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200 views

How can I learn stochastic process & stochastic calculus in two weeks? [closed]

I am going for an interview for a quant job. The interview will focus on my mathematical knowledge about stochastic process & stochastic calculus, and I believe I will definitely be asked to solve ...
0
votes
1answer
147 views

Calculation of market price for option at underlying strike price at some point in future

Would appreciate clarification on the below scenario. If a put option was sold at the start of the week, when the broker (Interactive Brokers) calculates the cost basis (the premium collected) are the ...
0
votes
0answers
35 views

Is this efficient frontier graph reasonable?

Hi. The above image is taken from https://www.newfrontieradvisors.com/media/1166/optimization-with-non-normal-resampling.pdf. Is this a reasonable chart? The 4 different methods give 4 non-overlapping ...
3
votes
1answer
122 views

Does CRR Model lose completeness if we add another instrument?

Consider the multiperiod binomial/CRR model with one risky asset $S^{1}$ and a numeraire $S^{0}$. By seeing that the equivalent martingale measure is uniquely determined, we obtain that the market is ...
1
vote
0answers
41 views

How does a hedged portfolio account for other greeks?

So a classic delta-hedged portfolio on a call option is: $$-C - \Phi(d) \cdot B + \frac{d}{dS}C \cdot S = 0$$ How is risk of other Greeks hedged? Is it something like this? $$-C - \Phi(d') \cdot B + \...
1
vote
2answers
107 views

Is it more profitable to invest in the S&P 500 outside regular trading hours?

Is https://www.nytimes.com/2018/02/02/your-money/stock-market-after-hours-trading.html correct? I don't think so because it doesn't consider dark pools? Of note, each business day has only 6.5 trading ...
1
vote
1answer
75 views

State-of-the-art MVO methods?

I learned Markowit'z mean-variance optimzation in school. Now I've been googling a bit, and to my surprise, Markowit'z is STILL being used by most people, AFAIK. Are there really not some state-of-the-...
0
votes
1answer
25 views

Non convertible currencies and trade

How importers and exporters sell/buys products if their country currency is non convertible or when non residents want to invest in the country? For example in Brazil.
1
vote
0answers
32 views

Controlling for factors that influence minimum variance optimization

I am trying to compare the performance of two minimum variance optimization (mvpo) methods applied on stocks Hierarchical risk parity (HRP) vs the analytical global minimum variance formula. I feel ...
1
vote
0answers
39 views

What's a sensible way to measure correlation in the volatility surface?

Lets say I construct a parametrisation of the volatility surface that lets me infer dynamics i.e correlation between strike vol. Is computing the sample correlation (after controlling for spot-vol ...
-1
votes
1answer
35 views

Potential risk from profiting forward Futures contract?

Assuming I am bought gold at \$100 from spot market, and I am shorting gold December-31 futures at \$120 which is cash settled, and I earn \$20 forward premium when settle; And when gold price drop, ...
0
votes
0answers
30 views

Strategy in mql5

I have the following code(is not mine) in an Expert Advisor: if((Handle(DXHandle, 0) - Simbolo.Ask()) >= (DXPontosDistancia * _Point)){...} Handle(DXHandle,0) ...
0
votes
1answer
40 views

Can I dynamically change hyper-parameters of a model?

Question Can I apply different hyper-parameters for different training sets? I can see the point of using the shared parameters but I cannot see the point of using shared hyper-parameters. The ...
1
vote
1answer
61 views

How to model fixed-rate loans or mortgages with act/365 but constant payment

My question I have a question on how to model the cashflows of fixed-rate loans or mortgages. Let's say the payments are monthly, and the rate remains constant throughout the life of the product; each ...
2
votes
2answers
94 views

Discussion on random matrix theory and impact on PCA

I've written a paper for university on Random Matrices and during my research I've had an interesting idea, let me explain: Wigner's Semicircle Law has seen much advancement since its original proof ...
1
vote
2answers
141 views

best way to calculate the return

Suppose that you want to calculate the single period return. Let p0 be the initial price and p1 be the final price over the ...
-2
votes
1answer
85 views

Best way to calculate a stock's fair value [closed]

I keep hearing "analysts" say that certain company's stock is currently much below the fair value, and I also keep hearing that certain other stocks are severely over-valued. However, I have ...
0
votes
2answers
30 views

UK Government Debt Statistics

I would like to find some stats regarding UK Government debt. Any leads ? I am looking for following questions Debt / GBP ? ( Got it already ) Debt profile ( by maturity, instrument) New debt ...
1
vote
0answers
57 views

How to calculate contributions to the granularity adjustment

In the Basel pillar 2 framework a granularity adjustment is introduced. While the capital requirements in pillar 1 do not take concetrations into account, this is meant to be covered with this ...
2
votes
1answer
111 views

What's the point of complex option formula adjustments?

I had a discussion with a colleague of mine about the implications of risk modelling for the Gamestock/Wirecard cases in the recent weeks and that stock borrow rates could be an important risk factor ...
2
votes
0answers
33 views

Simulating a square root process with jumps for mortgage defaults

I am trying to simulate the paydown of a large pool of mortgage loans. For each monthly period, I am reducing principal by the scheduled principal payment (approximated by the WAC of the underlying ...
-5
votes
0answers
55 views

Python function to calculate forward rates

This is a question received in an interview: The exercise consists of writing a function that allows you to estimate the implied three-month forward curve. The inputs of this program should be: • The ...
0
votes
1answer
47 views

How to use 'purging' in predicting stock price tomorrow based on information today?

Q1. How to create an 'overlap' when we predict a stock price tomorrow based on information today? According to the book 'Advances in Financial Machine Learning' written by Marcos Lopez de Prado, the ...
0
votes
1answer
74 views

Regressing changes in yield/yield curve

If I'm regressing changes in individual points along a yield curve and measures of changes in level/slope/curvature of that yield curve against the returns of some random variable then do I want to ...
-1
votes
0answers
60 views

Martin Hairer's breakthrough math prize 2021 [migrated]

Wikipedia states the 2021 Breakthrough Prize in Mathematics announced in September 2020 was made to Martin Hairer - "For transformative contributions to the theory of stochastic analysis, ...
3
votes
3answers
152 views

Can banks use reserves to settle liabilities arising from cash-settled options trading?

Here is a hypothetical scenario: Bank A sells 1 SPX CALL/PUT to a retail trader who uses Bank B. The SPX becomes in the money. SPX is cash-settled. So Bank A transfers reserves held at Federal Reserve ...
1
vote
0answers
45 views

Show that stochastic integral is $F_W(t)-$measurable

In some notes, my professor writes the following for the price function of an geometric asian option: \begin{align} \text{Price}(t)&=\tilde{\mathbb{E}}\left[\left(S(0)\exp\left(\frac{T}{2}\left(r-\...
5
votes
0answers
67 views

Non attainable claim - Incomplete market

I am wondering whether there is a standard procedure to find a non attainable (i.e. non replicable) asset in an incomplete market. As an example, let us have the following market ($B = (B^1, B^2, B^3)$...
-2
votes
0answers
119 views

A few questions on duration and convexity for floating-rate bonds (interpretation and formulae) [closed]

Update after the question was closed : the first 3 are simply T/F questions. I find them extremely focused. If you disagree, could you please elaborate on why? Questions 4 is also extremely focused: I ...
0
votes
1answer
54 views

Barrier Reverse Convertible

I am a finance student and during my free time I try to understand more financial products. Today I have found a term sheet for a specific type of barrier reverse convertible but I couldn't understand ...
1
vote
0answers
86 views

Is this the PnL you would expect to see for a hedged call option portfolio? [closed]

You are a market maker. Charging no commission, your only aim is to remain market (delta) neutral. Therefore you construct a portfolio of the form: $$\Pi = -C - w_{1} B + w_{2} S$$ where $B = K \cdot ...
0
votes
0answers
41 views

How to calculate approximate historical price of options?

Assuming that I have access to the historical daily closing price, it is possible to approximately calculate the daily price of an option? I understand that one pricing model is the Black-Scholes ...
1
vote
1answer
58 views

VaR and Expected Shorfall estimations with negative shape parameter of a GPD (Extreme Value Theory )

So im trying to replicate an code from the Quantative Risk Management Book (https://github.com/qrmtutorial/qrm/blob/master/code/09_Market_Risk/09_Standard_methods_for_market_risk.R). But when i try a ...
0
votes
0answers
39 views

Hypothetic derivative that absorbs underlying volatility

Market participants are usually assumed to be risk-averse and striving to improve the Sharpe ratios of their portfolios. Thus, if we have an asset A, which is expected to return between \$900 and \$...
3
votes
3answers
313 views

How can a deep discount bond with a longer time to maturity have a LOWER duration than an otherwise identical bond with a shorter time to maturity?

Here is a brief excerpt on the fixed income chapter from the 2020-2021 level 1 CFA curriculum: Generally, for the same coupon rate, a longer-term bond has a greater percentage price change than a ...
0
votes
0answers
23 views

Future forward convexity adjustment as the expected profit from reinvesting margin payments?

Having looked at the formula for the convexity adjustment as a function of the covariance between rates accruing till maturity and asset price, I have an intuition that the difference between fair ...
1
vote
2answers
129 views

Show that $\int_0^T(T-t)dW_t=\int_0^TW_t \ dt$

I want to show that $$\int_0^T(T-t)dW_t=\int_0^TW_t \ dt \tag1$$ By Ito's lemma we can write $$d((T-t)W_t)=(T-t)dW_t-W_t \ dt.\tag{2}$$ Now If I integrate this expression and use that $W_0=0$ I should ...
1
vote
0answers
37 views

How do I deal with nonexistant data in a time series with an irregular frequency?

I am trying to do some time series analysis on the margin resulting from three specific commodity futures contracts and ultimately forecast the margin. The margin is calculated as M = F1 + F2 - F3. I ...
1
vote
1answer
122 views

Clean noisy data from arbitrage

My problem is that I have a surface of implied black volatilites that is supposed to represent market data. However, the surface contains some slight arbitrage. More precisely, the graph contains ...
1
vote
2answers
495 views

How to prove no-arbitrage when a long butterfly is strictly positive?

I want to prove why there are no arbitrage opportunities when a long butterfly is strictly positive. I know there is a similar topic out there, but it seems it doesn't solve my question: Prove that ...
1
vote
0answers
39 views

MatLab code does not work for Heston model calibration

I am trying to calibrate Heston model on some data and I have the following code. Code is supposed, after it reads the data, to give back 5 parameters. However, I get an empty answer from MatLab. Does ...
1
vote
0answers
33 views

Option pricing and GARCH resources

Can anyone suggest resources for option pricing using GARCH models? Although I have a fairly good knowledge of GARCH models, for some reason I cannot seem to be able to follow Duan's paper and how to ...
0
votes
0answers
8 views

How to model run-off ratio for non-defined maturity deposit?

I'm trying to model run off ratios for different deposit products as well as how long it takes to lose all deposits, would anyone please suggest any methodology? In addition, would I be able to define ...
2
votes
0answers
59 views

Switching from EONIA to ESTR for CSA discounting

In practice, when bilateral counterparties switch from OIS to ESTR discounting, the party which sees a fall in the fair value of the CSA contract gets compensated for the decrease by the other party (...
2
votes
0answers
42 views

Cost of Volga & Vanna in Credit Options?

What are the commonly used methods to compare the cost of volga/vanna in credit index options across time and strikes? In practice, is the Vanna-Volga exposure technique used in credit, or are there ...
0
votes
0answers
32 views

Implications of modeling operational risks without frequency distribution

When modeling operational risk, the Loss Distribution Approach (LDA) is widely used. Usually, we model the loss frequency distribution and the loss severity distribution and then aggregate both to ...
0
votes
1answer
61 views

QuantLib Python: how to calculate duration and convexity for irregular cashflows? Can I use SimpleCashFlow or must I define a custom bond?

I have 2 questions: If I want to discount a set of irregular cashflows, I can do it using the SimpleCashFlow class, or defining a bond with custom cashflows (thank you to Ballabio and David Duarte for ...
3
votes
0answers
56 views

Implementation of solvers for curve construction

I'd be really interested to hear people's experiences of implementing global solvers for curve construction, especially with regard to how robust the approach is in practice, numerical performance, ...
0
votes
0answers
26 views

Whitespace in Option Symbols

A while ago exchange-traded option symbols migrated to a 21-character descriptor, formalized by the Options Clearing Corporation (OCC), consisting of: 7 characters: root or underlying symbol 6 ...
1
vote
0answers
56 views

Heston Model Calibration with MatLab: model prices do not fall in the bid-ask range

I am currently implementing the MatLab code reported below for the calibration of Heston Model. The code seems fine and, by reading the paper where I took the code, I was able to calibrate and price ...

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