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114 views

What is the correct tick size for the Nikkei 225 mini futures?

I would like to know the tick size equivalent for the Nikkei 225 m futures contracts. I can find different information: https://www.barchart.com/futures/quotes/NPH20/profile with: Tick Size: 10 ...
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votes
1answer
51 views

Highest asset allocation contribution to the fund’s performance

I am preparing for 2020 May FRM II test and will appreciate any explanation for this question: In terms of asset allocation contribution, why is real estate made the highest asset allocation ...
0
votes
1answer
85 views

HJM framework and expectations hypothesis, updated

Is there a way one can decompose the yield of say a government bond with respect the the HJM framework? (into say an expectations component and a term premium component). As far as I can see the HJM ...
0
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1answer
99 views

Black-Scholes formula and implied vol

Is the Black-Scholes formula the only way "implied volatility" is calculated/defined in markets?
0
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1answer
221 views

Quantlib InterpolatedDiscountCurve zero forward-rate at endpoint

I use QuantLib Python to calibrate a curve based on interpolated discount factors (https://github.com/lballabio/QuantLib-SWIG/blob/master/SWIG/discountcurve.i). Using LogLinear interpolation on ...
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2answers
131 views

Option pricing without analytical solutions

I am quite new to the topic of financial options. I'm aware of options with analytical solutions (e.g. European options in Black-Scholes and Ornstein-Uhlenbeck models). I read that sometimes (most ...
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1answer
83 views

Rebalancing Bond Indexes

I am trying to make an index for the bond market in my country, which will be modified daily. For simplicity, suppose that I only have three bonds. Additionally, suppose that I am interested in ...
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2answers
101 views

Delta Hedged PnL on Call Spread

Suppose I buy a call and then sell a call one dollar in strike higher. Suppose I get into this position for 10 cents lower than it is theoretically worth. (I.e if this spread is worth 0.50 I just ...
0
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1answer
292 views

The ETF trick - E-mini S&P 500 Futures

In Advances in Financial Machine Learning, Marcos Lopez de Prado talk about what he call the ETF Trick. I understand it is about building a time series from another time serie, with the aim to reflect ...
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votes
1answer
141 views

Calculate forward price based on option chain

I've got historical data for a spy option chain which looks as follows ...
0
votes
1answer
156 views

Should U and D change with the number of steps in a Binomial Tree?

In everyone's binomial trees online I see constant U and D. Even when I read Option Volatility and Pricing by Natenburg, all his diagrams use a constant U and D (where U is the upwards magnitude from ...
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votes
1answer
66 views

What if all the weights are negative in mean-variance optimization during a crisis?

Usually the constraint is that all weights sum up to 1. But in a crisis when all assets are falling in prices, intuitively, all the weights should be negative in the optimization. But it contradicts ...
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1answer
109 views

Computing implied volatilities of ITM and OTM options

For an ATM call the implied volatility can be computed by using the Newton-Raphson method: ...
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1answer
91 views

Market makers order execution on the order book

If a market maker is required to always have at least one order on a certain side of the order book (buy or sell), if there's no one else in the market and just market makers left on the book, will ...
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votes
2answers
72 views

How and why is there a restriction on short sales?

I'm taking a course on the fundamentals of financial mathematics. This is my first quantitative finance course, so I'm still getting acquainted with a lot of the ideas. We covered the notion of a ...
0
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1answer
51 views

Generate Random Variable Using Acceptance Rejection Method

I have a question about acceptance rejection method and really appreciate your advice: Suppose we want to generate random variable that has probability density function $f(x)$, since we're using ...
0
votes
1answer
109 views

Bloomberg: fetching returns based on identifiers

I have a list of about 8000 global companies identified using SEDOL identifiers and tickers (for whatever exchanges the companies are listed). I need to retrieve data about these for a regression, ...
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1answer
103 views

Vasicek Model, zero coupon bond question [closed]

I am trying to solve questions in the Vasicek model. Can anyone help me to solve this question... In the Vasicek model with parameters $\theta = 0.08$, $k$ = 2.5, $\sigma = 0.2$, assuming to be ...
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votes
1answer
46 views

How required yield affects price of the bond and how the durations changes

can somebody answer, those two theoretical questions? How does the bond price depend on the desired yield (market interest rates)? How the duration changes if we have a shorter / longer maturity and ...
0
votes
1answer
238 views

LIBOR Curve bootstrapping and compounding

I am currently reading about swap pricing based on using the LIBOR curve to calculate spot rates, forward rates, and discount rates. From what I understand LIBOR is quoted as a simple interest rate ...
0
votes
1answer
100 views

The similarity between a bond's quoted bid price and its clean price?

Is the Best Quoted Bid Price the same as the Clean Price for bonds? I understand that the Clean Price is the Dirty Price less Accrued Interests, however, I am a bit confused of why the Bid Price = ...
0
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2answers
112 views

Limit of product

Suppose $g(X, \delta_t)$ approaches a constant $J$ as $\delta_t$ approaches $0$, where $X$ is a random variable, and suppose $Y^2/\delta_t$ approaches some constant $K$ as $\delta_t$ approaches $0$, ...
0
votes
1answer
54 views

What is the difference between exercise and expiry date?

I know in American options you can exercise the options at any time before expiry date but in European options you can only exercise the options on expiry day. On National Stock Exchange of India the ...
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3answers
107 views

How to get know when CUSIP is changed

CUSIP code is not a constant, it could be changed. Does anybody know how to detect a CUSIP change? Is there any report with this info? Where can i find it? Thank you.
0
votes
1answer
61 views

What does volume dimension means?

In an exchange documentation, I see a definition for Volume Dimension parameter, Volume dimension: Shares are normally traded in Quantity, bonds in Nominal. Ok I can understand quantity but what ...
0
votes
1answer
50 views

EBA Stress Test Arbitrage

The EBA stress test defines specific shocks to yield curves that are applied to positions as at year end. There is no account for cashflows - it is simply an immediate shock. Suppose the interest ...
0
votes
1answer
128 views

How to validate trading strategy performance

I'm backtesting some algorithmic trading strategy based on the buy/sell signals: To validate the strategy performance I compare it against the buy-and-hold strategy of the same asset and calculate ...
0
votes
1answer
1k views

Negative Beta and CAPM

In the case of a stock with negative beta and non-zero volatility, under CAPM the required return is less than the risk-free rate. This seems contradictory under CAPM assumptions that investors are ...
0
votes
4answers
159 views

T-bond of what maturity to use as risk-free rate when calculating excess return?

I am comparing different asset classes in order to estimate the expected return and the risk of a portfolio. I have historical data (adjusted close price) for my asset classes for the last 5 years ...
0
votes
1answer
115 views

Statistics related question about ruin theory

I am trying to solve the following problem: 'An insurance company has an initial surplus of 150 and premium loading factor of 15%. Assume that claims arrive according to a compound Poisson process $(...
0
votes
1answer
128 views

Downward-sloping volatility skew in equity prices

I’m learning the market price for FRM, and I’m having a hard time understand a question in the assessment: From my understanding, the volatility skew for equity is the graph on the right upper corner:...
0
votes
1answer
61 views

step by step calculation of the sharpe ratio

I am trying to calculate the Sharpe ratio. Suppose I have: $$ x_t = \alpha + \beta y_{t} + \epsilon_{t}$$ $$E[x_{t}] = \alpha + \beta E[y_{t}]$$ $$var[x_{t}] = \beta^2var[y_t] + \sigma^2$$ The ...
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votes
1answer
90 views

some doubts about answers to ticket line question from interview book

I'm reading an interview book called A Practical Guide to Quantitative Finance Interviews (nickname: Greenbook) and cannot understand the answer to the following question: Question: From Chapter 5/5....
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votes
1answer
123 views

Basic Monte Carlo Present value calculation in R question

I'm self studying monte carlo applications with the application towards present values. However the values that I am using are of the uniform distribution variety with a pre defined minimum and ...
0
votes
1answer
69 views

Futures vs Forward (Last Delivery or Last Trading Day)

For all contracts except the 2-year and 5-year, the last trading day is 7 business days before the end of the contract month. If we assume there is no optionality, isn't there a mismatch in carry. ...
0
votes
1answer
95 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-...
0
votes
1answer
183 views

INTERPRETING PCA ANALYSIS

I am having little trouble figuring our which variables are the most important when I am using PCA . What I am trying to do is see which variables explain the most variance when it comes to stock ...
0
votes
1answer
34 views

What is the meaning of multiplying price of contingent claim with e.g consumption level?

In the textbook Asset Pricing by John Cochrane, on p. 57, a budget constraint of a Lagrange optimization is: $c + \Sigma_s pc(s) c(s) = y + \Sigma_s pc(s) y(s) $ $pc(s)$ is "price today of ...
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1answer
77 views

What was the first formal theory for asset selection/portfolio management?

Just curious about the timeline and evolution of asset/portfolio selection theory from past to present
0
votes
1answer
39 views

Are the price of vanilla bull/bear spread constructed by calls and puts same?

We know that both bull and bear can be constructed by either two calls or two puts. Say if given two strikes, will price of bull call equal to price of bull put?
0
votes
1answer
95 views

Is the european put option an increasing function?

My question is to show that the function $K \rightarrow p(T,K)$ is increasing. T being maturity time,K being any strike and $p(T,K)$ is a european put option. My only approach to this question has ...
0
votes
1answer
93 views

Finding todays price of a derivative

Today's market prices for European call options $c(T;K)$ and put options $p(T;K)$ with maturity T and any strike K. Let $B_t = e^{rt}$ be the price of the risk-free bond and St the price of the stock. ...
0
votes
1answer
47 views

How to deal with intermittent NA values in a price series when calculating returns

Let's say a have a price series for a share for the year 2000. On the 27th of July 2000, there is a missing value represented by NA. This was not a holiday or any other non trading day as other shares ...
0
votes
2answers
118 views

How do you simulate pseudo-realistic ask/bid quotes given a history of 1m OHLC candlesticks?

I'm currently backtesting and livetesting a RL-based system using the close of the last 1m bar as both ask and bid. While results are excellent, this is not a very realistic arrangement. In the ...
0
votes
1answer
50 views

Why would a lower stock price leads to higher value of a call option?

Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $47,$ the author mentions the following. Higher interest rates decrease the present value of ...
0
votes
1answer
26 views

Do not understand 'If an option position includes short American-style options, then the payoff-diagram may be misleading'

Currently I am reading Basic Black Scholes: Option Pricing and Trading by Timothy Falcon Crack. At page $42,$ the author mentions the following. If an option position includes short American-style ...
0
votes
1answer
97 views

Finding distinct possible values in binomial tree

I wonder how to solve this problem. Lets say we have a binomial tree with the following parameters: $u=1.25,\ d = 1/u,\ T=15$. How many distinct possible values are there for $X_{7}$?
0
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2answers
97 views

Why would a buyer buy a Warrant vs an Option, both having the same economics

Assume you have a Warrant and an Option both with the same economics i.e strike, expiry, type etc. Also assume that the Warrant has been issued by a high grade reputed issuer (i.e there is a almost a ...
0
votes
1answer
121 views

How does liquidity affect trading costs?

I am aware that the liquidity of a stock directly affects the trading costs associated with it. I am however unsure about the direction of this effect, since I hypothesize two counteracting forces: ...
0
votes
1answer
68 views

If short rates $r(t)$ do not determine the bond prices $P(t, T)$, then what is the basis for short rate models?

The question title says it all: We know that in general, specifying the short rate $r(t)$ does not specify the bond prices $P(t, T)$. So how can a model for short rates—for example the Vasicek model—...

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