cox-Ingereoll-Ross, etc.. For example, \begin{align*} dX_t &= -1/2 \alpha X_t ...
2
votes
0answers
51 views

Valuing TRYUSD currency swap on Bloomberg

Usually a leg in a swap is discounted using the corresponding OIS curve if the deal is collateralized and if collateral is posted in a different currency teh discounting happens with the corresponding ...
1
vote
1answer
68 views

Björks second $S$ process when introducing martingale measures

When Björk presents the Black-Scholes model and martingale measures he starts off with a process modeling the stock price calling it $S$ with some given dynamics w.r.t some measure $P$. Then he ...
1
vote
2answers
83 views

Rate of return in Black-Scholes model

The rate of return of a stock is denoted $\frac{dS}{S dt}$ where $S$ is the solution to the SDE modeling the price of a stock. Can someone give an explanation of the rate of return and what it is ...
2
votes
2answers
101 views

How to derive Black-Scholes equation with dividend?

Question: The Black-Scholes equation without dividend is given by $$\frac{\partial V}{\partial t} + \frac{1}{2}\sigma^2S^2\frac{\partial^2 V}{\partial S^2} + rS \frac{\partial V}{\partial S} -rV = ...
0
votes
0answers
35 views

Is my derivation of Black-Scholes equation correct or am I missing something (eg assumption)?

Question: The following is my derivation of the Black-Scholes equation. Is it correct or am I missing some details (eg assumption)? Let $V$ be value of an option. Suppose value $\Pi$ of a portfolio ...
1
vote
0answers
37 views

How To Calculate The Implied One Day Expected Return For Earnings

I am trying to figure out how to calculate the one day expected return given I have the event volatility. In his book Trading Volatility, Correlation, Term Structure and Skew, Collin Bennet (link) ...
0
votes
1answer
38 views

How to deal with intermittent NA values in a price series when calculating returns

Let's say a have a price series for a share for the year 2000. On the 27th of July 2000, there is a missing value represented by NA. This was not a holiday or any other non trading day as other shares ...
2
votes
0answers
44 views

Local volatility Formula and How To use it

I'm new to Volatility Modelling, so the content of this question may be completely wrong and th question naive. I'm reading "The volatility surface" by Gatheral. I'm trying to get a sense of the first ...
1
vote
3answers
215 views

Why is volatility skew/smile for long term options flatter compare to short term options?

Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
0
votes
0answers
25 views

Markovian short rate in HJM framework

In Bjork it is proven in proposition 20.5 that a forward rate dynamics: \begin{equation} f(t,T) = f(0,T) + \int_0^t\alpha(s,T)ds + \int_0^t\sigma(s,T)dW(s) \end{equation} imply a dynamics for the ...
0
votes
2answers
57 views

How do you simulate pseudo-realistic ask/bid quotes given a history of 1m OHLC candlesticks?

I'm currently backtesting and livetesting a RL-based system using the close of the last 1m bar as both ask and bid. While results are excellent, this is not a very realistic arrangement. In the ...

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