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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 ...
David Duarte's user avatar
  • 5,835
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 ...
Chris Taylor's user avatar
  • 5,931
6 votes

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 ...
Helin's user avatar
  • 11.8k
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 ...
horseless's user avatar
  • 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 ...
Malick's user avatar
  • 2,582
5 votes
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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 ...
Pleb's user avatar
  • 4,421
4 votes
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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\...
Kevin's user avatar
  • 16k
4 votes
Accepted

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 ...
Dimitri Vulis's user avatar
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 ...
user42108's user avatar
  • 2,272
4 votes

Forward price confusion

Note that forwards can behave differently in different markets; let's assume we're talking about an equity market and specifically on some stock $S(t)$ paying a continuous dividend of $q$. Also, let's ...
Rylan's user avatar
  • 625
4 votes

Forward price confusion

Less quantitative answer: Suppose I want to enter into a contract to buy corn in 6 months. The seller will look at the current price of corn, among other factors, and make an offer for which they are ...
D Stanley's user avatar
  • 1,441
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 ...
nbbo2's user avatar
  • 11.4k
3 votes
Accepted

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!
Mats Lind's user avatar
  • 1,412
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 ...
Koval  Boris's user avatar
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 ...
Patrick's user avatar
  • 31
3 votes

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 ...
Kevin's user avatar
  • 16k
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 (...
Dimitri Vulis's user avatar
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 ...
roz's user avatar
  • 989
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 ...
mark leeds's user avatar
  • 1,140
3 votes

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 ...
dm63's user avatar
  • 17.2k
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 ...
Dimitri Vulis's user avatar
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&...
databento's user avatar
  • 2,518
3 votes
Accepted

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 ...
Richard at NorgateData's user avatar
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 ...
Svisstack's user avatar
  • 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 ...
FX_NINJA's user avatar
  • 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 ...
rrg's user avatar
  • 969
2 votes

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 $...
lehalle's user avatar
  • 12.3k
2 votes
Accepted

Relation between price changes and trading volume (market impact)

See Kandel and Pearson (1995) and Kim and Verrecchia (1991, 1994, 1997).
michaelcarniol's user avatar
2 votes
Accepted

How does after-hours trading affect the next session prices?

Yes, prices change overnight. A great reference on the issue is Lou, Polk and Spouras (2018). They basically argue that there are investors who prefer to trade overnight whereas other prefer to trade ...
phdstudent's user avatar
  • 8,421

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