14 votes
Accepted

How exactly are corporate bonds priced at issue

I am not an investment banker, but usually the procedure is something like this: (0) The IB knows the yield of existing bonds with the same maturity and credit rating, so it is not too difficult for ...
  • 9,167
5 votes
Accepted

Parameters variation in fundraising financial model

Yes, a Monte Carlo simulation (MC) is what you need. It is a well known and documented approach with many uses in finance, science and engineering. MC simulations are used to simulate the returns of ...
  • 1,335
5 votes
Accepted

IPO Valuation: Share Pricing and Number of Shares

IPO valuation is super sophisticated. There is usually a Managing Underwriter, who has a team of analysts/asset pricers/investment bankers/lawyers/etc. with complicated terms and they go and value a ...
  • 460
4 votes

How exactly are corporate bonds priced at issue

In addition to @AlexC answer there are 2 additional key points. 1) if the issue is oversubscribed the IB / syndicate team will choose the allocation to each client usually based on their relative ...
  • 8,099
4 votes
Accepted

How much market data is required to confidently predict the yearly returns of a stock?

It seems implicit in the question that you are happy to assume that the distribution of historical returns is an unbiased and consistent estimator of the distribution of future returns. Else "it ...
  • 4,936
3 votes
Accepted

Compute the (Net) Present Value

No, it's not correct. The 1000 you invest at the beginning of the second year should also be discounted, That 1000 also has a present value. This gives: $$NPV = \frac{2200}{(1+R)^2} - \frac{1000}{(1+...
  • 1,859
3 votes

How to calculate performance of a private equity investment?

I am not an expert on GIPS, with its many pages of rules, but I do remember that under GIPS Private Equity results are to be given in terms of IRR (Internal Rate of Return). In most other cases (stock/...
  • 9,167
3 votes
Accepted

Why are changes in stock market wealth considered permanent?

I guess the concept you're looking for are martingales. These are stochastic processes which remain on their current level (in expectation!). Ignoring some technical conditions, a stochastic process $...
  • 14k
3 votes
Accepted

Calculate interest

You can't derive a formula from this equation to calculate $q$ (or $i$) directly for all values of $n$ given the other variables. However, you can use the RATE() function in Excel (or a similar ...
  • 598
3 votes

How to incorporate ESG in Portfolio Optimization?

recall that, in general, you have the following elements: A universe of possible stocks. There are tens of thousands of possible investments out there, so you apply screens to limit your universe to ...
2 votes

Buy side techniques

The classic text for machine learning is 'The Elements of Statistical Learning' by Tibshirani et al. I believe the term "data mining" is often used synonymously with "machine learning".
  • 5,081
2 votes
Accepted

Sharpe Ratio for strategies with different rebalancing period

It is true that strategies with higher trading frequencies have Sharpe ratios that appear implausibly high by the standards of Fama-French factors. The strong law of large numbers really helps them, ...
  • 14.5k
2 votes
Accepted

ABS vs covered bonds vs CDO

MBS are securities which represent ownership in a pool of mortgages ABS are securities which represent ownership in a pool of assets other than mortgages (for example auto loans or credit card loans) ...
  • 9,167
2 votes

PPPN: participation rate, stocks and premium

In general, PPN is the short form for principal protected notes. Here, the principal, or notional, $N$ is generally return in full. I am a little confused why only 80 % is returned. It may be a ...
  • 20.5k
2 votes
Accepted

Multi-year annualized Sharpe Ratio

You have to annualize the monthly avg return also: =(12*AVERAGE(G3:G145)-0.015)/(STDEV(G3:G145)*Sqrt(12))
  • 9,167
2 votes

A citizen's life as an investment project (from the State's PoV)

I do not think such figure exist in its per-canned form. However, for the most part, any pension/social security/annuity provider needs to have an idea of that, since it is their current and future ...
  • 193
2 votes

Thoughts on how quantitative hedge funds use machine learning to invest in the stock market (algorithms, examples of data, etc.)

This may not directly answer your questions. There's a class offered by Georgia Tech called Machine Learning for Trading, you might find it useful. https://www.udacity.com/course/machine-learning-for-...
  • 313
2 votes
Accepted

How to (efficiently) calculate the maximum possible return of a perfect "crystal ball" investment strategy?

To me, that smelled like dynamic programming too. After implementing a dynamic programming solution according to http://www.cs.rpi.edu/~magdon/courses/cf/notes/optimal.pdf and other sources from the ...
2 votes

Choice between 2 investments that cost the same but offer different interest and face value

Why don't you calculate the IRR of each investment? (aside from all the issues with IRR).
  • 238
2 votes
Accepted

Why should long-term investors care about flash crashes/ intra-daily volatility/HFT?

I agree with the implicit idea behind your question that "on the paper, high frequency fluctuations of prices should not affect long term moves". One point is for sure: the volatility we have in mind ...
  • 10.7k
2 votes

Optimizing Investment Portfolio

The scope of your question is quite unclear to me. You seem to mention trading. If you have multiple trading strategies (that you think are good, and reasonably uncorrelated) and you want to trade ...
  • 9,647
2 votes

Optimizing Investment Portfolio

What does it mean that you will optime portfolio "without programming"? Does that mean that you will do calculations by hand??? Articles will not help you since every article you will be able find ...
  • 1,585
2 votes

Estimating realised gains given growth rate and churn

Assume we start at $t=0$ with $P_0$, there are $t=1...N$ subsequent periods, and at each period-end $t$ an (entirely arbitrary) portion $c$ of our portfolio $P_t$ is churned and $(1-c)$ remains ...
  • 1,346
2 votes

NPV and efficient market hypothesis

The assumption that the discount rate should be derived from the IRR of an alternative investment is not correct. Commonly the WACC of the company (or the WACC of the funds needed for the investment ...
2 votes

What is the duration of a rolling 5 year investment?

The duration represents the sensitivity of the price of a financial instrument to current interest rates. Since at the rolling date the price will be equal to the face value no matter what happens to ...
2 votes

Open Interest on Stocks

In my opinion, your intuition that their definition is crap is correct. Google doesn’t give me another source that uses this definition either.
  • 7,731
1 vote

Possible application of Polya's Urn on Portfolio's Investments?

As a Polya urn is often referred to as the rich get richer, it maybe possible to use his urn to get richer. It is known that these urns can be related to the Dirichlet-multinomial distribution. That ...
1 vote

Comparing values of indicator between different stocks

Technical analysis is not quite in my wheelhouse, but it's been an interesting topic to me, so hopefully I can lend a hand. Let's start with some basic assumptions: Because OBV is based on volume, ...
1 vote

How did Dimson, Marsh and Staunton (2002) computed the equity index annual real return?

All of the DMS returns are adjusting for dividends. Hence dividends are accounted in the sample. Moreover, DMS have also accounted for inflation. Hence, the real total net equity index return, now and ...
  • 111
1 vote
Accepted

Filter the NASDAQ stocks for investment

Not really sure about papers, but it seems you are looking for a stock screener, which these two are my favorites, that you can filter stocks based on your ...
  • 460

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