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15 views

Financial engineering and risk manament [closed]

Quiz Instructions: Option Pricing in the Multi-Period Binomial Questions 1-8 should be answered by building a 15-period binomial model whose parameters should be calibrated to a Black-Scholes ...
0
votes
0answers
14 views

How to price an Annuity

When we price a fixed rate bond using Quantlib, we generally take below approach - ...
0
votes
1answer
43 views

Why does portfolio optimization require a positive-definite covariance matrix?

Why does the portfolio optimization mean-variance model require the covariance matrix to be positive-definite? Does this requirement have to do with the need to be able to invert the matrix during ...
0
votes
1answer
20 views

Bond portfolio valuation in Quantlib python

I have a table of bonds which I imported into python using pandas. Is there a way I can simultaneously price all of them in python using the Quantlib library. I know how to price one bond but not in a ...
0
votes
0answers
24 views

Index Replication

I am a first year university student. I am trying to replicate an Index, for instance SP500. But instead of doing a full replication (by buying all the stocks), I wonder : How can I choose a portfolio ...
1
vote
2answers
40 views

Performance measurement

When I regress the excess performance of a portfolio on the MKT Factor using daily data. I get a Beta of 0.95 and an alpha of 0.00011 that I annualize *252 = 2.77% I know that the annualized return of ...
0
votes
1answer
28 views

Pairs Trading: Normalized price series (co-integrated and correlated) always end up diverging

Need some expert advice and suggestions: I am trying out pairs trading or statistical arbitrage (as traders say). But even if two price series are co-integrated (ADF test, Hurst exponent, Ornstein–...
0
votes
2answers
46 views

Modeling Slippage without Order Book data

I am building a portfolio simulator and finding ways to make it more 'realistic'. For example, giving the option to reinvest dividends, include capital gain taxes, commission/fees (fixed for now) etc. ...
0
votes
1answer
33 views

Comprehending Corr heatmap from multiple trials of investment strategy (Paper)

Can someone please explain the heatmap of Corr from backtests in this research paper ? A Data Science Solution to the Multiple-Testing Crisis in Financial Research - Lopez De Prado (2019) - (Exhibit #...
1
vote
1answer
49 views

Factor model for Gold has low adjusted R2

I am trying to build up a factor model for gold. To be able to identify the correct factors, I did a correlation analysis between a few factors vs gold and I integrated this analysis with what I saw ...
1
vote
1answer
30 views

Computing FX forward delivery dates for 1M rates on end of the month

Up to now, I have been unable to find a clear explanation on the calculation of the forward delivery date for 1M. I understand that when the spot delivery date is e.g. 14-Jan, then the 1M delivery ...
0
votes
0answers
11 views

BEKK Garch for time-varying beta in python

I am currently trying to analyse stocks of the S&P500 for their time-varying beta using BEKK Garch in python(jupyter). Unfortunately, I can't find any good packages and the documentation for bekk ...
1
vote
1answer
64 views

Hedging an Inverse Product

We have two different products that follow the same price $S(t)$ for all time $t$. The payout for product one is given by $w_1(\frac{100}{S(t)} - \frac{100}{S(t + \Delta t)})$ and the payout for ...
0
votes
1answer
15 views

PRIIPs category 2 Cornish-Fisher : how to calculate

i am not very good at finance ,but i have been trying to calculate the example from this link. https://www.dropbox.com/s/egfx0ktolojfsek/3.PRIIPs%20Workshop%20-%20Risk%20Reward%20Methodology.pdf?dl=0 ...
0
votes
1answer
57 views

MonteCarlo Value at Risk for a bonds portfolio

As mentioned in the title, I am trying to calculate MC VaR for a portfolio consisting entirely of bonds. I already modeled the zero curve using Vasicek and Cox,Ingersoll & Ross models. Next steps ...
1
vote
0answers
15 views

Which is the “correct” 5Y5Y Inflation Expectation on Bloomberg, and what are the differences?

When the market talks about 5Y5Y expectation, is it referring to FWISUS55 Index, or G0169 5Y5Y BLC2 Curncy on Bloomberg? I ...
0
votes
1answer
30 views

Alpha and returns annualized

Basic question , but if I do a daily regression and get an alpha of 0.00004. Should the yearly alpha be : 0.00004 *100 *252 = 1.008% OR 0.00004 * 100 *365 = 1.46%. What is considered the yearly alpha ...
-2
votes
0answers
16 views

How do companies like Fiverr and Upwork avoid having to setup Nexus for each user? [closed]

Pardon me if this is the wrong place to ask this question. I have some ideas on setting up a platform where people can provide their services via the tools I build. However, this raises the question ...
0
votes
2answers
13 views

Daily US stock price data provider with opening Auction prices

I'm looking for a data provider with historical open auction prices (i.e. not opening trade as found on most providers) for SP500 stocks. This is the price obtained by a MOO order. Thanks.
-3
votes
0answers
16 views

Python( ipysheet ) How to add a checkbox in Python dataframe sheet? [closed]

df=pd.DataFrame(index=index, columns=columns) sheet = ipysheet.from_dataframe(df) column1= ipysheet.column(1,[Checkbox() for _ in range(len(df)])
1
vote
0answers
53 views

Option that never expires

I have been struggling with the problem below for quite some time now. I really don't know how to approach it. All I could think of is to use the Black-Scholes formula with $T \rightarrow \infty$, ...
2
votes
1answer
49 views

Intuitive explanation of put option pricing based on put-call parity

Assuming no dividends, the put-call parity equation says: $c + \mathrm{Ke}^\mathrm{-rT} = p + S$ where $c$ is the price of the European call, $p$ is the price of the European put, $S$ is the current ...
1
vote
1answer
36 views

How to adjust a portfolio's rate of return for contributions and withdrawals?

Suppose we have a portfolio with many assets. Since this portfolio receives monthly contributions and withdrawals, what is the best method to evaluate its global rate of return and avoid computing ...
0
votes
1answer
32 views

Greeks and splits

Should we adjust greeks on stock splits? Let's just ask about splits instead of reverse splits. I'm also interested how answers change if we change models/assumptions. I have some contradicting ...
0
votes
1answer
37 views

Capped Variance Swap // Fair volatility using replication portfolio

I know that the Heston volatility model should be the best approach for computing fair volatility on capped variance swap but is there a way to estimate it from replication portfolio? What I call ...
0
votes
0answers
12 views

Configuration of control parameters tol and delta in the rsolnp package

I am working with the rugarch package which includes a solver.control argument. I am using the solnp solver. I can pass values for tol and delta. In the rsolnp the authors suggest that the control ...
1
vote
3answers
200 views

Ito Integral of functions of Brownian motion

How does one show that: $$ \mathbb{E}\left[ \int f(W_s)dWs \right] = 0 $$ For all $f()$ that are powers of $W(s)$?? I assume that one would have to go via the definition of Ito integral and express ...
1
vote
1answer
51 views

How do leveraged ETFs achieve their investment objectives?

I am interested in the ways how those leveraged ETFs, e.g. TQQQ, achieve their leveraged investment objective. Questions are around, Do they use stock options of the underlying asset primarily to ...
0
votes
0answers
28 views

Using Timeseries DB for Tracking Asset Performance over time

I am building a system that allows users to purchase digital assets, and i would like to know the asset's performance of individual users. A user may purchase an asset multiple time in a single day, ...
1
vote
1answer
45 views

Simulating the Rough Heston

I found this paper here https://arxiv.org/abs/1810.04868, "The Lifted Heston", but since I'm not an expert in stochastic volterra processes , nor in fractional ricatti equations, the math is ...
0
votes
0answers
33 views

What is the formula for the global minimum variance portfolio with positive weights?

I know how to algebraically solve for the weights when short selling is allowed but I can’t seem to find the formula for when it’s strictly positive an the weights sum to 1 anywhere online.
0
votes
0answers
39 views

Ultrashort ETFs and YTM

Currently I hold the ETF JPST with steadily declining yield. For example, the last published YTM was .81 on 6/30/20, and the most recent SEC daily yield was .57 on 8/7/20. My question, with JPST as ...
3
votes
3answers
81 views

FED rate cuts don't exist

I would just like to confirm my understanding of how the FED controls interest rates. In my view there's no such thing as changing an interest rate. Because rate/yield is just an effect of price ...
0
votes
2answers
44 views

Consistent offset/lag in time-series prediction using Neural Network (all code provided)

I'm using a neural network (keras package) to predict Bitcoin prices 48 hours in advance. The issue is that for some reason, my predictions are "correct" but they are lagging behind the true ...
1
vote
1answer
51 views

help with derivation of equation 8 in Derman and Kani's binomial tree for local vol

in this paper "The Volatility Smile and Its Implied Tree" - Derman and Kani 1994 i understand the derivation of all equations up to 7. But eq 8 i cannot figure out how to derive! i have ...
0
votes
1answer
45 views

Calculate annualized returns and annualized volatility from monthly returns?

I have a dataset with monthly returns (In decimals) Jan-2008, Feb-2008 .... Dec-2008, Jan-2009 .... Dec-2017 This is what I have done, ...
0
votes
2answers
51 views

What do large weights above 1 in a portfolio represent?

If I have a portfolio consisting of weights -12,11,3,-2,5,-5, I know that negative weights correspond to shorting but what do these large weights represent? I thought the weights are the proportion of ...
0
votes
1answer
88 views

Quantlib: How do I price a ZC bond using the Hull White model?

I am trying to use QuantLib to model short rate and looks like QL has some material here http://gouthamanbalaraman.com/blog/hull-white-simulation-quantlib-python.html I have been able to simulate ...
-2
votes
1answer
49 views

Quanto CDS- basic question- [closed]

Just wanted to know if the quanto CDS hedge each other or not, if we assume that the quanto ratio is 100%(1). Also, is it true that in stressed condition the volatility of CDS with home ccy decreases ...
1
vote
1answer
58 views

Why is the liquidity of ATM stock options often relatively low even if the underlying security is being traded in large quantities

I am currently trying to learn more about options trading and option strategies. One thing I have noticed recently is that for a lof of stocks I look up on yahoo finance often a very low open interest ...
0
votes
1answer
55 views

FX convertability modelling: have FX markets ever closed down?

I am working on modelling the risk that a bank's cash in one currency could not be converted into another currencies. This convertability risk has liquidity implacations for the asset liabilities ...
0
votes
0answers
26 views

Do asset return correlations have strong non-linear interactions? [duplicate]

If I compute the correlation matrix for $N$ stocks or indices, are there always expected to be strong non-linear dependencies between each asset pair-wise? Or are there only linear dependencies in ...
0
votes
0answers
31 views

Is there a performance measure for the entire efficient frontier?

The Sharpe ratio is an example of a performance measure for individual mean-variance efficient portfolios, regardless if they maximize the Sharpe ratio or not. The efficient frontier, however, ...
0
votes
2answers
91 views

Do basket options have a closed form valuation formula?

Suppose I'm simulating a European call option on a basket consisting of N stocks with slightly varying volatilities but all other parameters remain the same. From the perspective of an estimate, it ...
0
votes
0answers
27 views

Why do only portfolios of indices show elliptical dependence?

Elliptical distributions imply an asymmetric relationship between variables such as financial returns of different assets. I'm guessing this is mainly due to skewness, although I might be wrong and ...
0
votes
0answers
20 views

Secured Overnight Financing Rate (SOFR) ISIN

Does anybody happen to know the ISIN of the Secured Overnight Financing Rate (SOFR)? I can't find it anywhere on the NY Fed website.
1
vote
1answer
63 views

Under Put-Call Parity, why do we add the cost of carry to Call prices but subtract them from the Stock price and Put prices?

In Natenberg (1994) Chapter 11 he outlines the Put-Call parity relationships. ...
-1
votes
1answer
71 views

How to simulate Poisson and Compound Poisson process

someone knows, maybe websites / blogs where I can find tips (preferably ready codes) to simulate the trajectory of processes? So far I only need the Poisson process and the compound Poisson process ...
2
votes
2answers
167 views

Exchangeability of random vector

I hope you can help me with this rather basic question that I asked myself. A random vector $(X_1,...,X_n)$ is said to be exchangeable if it has the same distribution as the permuted random vector $(...
0
votes
0answers
39 views

Adding Constraints to Efficient Frontier

I'm using an optimization method to solve an efficient frontier but I want to add two restrictions additionals. My optimization problem is: ...

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