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22 views

Where to find the components of an index and how to replicate it by subset selection?

I am interested in replicating the performance of the eurostoxx 50 index using different statistical methods. That's what ETFs do, right? How to replicate an index using subset selection? I think I ...
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86 views

Algorithmic Trading Competition at MIT

Has anyone participated in MIT trading competition before(traders@mit)? Wondering what type of data are used-tick data or bar data-and are participants connected to a web socket? Are we allowed to ...
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44 views

Strictly increasing asset price under a risk-neutral probability measure?

I am reading a paper on option pricing under jump processes in continuous time. There is a section labeled examples where the authors work under a risk neutral probability measure and derive option ...
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28 views

Clusters evolution over time

I have a dataset of stock prices and I want to group stocks that share similar characteristics together using cluster analysis. I'm interested in following the evolution of each cluster over time, but ...
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33 views

Turning a spread always-positive for profit calculations?

I have a strange problem. I am running a backtest on a strategy whose signal is based on a spread. Naturally, a spread can go negative or positive. If I try to calculate the log return of a difference ...
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45 views

Expected Yield to Maturity & Default Risk Premium

For a corporate bond, which natuarally has a default risk, the expected yield to maturity (EYTM) is defined as the probability-weighted average of all possible yields. Hence, for a 10-year zero-...
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36 views

How long a time horizon should be for verifying the effectiveness of an investment strategy?

Question To verify the effectiveness of a certain asset allocation strategy, how long a time horizon should be? Is there any academic paper regarding this topic? Question in more detial I know ...
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1answer
76 views

Interest rates compounded monthly [closed]

Suppose the quoted APR is $r_0 = x-1$ and interest is compounded monthly; Am I correct in saying the formula for the monthly interest rate $r$ is: $$r = (1+ (\frac{r_0}{m}))^m -1 $$ Is it also ...
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60 views

As a market maker, how to prevent short selling on a specific stock with many broker accounts?

Consider a scenario that a market maker placing orders through many brokers. Each broker allows short selling, but the exchange forbids it. How does the market maker ensure that the overall position ...
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73 views

Historical data for total market capitalization

I'm working on a data analytics certificate and need historical data on the total market capitalization for the US for a course project. Can anyone suggest a source? Thanks!
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26 views

Positive carry with negative yielding bonds when repo is negative

Could someone please explain to me how positive carry is achieved when the repo rate is negative? For example I can see the German repo rate is -0.57% and the 2 year German bund is -0.78%. So to ...
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61 views

FX TARF hedging (target redemption forward)

Lets say client is buying from you eurusd tarf strike 1,16 sell eur buy usd notional per fixing 500k usd leverage 2 first expiry 1 month from now, 12 fixings in total (monthly) full final payout ...
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41 views

Which Python or C# backtesting framework supports multi-asset?

Is there any backtesting framework written in C# or Python that supports multiple assets? I'm trying to backtest a pair trading strategy that requires to
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51 views

Displaced diffusion LMM

In the standard LMM a rate $L_i(t)=L(t,T_{i-1},T_i)$ has under the $T_n$-forward measure ($n>i$) the dynamics \begin{equation} d{L_i}(t) = - {\sigma _i}(t){L_i}(t)\sum\limits_{j = i + 1}^n {\frac{{...
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34 views

Change of numeraire/probability when asset pays dividends

So I was looking at Margrabe's formula for exchange call options in the book 'Mathematical Methods for Financial Markets' (Jeanblanc, Chesney, Yor), and I was having trouble justifying their change of ...
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40 views

Are BARRA's Multiple-Factor Risk models rational asset pricing models?

Barra's Multiple-Factor Models for risk (e.g. USE3, USE4, CNE5) are much like those models used in empirical asset pricing studies such as CAPM, Fama-French three-factor model and others. I'm not ...
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45 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 ...
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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 ...
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21 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.
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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 ...
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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?
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0answers
36 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 ...
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30 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 ...
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15 views

Applications of a calibrated price or IV surface and other basic questions

Newbie here with basic questions. I have researched the topic online, but am still at a loss. I went through a nice course on calibration, saw how to apply stochastic short rate, stochastic vol, jump ...
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19 views

American Option - Early exercise risk management

This is for American Option Book Management in real trading. Let`s suppose, American Option seller(Book manager) only do delta hedging, which means seller cannot do Vega hedging, American Option ...
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0answers
25 views

What MIPS (Municipal Inflation Protected Securities) are out there besides the two DFA ones?

DFA has DMREX AND DCARX. Are there others? I'm specially looking for high quality, medium or long duration MIPS but a list of anything would help.
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42 views

Currency exchange rate

I'm working with monthly data and I need to use FX rate in my model. I have daily data for exchange rate and not sure how to average it over the month. Should I compute simple arithmetic average over ...
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0answers
13 views

How to compute reference share price and reference volatility in CreditGrade?

I'm trying to implement CreditGrade in python, from the msci Technical Notes (https://www.msci.com/documents/10199/dd31bcce-6fe3-47b7-9fb7-10c4c8f750ba) but I'm running into some comprehension trouble ...
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35 views

How can I estimate a dynamic GARCH model using a Kalman filter methodology in R or MATLAB?

Does anyone know of any R or MATLAB packages for estimating GARCH models using Kalman filtering or any other state-space methodology? I would like to estimate a GARCH so that not only the variance, ...
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29 views

Arbitrage free volatility smile and delta

If we have a (parametric) volatility surface which has arbitrage, then consider the delta of the options, i.e. $N(d_1)$, where $d_1 = \frac{1}{\sqrt{t}\sigma(K)}\log(F/K) + \frac{1}{2}\sigma(K)\sqrt{...
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17 views

which books can be studied to get knowledge about banking? [duplicate]

Which books are preferable for banking awareness? I need to increase my banking knowledge as I am new to this, Kindly refer me some good books to start with !!!
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20 views

CDS ISDA Pricing (usage of accrued in calibration)

I am looking to understand the ISDA CDS Pricing Model for a 1Y "Buy Protection" CDS with Coupon = Quoted Spread = 100bp. Numbers are from Bloomberg. Cash-Flow Matrix ...
0
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1answer
99 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
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40 views

Deriving the risk-neutral pricing formula for the 2-state credit risk model

I am reading Interest rate models by Cairns—specifically the chapter on credit risk. Cairns introduces first the simple 2-state continuous time Markov model for credit risk—with the two states being "...
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0answers
35 views

Risk neutral measure in the binomial approximation of geometric Brownian motion

Suppose an asset is described by geometric Brownian motion with a drift, i.e. $$dS_t = S_t\mu dt + S_t \sigma dW_t$$ for a Wiener process $W_t$ and $S_0=1$. By some consequence of Girsanov's theorem (...
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1answer
40 views

How to use ARMA GARCH to do forecasting in R?

How to use ARMA GARCH to do forecasting in R? I only know how to use ARMA to do the prediction and GARCH to do volatility forecasting but how can we use ARMA GARCH to do forecasting in R. Can anyone ...
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0answers
22 views

Searching for historical gold price intraday data

I'm searching for historical gold price intraday data. Can someone help me and tell me where I can get this data from? I need this data for a research project. I've only found data for historical ...
0
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1answer
45 views

Weighting schemes - Volatility

One extension to this weighting scheme is to assume a long-run variance level in addition to weighted squared return observations. The most frequently used model is an autoregressive conditional ...
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0answers
16 views

Walk-Forward Analysis: Sensitivity of Result w.r.t. shift in train/testing windows

I currently test numerous Trend-Following/Momentum and Mean Reversion trading strategies for cryptographic assets with granularities ranging from daily to 3 hourly spaced data points. The general set-...
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0answers
39 views

How to backtest a sample of trades to optimize stop loss on losing trades and profit targets on winning trades?

I have a history of hundreds of executed trades. Given those trades, I want to know if there's a tool or framework that can help me figuring out: What would have been the most cost efficient stop ...
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0answers
39 views

Can a bond be denominated in another security?

Could a bond be issued that's denominated in securities like ETF shares or stock shares? Of course most people would not want to buy it, but is it possible? I know it's possible to short a security, ...
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0answers
27 views
0
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0answers
45 views

Options trade - statistically expected return calculation?

I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, consider the following spread On the left hand side we see: maximal ...
0
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1answer
112 views

Calculate the historical simulation VaR of the portfolio using Python

Assume that we have 200 stocks in WeiBo (WB), 300 stocks in Netflix (NFLX), 250 stocks in Ford Motor Company (F) and 150 in Royal Dutch Shell (RDS-A) as of 31 August 2019 in the portfolio. I have ...
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0answers
21 views

Getting index sectors historical weightings from Bloomberg using python

I want to know how to download an index sectors' historical weightings from Bloomberg. For example, S&P 500 is comprised of Telecom Svc, Materials, Utilities, Energy, Consumer Staples, ...
0
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0answers
39 views

CRRA Utility Function Problem

"Assume an investor with total wealth of $100 that has a constant relative risk aversion (CRRA) utility function. The functional formula for the CRRA utility function is given as $\ U[W]=\frac{W^{1-θ}...
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0answers
33 views

Eliminating factor risk?

Suppose there are two risky assets, related to the same risk factor $f$. $r_1 = μ_1 + β_1f$ $r_2 = μ_2 + β_2f$ There is also a risk free asset available at $r_f$ How do you eliminate factor risk ...
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0answers
26 views

Is it possible to price a double barrier option which one barrier is monitored continuously while another barrier discretely without using MCS?

I am thinking about pricing a down-and-in and up-and-out double barrier put option under Black-Scholes assumption. The upper barrier is monitored continuously and the lower barrier is monitored ...
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0answers
42 views

Optimal asset allocation

I apologize if similar question has been already asked. I have to compute optimal allocation of investment I between market asset and risk free asset. The investor's utility function is $U(w)=E(r_P)-...
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0answers
32 views

OTC equity option under foreign currency CSA

What adjustment do I need to make to the Black-Scholes equation when the CSA of an OTC equity option is in a different currency than the underlying in order to get the correct price? For instance, ...

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