# All Questions

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### Let $dp=\mu(t)p(t)dt − k\,p(t)h(t)dt.$ Why $E[dp]=0$?

Assuming for simplicity that the price falls during a crash by a fixed percentage $k \in (0, 1)$, the asset price dynamics is given by $$dp=\mu(t)p(t)dt − k\,p(t)h(t)dt.$$ In a paper I read: The no-...
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### Black-Scholes equation Variational / Weak form

I am having difficulty deriving the weak formulation of the Black-Scholes Equation. I have multiplied it with a test function phi and integrated over Omega. But results on the internet suggest ...
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### Hull White Cap/Floor calibration

I have a problem and I hope someone could help me. I calibrated the Hull-White model to Caps and Floors from t=0 so the bond prices are equivalent to todays term structure. See: Hull-White zero-...
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### How can Hedge Funds get lots of profit without making big trades?

If Hedge Funds that get money through trading make big trades, they will create whales. How can the get that much profit withou making whales?
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### Is a more robust Covariance estimation possible?

I'm working on a mean-variance optimization problem, but instead of financial securities I'm choosing a 'portfolio' of N athletes. It is a 1-period optimization problem over one generic statistic ...
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### Is there any way to compare portfolios created using sharpe optimization model?

I created different portfolios using sharpe portfolio optimization model and I want to know is there any way to compare those portfolios before actually investing in them?
36 views

### Adjusting volatility while constructing portfolio

I am trying to construct a portfolio based on a macro momentum strategy for backtesting purposes as outlined in https://www.aqr.com/-/media/AQR/Documents/Insights/White-Papers/A-Half-Century-of-Macro-...
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Say the CTD's recovery is 40%, when calculating bond future's jump to default, should it be 1) or 2) 1) (future no. of contracts * contract size * 0.4 - ctd market value)/conversion factor 2) future ...
15 views

### What are the changes which will be needed in the systems if the settlement cycle changes from T+3 to T+2?

If the Settlement cycle is changed from T+3 to T+2, what changes will be required in the various systems from Front office to Middle office to Back Office. I can think of Reference data service ...
17 views

### CFH TOOLBOX MATLAB OPTION PRICING [on hold]

Does anybody know CFH (Characteristic Function Option Pricing) toolbox of matlab? How does this toolbox work? I've just intalled it into my matlab and I would like to use it to pricing option with ...
51 views

### Cox-Ingersoll-Ross Zero Bond Put Option

according to Brigo & Mercurio (2006): But how is the Zero bond Put of the CIR model? I couldn't find any information about that. Thanks in advance. Regards Chris
76 views

### Produce the random variable for an asset from a uniformly distributed random varible

I'm working on a quant interview question from the book called Quant Job Interview Questions And Answers (by Mark Joshi and other authors). I cannot understand the following question(not the answer, ...
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### Fourier transform method: the reason why it's beneficial to put points of interest on the middle of the “time-domain”?

I was trying to solve European option pricing problem using Conv method (introduced by Lord in 2008 https://pdfs.semanticscholar.org/0632/460bd50b2151f74ac40028df4cc60e73a884.pdf). The final step of ...
29 views

### Why use reinforcement learning for portfolio optimization with historical market data?

One of the main advantages of (deep) reinforcement learning approaches (compared to more widely known supervised deep learning approaches) is the fact that it enables us to automatically take ...
51 views

### Deriving implied volatility programmatically

I'm working on a project to calculate the value of options using Python. I'm using the Black-Scholes model, and I can get accurate results by plugging in a given ...
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### What is the payoff matrix of a set of put option that completes the market?

For example, there are three states of nature but only one security yielding payoffs {1,2,3} in the three states. What would be the set of put options that completes the market? I know that if it his ...
18 views

### 0 Delta on Forward starting Equity basket option

I wanted to confirm the inherent reasoning behind 0 delta on a weighted equity basket option. For instance, if we have a basket option with a forward starting initial fixing date, we can expect the ...
24 views

### Quantlib Yield Curve

Is it possible to create yield curve object in Quantlib given some function of time? For example, given Nelson-Siegel parameters, create yield curve which can compute zero yield for any date >= ...
38 views

### Heston model with jumps in both variance and underlying dynamic

How can I build on Matlab a Heston model using characteristic function adding jumps in both variance and underlying dynamic ? Suppose that the number of jumps is Poisson-distributed but the jump size ...
93 views

### Is the vega of a portfolio of a long 0.5 delta and short two 0.25 delta calls positive or negative?

More specifically what I am trying to find out is whether the following relationship is always true or not. Same underlying for the calls, assume the most simplistic assumptions (interest rate = ...
45 views

### Dynamic Programming optimal saving-consumtion finite horizon problem

Let $w_t$ denote a consumer's wealth at time $t$ and $c_t$, the amount she chooses to consume, so her savings exiting this time period are $w_t-c_t$. Given this savings decision, her savings $w_{t+1}$ ...
193 views

### List of all Russell 2000 Stocks

Anyone know where to find a list of all the stocks on the Russell 2000 index? I've Googled away on this one, but thus far, have only found a junk site (suredividend.com) that purports to have it, ...
40 views

### What is NYSE breakpoint as used by Fama French?

I googled the term, the closest I could find was "breakpoint", which does not fit the context.
380 views

### Numeric example to understand the effect of option gamma

Gamma of an option is the second partial derivative of the theoretical value of an option wrt the underlying. It should be the rate of change of Delta wrt to a small change on the underlying. However ...
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### Hedging a trade for PCA component neutrality

Suppose I am given a set of financial instruments, e.g. {1Y, 2Y, ..., 30Y} interest rate swaps or {Barclays, Lloyds, .. } FTSE100 companies. It doesn't matter which so let's go with IRS. I have ...
31 views

### Data Sources/Vendors for Closed End Fund NAV data

I am seeking NAV pricing for closed end funds as a data source. Listed CEFs are required to disclose NAV once every quarter at the least, and many disclose daily at the most. I do see a previous ...
18 views

### Show the expected return of the portfolio and how to derive return variance of the long-short portfolio?

Show the expected return of the portfolio and how to derive the return variance of the long-short portfolio? (see picture)
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### Black-Scholes-Merton and alternatives as interpolation tools

This is a not very quantitative question, but is nevertheless related to quantitative methods in Finance. I was reading the following paragraph from Hull's Options, Futures, and other Derivatives: ...
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### Shift from stocks to bonds in the 1987 crash [on hold]

I read that a potential reason for the stock market panic of 1987 could be the rapidly increasing long term US interest rates: the yield of 30Y US Treasury Bonds increased from the low of the year, 7....
61 views

### Libor reform: why SONIA stays, but EONIA is to be replaced by ESTER

what is the reason that why SONIA stays, but EONIA is to be replaced by ESTER
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### Hedging option delta

Let's say I am long 1000 50 delta call options. I need to hedge my deltas now. There can be infinite ways to do this. How should I think about proceeding wit this? My first thought was, if the ...
54 views

### Proving an Expectation

Assume the risk-free bond $B_t$ and the stock $S_t$ follow the dynamics of the Black & Scholes model without dividends. Consider the perpetual American put option with payoff $(K-S_\tau)^+$ when ...
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### Is my thinking on futures implied repo correct?

I am building analytics for futures and have a theoretical understanding. If implied repo > actual repo then I can short futures and go long the security and finance it in repo. ON my Bloomberg ...
47 views

### Should the NPV be equal to zero in liquid markets?

My question is actually very simple. I would like to motivate it by bringing the following example: suppose we have a (conventional) bond which generates $CF_1;CF_2;...;CF_n$ cash flow (for ...
249 views

### Stochastic Integral Graph

As we can represent the integration of $f(x)$ on $[a,b]$ with the graph below, I was wondering how to represent the following integral with $X(t)$ a Brownian motion, $f(t)$ any function and \$t_j = ...