22
votes
Accepted
Negative price of oil
The negative price that was all over the news was the front contract for WTI (West Texas Intermediate) futures that went to -40 and had a last trade date of 21.04.2020, so today.
This movement was ...
- 5,685
7
votes
How do I get a good mid-price?
Ask minus bid has nothing to do with the mid price - it is the spread.
Generally you see a collection of bid/offer orders resting on different price levels. In the simplest case, you just see one bid ...
- 5,891
6
votes
The Dog That Did Not Bark?
I'm not sure how deep of a question you are asking. The dog that did not bark is from a Sherlock Holmes murder mystery. The dog at the house did not bark at the intruder, so Holmes believed the dog ...
- 266
5
votes
Scale prices in multiple stocks for comparison
Yes I would recommend you to plot the log of prices instead of prices. It will re-scale the data while preserving the hierarchy of prices, and more importantly it allows to compare easily the growth ...
- 2,552
5
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Clean vs. Dirty Price and its impact on duration
By definition, modified duration is
$$ D_\text{mod} = \frac{1}{P} \frac{dP}{dy} $$
where $P$ is the dirty price of a bond.
Clean price is the standard quoting convention for the vast majority of bond ...
- 11.4k
4
votes
Accepted
How to estimate today's closing price?
Since you're asking on a quant finance forum, the mathematical approach would be
Decide on a model that the stock price follows, and
Compute the expected value of the price, conditional on the most ...
- 2,778
4
votes
Accepted
Brownian motion Price and Hedge problem
Step 1: Know your distribution
Since $\int_0^t W_s\mathrm{d}s\sim N\left(0,\frac{1}{3}t^3\right)$, we have
\begin{align*}
S_t &= S_0 \exp\left( rt-\frac{1}{6}\sigma^2 t^3 + \sigma \int_0^t W_s\...
- 15.2k
4
votes
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Why using mid price to compute mark-to-market P&L if it is less accurate than using bid/offer price?
This is an excellent philosophical question.
Recall that the goal of mark to market is to predict the P&L if we unwound this position in an orderly market.
Suppose that you're in a very convinient ...
- 11.9k
4
votes
How is forex price precision (of the actual floating point number) determined?
"How do they choose the forex price number's precision?"
By convention. And/or by vendor, e.g. BBG has 4dp for some pairs where Oanda has 5. And of course convention for forwards differs ...
- 2,209
3
votes
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Fill prices on limit and market orders
In the first case it is a "race condition": whichever order is received first (even if it is only one microsecond before the other) will populate the Book and the second limit order will execute ...
- 10.9k
3
votes
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Scale prices in multiple stocks for comparison
Index all the stocks to 100 in the start of the period!That is mulitiply all stock prices with 100 and divide all stock prices with their price in the beginning of the time series!
- 1,352
3
votes
The Dog That Did Not Bark?
As it was pointed above the phrase is taken from Sherlock Holme's novel. It describes the case when the dog should have bark, but didn't. Now if we come to the Cochrane paper.
He introduces the system ...
- 87
3
votes
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Normalizing SPY ETF time series data with its sector ETFs?
Why not just use Geometric Mean Returns? Each time you buy/sell an ETF calculate the holding period return as a percentage and plug into the formula. The answer is a percentage that you can use to ...
- 271
3
votes
Difference in weekly and monthly data
If anyone else is wondering what the actual answer is, I've figured it out. When viewing as weekly or monthly data, yahoo displays the Open, Low, High, Close, Vol., and Adj. Close "as of the end ...
- 31
3
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What does it mean by "A one period bond is a claim to a unit payoff." from Cochrane?
That simply means that a bond pays one unit of the currency in any state (regardless what happens in the future, i.e. there is no default risk about the payoff of a bond).
So you will receive 1 in ...
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3
votes
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What does it mean by "A one period bond is a claim to a unit payoff." from Cochrane?
A bond repays its notional face value (plus interest sometimes), not the original purchase price. Do not assume the the price you pay for a bond is its face value.
Sometimes a law or a regulation (...
- 11.9k
3
votes
Accepted
How would a FX price probability distibution function look?
You can extract the risk neutral density implied by option prices and have a look at that. The implied probabilities are given by the prices of butterfly spreads in the market. This is common ...
- 969
3
votes
Accepted
What should basic statistical analysis of different price forecasts contain
Hi: Based on your question, it sounds like the Diebold-Mariano test might be perfect for your case. It doesn't require any sophisticated assumptions about models or processes etc. All one needs are ...
- 1,082
3
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Why using mid price to compute mark-to-market P&L if it is less accurate than using bid/offer price?
Most banks use mid market to compute daily MTM p/l whilst maintaining a reserve to account for liquidation costs. The latter is usually recalculated periodically and is indeed a function of market ...
- 16.5k
3
votes
Accepted
Are there any standards for the precision of stocks prices, amount of stocks etc.?
Giving my 2 cents on your questions: I believe the amount of decimal places is dependent on (the exchange and) the type of financial product. However, an Investopedia article writes:
In 2005, the ...
- 4,176
3
votes
Resources to learn the applications of SVD in quant finance?
An example of typical use of SVD:
Suppose you have a square matrix. You would like to apply Cholesky decomposition. But Cholesky complains that the matrix is not positive definite. So you call SVD ...
- 11.9k
3
votes
Accepted
Exchange vs Order-Driven vs Quote -Driven
Some terminology, including terms like "quotes" and "orders", has become obsolete in the modern equity or futures markets.
However, "quote-driven" or "order-driven&...
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3
votes
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Why some stocks not traded today?
There's a common misconception that everything must trade every day / hour / minute when the market is open.
Quite simply, the price is in equilibrium - no new buyers willing to push the bid higher ...
- 1,335
2
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Strategies to merge bid, offer and trade price time series into a single price time series?
The average would be called the mid-price, not the best in my opinion, but that depends on your modeling.
Another strategy is to weight the bid and offer prices according to size, also called the ...
- 451
2
votes
Correlation: Use Price or Return? Return doesn't make sense
Actually prices dont make sense as they are correlated with previous samples (prices), returns are not. Better will be difference between prices, but then you dont have reference point and ...
- 491
2
votes
What does implied volatility means for different call and put strike prices?
Implied volatility will depend on the price the option is trading at. If more people buy a certain strike than another, or the given option is more difficult to hedge then the implied volatility will ...
- 500
2
votes
How do I get a good mid-price?
This is an implied mid price.
If an illiquid market and/or quiet time of day to snap bid and ask prices, you may have an implied mid that is skewed (consider the ...
- 949
2
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Question about order book and single player interference
This is a complex question. First of all, you need to know that orderbook manipulation is illegal. That being said, I can rephrase you question as:
given an orderbook
say a new sell order of size $...
- 11.5k
2
votes
Accepted
Relation between price changes and trading volume (market impact)
See Kandel and Pearson (1995) and Kim and Verrecchia (1991, 1994, 1997).
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