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0answers
11 views

Can we observe smile arbitrage from the implied and local volatility?

Here are graphs of implied volatility and local volatility. Our prof mentioned that we can observe that the short end low strike region has some smile arbitrage. I would like to know how? Thanks
-4
votes
0answers
10 views

Calculations in a column which depends on previous observations in R [closed]

Is there any way I can create a variable which depends on its earlier observation in R? In the below example, the column 'asset' should be depreciated in value by 1,67% (20%/12) per time period (t) ...
0
votes
0answers
20 views

What does p-value adjustment under FWER do?

The background is I am predicting a time series with three strategies, the hypotheses is the strategies have a non-zero Sharpe ratio. I am reading Backtesting, by Campbell Harvey and Yan Liu paper in ...
0
votes
1answer
39 views

Method of comparing two option pricing models?

I am currently writing a small paper comparing the Black-Scholes formula to the Bachelier model. However I am wondering how exactly I should compare the two models? Obviously I am comparing the prices ...
0
votes
0answers
26 views

Banks' use of repo to finance operations

"Dealers typically use repo to fund both their cash Treasury positions and their lending to clients through Treasury reverse repos. Thus, the ability and willingness to engage in repo, which ...
1
vote
0answers
16 views

Arbitrage-free prices in incomplete markets

Hey where I could find theory of option pricing in incomplete markets? I know that there we have not one price, but interval of arbitrage-free prices and I would like to read more about it and I need ...
0
votes
0answers
12 views

How to collect Data for different announcement date?

I have recently conducting a research on the determinant of securities offering. And I have about 1500 companies at different announcement dates (From 2000- 2018). However, I need to collect financial ...
-1
votes
0answers
32 views

What exactly does a “closed-form solution” mean

The question is pretty trivial but still I am not 100% sure about it. For example, geometric Brownian motion follows the below SDE: $$dS_t=S_t(\mu dt+\sigma dW_t)$$ and after some manipulation it is ...
0
votes
1answer
46 views

What's the difference between shorting “borrowed” shares and “fake” shares

Like it or not, millions of people are now looking to r/wallstreetbets for not only memes but to view shared investment research. I've learned a lot about stock options in the past year, but I'd like ...
0
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0answers
23 views

Short the difference between implied volatility and realized volatility of SPX

A professional trader said that the way is not to short VIX or other volatility products, but to short the difference between implied volatility and realized volatility of SPX This has to do with VRP ...
1
vote
2answers
66 views

Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

Do passive ETF fund managers care about portfolio metrics such as Sharpe ratio and Sortino ratio? I understand hedge fund managers care about these risk metrics for their investors. What about the ...
-3
votes
0answers
34 views

Where is the money going that is moving out of bonds given that both bond prices and stock prices are falling? [closed]

Does rising bond yields mean reducing bond prices? If so then where this outflow is going? Especially why not it's going to equities?
1
vote
1answer
26 views

How to compute returns of a Pairs Trading Strategy with different holding periods?

I am currently working on a project where I am testing a Pairs Trading Strategy based on Cointegration. In this strategy I am considering to trade a couple of hundred stock pairs every day over a time ...
0
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0answers
25 views

Is there a difference between volume and turnover in the FX market?

For example in equities volume refers to the numbers of share traded and turnover to the total amount exchanged. Was wondering how this applies to FX.
-3
votes
0answers
41 views

How Mortgage formula works [closed]

I'm trying to figure out how the Mortgage formula works. When the fixed monthly payment is defined as E, monthly interest as b, ...
2
votes
2answers
173 views

What is the best way to interpret changes in Treasury yields?

My question is quick and simple. However, I would like to use this answer to further my understanding of bonds and yields. If the YTM on a 10yr Note yesterday was 1.00% and the YTM on the same 10yr ...
0
votes
2answers
59 views

Alpha Vantage API time series intraday for foreign stocks into a pandas df

I need to compile stock price data for ADR and ORD pairs (and the currency between them) into a Pandas dataframe. I just started using the Alpha Vantage API for this, which works great for getting the ...
0
votes
0answers
34 views

Deriving implied volatility of a call option as a function of moneyness and maturity

I have a black-scholes function named C that represents the price of a euro call option on a stock S. I'm trying to find a way to transform the black-scholes into a function of implied volatility with ...
-1
votes
0answers
21 views

How can I get ESG data (and controversy score) from TWS API?

The question speaks for itself. I'd just add that solutions in Python would be preferred.
0
votes
0answers
41 views

calculating risk free interest rate from put call parity

I'm trying to calculate the interest rate $r$ from the put-call parity. As per hull, put-call parity is given by the below equation. $c + Ke^{-rT} = p + S_{0}$ where: $c$ = current call option price ...
1
vote
0answers
56 views

Cost of shorting currencies

I thought cost of hedging/going short on a currency with a forward was given by F/S-1 but it seems the author states 0.25% (see below). Am I missing anything (transaction costs, balance sheet costs, ...
5
votes
2answers
631 views

A stochastic differential equation

Consider the following stochastic differential equation (SDE) $$d X_s= \mu (X_s + b)ds + \sigma X_s d w_s $$ where constants $\mu, \sigma, b > 0$ and initial position $X_0$ are given. If $b=0$, ...
0
votes
0answers
38 views

What is the Id in the ARIMA model in Notes on financial risk of Privault?

I hope this is the right place to ask this question. I am studying the time series from Privault's Notes on Financial Risks. In the ARIMA model part I can't understand what is "I_d", it is ...
-4
votes
0answers
14 views

Bounds using different lending and borrowing rate [closed]

Suppose the borrowing rate r_B = 10%r B ​ =10% compounded annually. However, the lending rate (or equivalently, the interest rate on deposits) is only 8%8% compounded annually. Compute the difference ...
0
votes
0answers
39 views

Settlement price of SPX

How would the settlement price of SPX be determined if market is closed on the expiration date due to natural disasters/terrorist attacks?
0
votes
0answers
28 views

Yield-to-maturity (YTM) vs effective annual rate (EAR)

If the yield-to-maturity (YTM) on a bond is 5%, is the effective annual rate (EAR) on the cash flows associated with the bond also 5%? I know that YTM does account for the present value of a bond's ...
-1
votes
0answers
33 views

Zero Curve or Spot Curve, what measure?

Practically, We use Zero Curve or Spot curve from Market Quotes to price Cashflows. What I want to know : this behavior is related what measure? risk neutral? or T-forward or else? Also I want to know ...
0
votes
0answers
11 views

Why does amortizing a balloon payment over the term yield a monthly payment increase % greater than the balloon % being on the backend?

This is really not making sense to me on a conceptual level, but after testing, appears to be the case. We are borrowing money at 3.00% to fund the leasing of some equipment to a customer. Lease Term: ...
0
votes
0answers
30 views

What is practical meaning of T-forward Measure vs Risk-neutral Measure?

What I understand is that risk-neutral measure use Risk-free product as numeraire and T-Forward measure use Bond Price as numeraire reading material says, T-forward measure make the pricing behavior ...
1
vote
0answers
37 views

Swaption extrapolation

I have some ATM swaption volatilities with the following characteristics: (-IBOR) payment frequency: 1M Underlying swap maturities (tail): 1Y, 2Y, 5Y, 10Y, 15Y and 20Y Swaption expiries: 1M, 3M, 6M, ...
0
votes
1answer
56 views

Second by second stock data from Bloomberg API (or anywhere else that is free) into Pandas Dataframe

I need to compile stock price data for ADR and ORD pairs (and the currency between them) into a Pandas dataframe. My initial plan was use Python's requests library and a free Rapid API account to get ...
2
votes
0answers
43 views

Electricity Futures Risk Premiums With ARIMA

I am attempting to model long-term electricity prices using today's futures prices. Unlike most futures, electricity is delivered over a period of time (usually a month), rather than at a point in ...
0
votes
0answers
43 views

Is this simple model used to calculate the interest rate duration and credit duration of a floating rate note? Other models?

I found this model for floating rate bonds in a book I am reading and I am wondering if it is used anywhere in practice? $$MV=\frac{\frac{(Index+QM)\cdot FV}{PER}}{\left(1+\frac{Index+DM}{PER}\right)^...
-3
votes
0answers
30 views

When to stop GBM/drift Monte Carlos? How much memory is expected? [closed]

So I don't have a quantiative finance background, really. Just computing and economics... I have a question for y'all. I am currently running an MC simulation that is your basic stock drift formula. I ...
2
votes
1answer
189 views

What are the “sniffing” or “stalking” algorithms?

I was looking for all the sorts of trading algorithms used in stock market and I came across the so-called "sniffing" algorithms. However, the explanations of this concept I found are very ...
1
vote
0answers
38 views

How could option vega be remapped on reduced volatility surface?

try to be clear to ask my question: Suppose the original vol surface is a n by m matrix where n is the number of pillars in the volatility term structure and m is the number of strikes. According to ...
-2
votes
0answers
37 views

Option pricing with expectation (Using Integral & Log Normal Desnsity) vs Black Scholes Model [closed]

I am little bit confuse and I would appreciate if someone can comment on this. In one of the QuantLib library document I saw a code snippet (Numerically calculating call option price by solving ...
0
votes
0answers
13 views

Statistical distribution of crowdfunding donations? [migrated]

Is there an accepted model for the statistical distribution of the size of crowdfunding contributions (be it simple donations or some sort of investment scheme)? Or at least some freely available data ...
1
vote
1answer
97 views

calibration of a local volatility model

Generally speaking, when calibrating a local volatility model a la Dupire to European vanilla calls, should I use the numerically (PDE or Monte Carlo) solved price for the vanilla call in the cost ...
-4
votes
0answers
38 views

Black-Scholes hedged portfolio [closed]

Suppose that a Share price $S$ is currently 100 and that tomorrow it will be 101, with probability $\mathcal{P}$, or 99, with probability 1-$\mathcal{p}$. A call option with value $C$, has strike ...
-3
votes
0answers
23 views

Holdings vector R3 [closed]

I’m confused by what the elements are, or just the basic definition. Is a holdings vector of R3 ( beta, quantity , price ). Any help would be greatly appreciated
0
votes
2answers
72 views

Exponential moving average values before the data range is met?

The above chart plots a 300 weekly exponential average. With 52 weeks per year, the indicator would start calculating the EMAVG after 5.77 years, in 2016. What technique could it be using to be able ...
-6
votes
0answers
32 views

The difference formal of BS PDE and asset-or-nothing call option PDE [closed]

difference and relationship between BS PDE and asset-or-nothing call option PDE
0
votes
1answer
72 views

Misconception about replicating portfolio

I am solving a problem in which following payoff is provided: With $S_0=100$ and $T=8$. Looking at the payoff it seems obvious that it is replicated with two european put options ($K=100$ and $K=150$)...
0
votes
1answer
64 views

Why do a callable bond always have higher yields?

In an american callable bond there is an expectation for the issuer to prepay its debt prior to maturity. I understand that this reduces it's value and therefore, higher yield. But another way to ...
0
votes
1answer
81 views

FX futures valuation under negative rates

Market participants use negative interbank rates (LIBOR JPY/CHF) for the valuation of FX futures. Does this make any economic sense? Positive rates in valuation formula indicate opportunity cost of ...
-5
votes
0answers
28 views

asset-or-nothing call option in BS model [closed]

In the standard Black-Scholes model, consider an asset-or-nothing call option, which pays the terminal underlying asset price, provided this price is greater than or equal to a pre-specified trigger ...
1
vote
0answers
35 views

Why should a seller of autocall (down out ones) cover gamma risk?

I wonder why sellers of Autocalls should cover the gamma ? The autocall I'm talking about is of this type : While the spot never goes below 70 % of the initial value, nothing happens. If it happens, ...
0
votes
0answers
36 views

OIS Discount Factor Calculation [closed]

I've a table below with the OIS rates. Day Count Convention: 30/360 O/N Leg Frequency: Daily Fixed Leg Frequency: Annual How do I calculate the forward rate and discount factor for the OIS at 6m? ...
0
votes
0answers
25 views

Import an external term rates structure in QuantLib

I need to create a Monte Carlo simulation for a Hull-White process. I have the term rates structure already given in a csv, and imported it into Python with the name "rates". However, I have ...

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