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Sell-side analysts' earnings estimates for individual companies, typically reported by [I/B/E/S][1], are a key ingredient to many quantitative models. However, revisions to analyst estimates tend to lag changes in market expectations. Basing a model's recommendation on these estimates, particularly for valuation, can... |
How do earnings estimates respond to changes in underlying fundamentals and economic conditions? |
I wouldn't put too much faith in IBES forecasts. You may remember this situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889322
You'll find lots of excuses for worthless forecasts:
http://www.princeton.edu/~hhong/rje-analyst.pdf
Below is a graph that I saved from some study. As I recall, thei... |
I wouldn't put too much faith in IBES forecasts. You may remember this situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889322
(In case the above link doesn't work, Google "Rewriting History Alexander Ljungqvist").
You'll find lots of excuses for worthless forecasts:
http://www.princeton.edu/... |
I wouldn't put too much faith in IBES forecasts. You may remember this situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889322
(In case the above link doesn't work, Google "Rewriting History Alexander Ljungqvist").
You'll find lots of excuses for worthless forecasts:
http://www.princeton.edu/... |
I wouldn't put too much faith in IBES forecasts. You may remember this situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889322
(In case the above link doesn't work, Google "Rewriting History Alexander Ljungqvist").
You'll find lots of excuses for worthless forecasts:
http://www.princeton.edu/... |
I wouldn't put too much faith in IBES forecasts. You may remember this situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889322
(In case the above link doesn't work, Google "Rewriting History Alexander Ljungqvist").
You'll find lots of excuses for worthless forecasts:
http://www.princeton.edu/... |
Suppose I have two asset time series, $X_t$ and $Y_t$, and I'm estimating their correlation from historical data. I'd like to apply some systematical criterion to estimate what time window I should use to estimate the correlation reliably, and also to spot "regime changes" (when the correlation jumps suddenly) after wh... |
This is a very interesting question. I believe it is getting a lot of up-votes from people who have wondered the same thing and don't know where to begin, whereas you have at least laid out a reasonable-sounding plan. I commend you for that. However, it is not clear to me what you're trying to learn by posting this ... |
From a text book I have this excercise:
Prove that
$$
\int_{t_1}^{t_2}W(s)^ndW(s)=\frac{1}{n+1}[W(t_2)^{n+1}-W(t_1)^{n+1}]-\frac{n}{2}\int_{t_1}^{t_2}W(s)^{n-1}ds
$$
Hint: Calculate $d(W^{n+1})$ using Ito's lemma.
This is my calculation:
I use Ito's Lemma and use, as the text book does, the simplified ... |
How to perform basic integrations with the Ito integral? |
From a text book I have this excercise:
Prove that
$$
\int_{t_1}^{t_2}W(s)^ndW(s)=\frac{1}{n+1}[W(t_2)^{n+1}-W(t_1)^{n+1}]-\frac{n}{2}\int_{t_1}^{t_2}W(s)^{n-1}ds
$$
Hint: Calculate $d(W^{n+1})$ using Ito's lemma.
This is my calculation:
I use Ito's Lemma and use, as the text book does, the simplified ... |
From a text book I have this excercise:
Prove that
$$
\int_{t_1}^{t_2}W(s)^ndW(s)=\frac{1}{n+1}[W(t_2)^{n+1}-W(t_1)^{n+1}]-\frac{n}{2}\int_{t_1}^{t_2}W(s)^{n-1}ds
$$
Hint: Calculate $d(W^{n+1})$ using Ito's lemma.
This is my calculation:
I use Ito's Lemma and use, as the text book does, the simplified ... |
I think you should see the hint as follows:
$d(W_t^{n+1})=d(f(W_t))$ with $f(x)=x^{n+1}$
Apply Ito:
$d(W_t^{n+1}) = f'(W_t)dW_t + \frac{1}{2} f''(W_t) d<W>_t$
$d(W_t^{n+1}) = (n+1) W_t^n dW_t + \frac{1}{2} n (n+1) W_t^{n-1} dt$
If you integrate, you get:
$W_{t_2}^{n+1}-W_{t_1}^{n+1}=(n+1) \int_{t_1}^{... |
From the text book [Quantitative Finance for Physicists: An Introduction (Academic Press Advanced Finance)][1] I have this excercise:
Prove that
$$
\int_{t_1}^{t_2}W(s)^ndW(s)=\frac{1}{n+1}[W(t_2)^{n+1}-W(t_1)^{n+1}]-\frac{n}{2}\int_{t_1}^{t_2}W(s)^{n-1}ds
$$
Hint: Calculate $d(W^{n+1})$ using Ito's lemma.
... |
Assume a stock had an open of \$100 and a close of \$102. If the high of the day was \$103 and the low was \$99, the daily range is obviously \$4. What is the best way to express the daily range in terms of percentage?
If you take the range and divide it by the open, you get 4.00%. If you take the high and divide it... |
What is the denominator in calculating daily range as a percentage? |
I think you should see the hint as follows:
$$d(W_t^{n+1})=d(f(W_t))$$ with $$f(x)=x^{n+1}$$
Apply Ito:
$$d(W_t^{n+1}) = f'(W_t)dW_t + \frac{1}{2} f''(W_t) d<W>_t$$
$$d(W_t^{n+1}) = (n+1) W_t^n dW_t + \frac{1}{2} n (n+1) W_t^{n-1} dt$$
If you integrate, you get:
$$W_{t_2}^{n+1}-W_{t_1}^{n+1}=(n+1) \in... |
My data source for end of day prices only gives the prices of the trades during the day. If a stock stops trading/goes out/moves to another exchange|changes symbol. I never hear about this.
My question(s) are:
1. Is there a way to determine that a stock is no longer trading? Most stocks that I have, have dail... |
Where can you find data on non-trading stocks? |
...and assuming the stock opens at 48 and closes at 50 with a high of 51 and a low of 47 the percentage ranges will be 8.3% and 8.5%, the point being that your percentage measure of the range is determined entirely by the price level(s) of the denominator(s). This is an important caveat as these levels will change as t... |
Seasonality is a big deal in the natural gas markets. My understanding is that they are broadly divided into summer and winter, with seasonality in both price and the volatility.
What does this translate into in terms of skews or volatility surfaces? What implications are there for hedging? And how do the options... |
What are the major characteristics of natural gas volatility and options? |
I'm using a binomial tree to price a bond that has a call or a put option on it.
On every node that has a coupon payment, do you include the coupon payment then max/min out the value, or do you max/min out the value then apply the coupon?
My guess is that for a call option, the issuer will make sure the value to ... |
For example, if I'm analysing AMD, and I'm looking at the option chain (see picture), what are some possible ways to approximate the buying % and selling %'s for the put with the strike price of 5?
![AMD - Option Chain on 14/10/11][1]
[1]: https://i.stack.imgur.com/zSpYO.png |
Regarding open interest of options, how can one determine what's the approximate % of buying & selling volume? |
A binary option with payout \$0/\$100 is trading at \$30 with 12 hours to
expiration.
Assuming volatility remains constant, what probability distribution
describes the option's maximum price between now and expiration?
I'm looking for a generic "formula". Even though I used price and
expiration, I'm ass... |
Probability distribution of maximum value of binary option? |
A cautionary tale on all these approaches it told by Tim Loughran and Bill MacDonald in the Journal of Finance, 2011 (When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10-Ks, [here][1]).
In their analysis they show that the commonly used Harvard Psychosociological Dictionary is inadequate for... |
Beginner question. Having read a couple of papers and book chapters on high-frequency data forecasting, I'm surprised (and confused) that the same time series techniques can be applied to high-frequency/ tick data than for lower frequencies.
High-frequency data seems to clearly not follow a normal distribution give... |
Applying models with normality assumption on tick data? |
A binary option with payout \$0/\$100 is trading at \$30 with 12 hours to
expiration.
Assuming the underlying follows a geometric Brownian motion (hence volatility remains constant), what probability distribution
describes the option's maximum price between now and expiration?
I'm looking for a generic "f... |
Beginner question. Having read a couple of papers and book chapters on high-frequency data forecasting, I'm surprised (and confused) that the same time series techniques can be applied to high-frequency/ tick data than for lower frequencies.
High-frequency data seems to clearly not follow a normal distribution give... |
A very conservative stand is to distinguish between *anomalies* and *arbitrage opportunities*. Roughly speaking, while an arbitrage opportunity is risk-free by definition, an anomaly allows for unaccounted risk factors. It is the magnitude of these unidentified risk factors that might determine the long term persistan... |
Latency has been a hot topic for a while, first in the industry and more recently also in academia. It is very common to hear about milliseconds, even microseconds.
While most of the media attention is on equity markets, latency is an important variable in options markets, futures markets, and FX markets (arguably,... |
What are the typical latencies across different products and infrastructure? |
Latency has been a hot topic for a while, first in the industry and more recently also in academia. It is very common to hear about milliseconds, even microseconds.
While most of the media attention is on equity markets, latency is an important variable in options markets, futures markets, and FX markets (arguably,... |
What are the typical latencies across different products and infrastructures? |
First of all, I'm not sure I got it right. You're directly shrinking the final result (vector of asset weights), right?
If that's the case, it may not be exactly what you're looking for, but you may still have a look at some papers by *Ledoit* and *Wolf*.
Specifically, in [*Honey, I Shrunk the Sample Covariance M... |
**This post is Quant Stack Exchange's master list of data sources.**
Please append your links to other data sources to the list below. Include your opinion of the data as a comment on this answer.
## Economic Data ##
<br>
See [What are the most useful sources of economics data?][1] on the economics SE.
**Wo... |
What are the best sources of quantitative finance research in equities?
I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online:
1. BAC-Merrill Lynch - Savita Subramanian
2. Deutsche Bank - Yin Luo*
3. Credit Suisse - Pankaj Patel
4. Barclay's - Matt... |
How can one determine approximately what percentage of options trades are buyer-initiated vs. seller-initiated? What measures of order flow are available specifically for options, preferably for individual contracts covering specific strikes and maturities? |
How can one determine approximately what percentage of options trades are buyer-initiated vs. seller-initiated? |
I'm using a binomial tree to price a bond that has an embedded call or put option.
On every node that has a coupon payment, do you include the coupon payment then max/min out the value, or do you max/min out the value then apply the coupon?
My guess is that for a call option, the issuer will make sure the value t... |
How to handle coupon payments when pricing a bond with an embedded option? |
Suppose I have two asset time series, $X_t$ and $Y_t$, and I'm estimating their correlation from historical data. I'd like to apply some systematic criterion to estimate what time window I should use to estimate the correlation reliably, and also to spot "regime changes" (when the correlation jumps suddenly) after whic... |
How to detect regime change when estimating asset correlation from historical time series? |
I'm wading through the vast sea of literature on realized volatility estimation and expected volatility forecasting (see, e.g. [Realized Volatility][1] by Andersen and Benzoni, which cites 120 other papers, and [Volatility][2] by Bandi and Russell, which cites a slightly overlapping set of 120 papers).
I'm having a ... |
How to forecast expected volatility from high-frequency equity panel data? |
A very conservative stand is to distinguish between *anomalies* and *arbitrage opportunities*. Roughly speaking, while an arbitrage opportunity is risk-free by definition, an anomaly allows for unaccounted risk factors. It is the magnitude of these unidentified risk factors that might determine the long term persistan... |
- Which is the most extensible?
- Which is the most efficient in terms of a minimal learning curve while providing a meaningful degree of flexibility and performance?
- Any of these tools really limited in terms of customization and worth avoiding? |
What are your opinions on WEKA KnowledgeFlow, Rapidminer, and other rapid development environments for machine learning? |
Why does the following data fail my cointegration test? |
Let's assume a stock price S, with volatility $\sigma$ constant, no dividend, and risk free interest rate $r$ we have :
$ dS=\mu Sdt +\sigma SdW $
And therefore using ito's lemma we get that $\ln(S)$ follows the following normal distribution:
$ \ln(S) \rightarrow \phi((r -\frac {\sigma^2}2)T,\sigma \sqrt(T)) ... |
How to execute a large futures order? |
> **Possible Duplicate:**
> [How to derive the implied probability distribution from B-S volatilities?](http://quant.stackexchange.com/questions/1621/how-to-derive-the-implied-probability-distribution-from-b-s-volatilities)
<!-- End of automatically inserted text -->
Let's assume a stock price S, with volatility ... |
I'm trying to formulate an answer for latter users of the site and, hopefully to lure some more experienced high frequency traders to further react to my post.
First of all, I'd notice that the paper you mentioned was published in 1991. I believe high-frequency trading has evolved a lot since then, and that nowadays... |
Let's say I have a time series of stocks (50 stocks). What's the best way to compare such a time series and then derive/sort the results based on the most valuable stocks (ie stocks that have been going up/stayed the same relative to others)?
Obviously one can use just average the whole time series, but I've been t... |
Let's say I have time series of stock prices for many stocks. What's the best way to compare such sort the stocks based on which have been going up/stayed the same relative to others? Can this be done with a weighted average, putting more weight on the most recent numbers, to account for trends? |
How to compute momentum from equity time series? |
Let's say I have time series of stock prices for many stocks. What's the best way to sort the stocks based on which have been going up/stayed the same relative to others? Can this be done with a weighted average, putting more weight on the most recent numbers, to account for trends? |
I'm looking for histocial weights of S&P 500 constituents. I have access to a Bloomberg terminal. Any thoughts on how/where I might calculate/find these data?
P.S. I'm looking for as much data as possible but at least five consecutive years within the last 15 years.
P.P.S. Monthly data. |
In what ways (and under what circumstances) are correlation and cointegration related, if at all? One difference is that one usually thinks of correlation in terms of returns and cointegration in terms of price. Another issue is the different measures of correlation (Pearson, Spearman, distance/Brownian) and cointegr... |
How are correlation and cointegration related? |
What would be an ideal way to estimate the covariance of an index with a basket of stocks? For example, should I use one-tail ANOVA test or an individual stock & index F-test? |
How to estimate the covariance of an index with a basket of stocks? |
Consider a market participant $A$ who is mechanically following an automated liquidity providing algorithm (HFT) in a number of large cap stocks on a specific exchange.
Assume furthermore that we are able to observe all orders placed by $A$ and that we know that the algorithm used by $A$ takes only public market dat... |
How can we reverse engineer a market-making algorithm (HFT)? |
How to quickly estimate a lower bound on correlation for a large number of stocks? |
What types of neural networks are most appropriate for forecasting returns? Can neural networks be the basis for a high-frequency trading strategy?
Types of neural networks include:
- Support Vector Machines
- Radial Basis Function Networks
- Multilayer Perceptron
- Q-learning Networks or Recurrent Reinfo... |
What types of neural networks are most appropriate for trading? |
According to my current understanding, there is a clear difference between **data mining** and **mathematical modeling**.
*Data mining* methods treat systems (e.g., financial markets) as a "black box". The focus is on the observed variables (e.g., stock prices). The methods do not try to explain the observed phenome... |
Which approach dominates? Mathematical modeling or data mining? |
Hi I was wondering if anyone could help me with the instantaneous forward rate equation for a Black-Karasinski interest rate model?
I was also after the Black-Karasinski Bond Option Pricing Formula.
Cheers |
What is the forward rate for a Black-Karasinski interest rate model? |
I was wondering if anyone could help me with the instantaneous forward rate equation for a Black-Karasinski interest rate model?
I was also after the Black-Karasinski Bond Option Pricing Formula.
|
Hi I am looking for a clear explanation of T statistics concept. Especially in quantitative equity portfolio management context, what does T statistics of monthly Information Coefficient for one factor indicate? How can I tell if it is significant, and if it is, any useful information I could derive from that? |
What does T statistics of Information Coefficient indicate? |
Can you simulate an option on an arbitrary index? |
I know you're really looking for some empirical work on this topic, but I think the following theoretical paper puts your question into proper perspective.*
[Risk-Based Asset Allocation: A New Answer to an Old Question by Wai Lee,][1] [JPM 2011][2].
Overall, he finds that supposedly risk-based approaches to portf... |
Can you replicate an option on an arbitrary basket of stocks? |
In their 1990 book, [A Non-Random Walk Down Wall Street][1], Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known as lead-lag or serial cross-correlation, and it says that the returns of larger, more liquid stocks tend to lead t... |
We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the unsystematic risk quantitatively? is there any formula or calculation that can be related to the measurement of unsystematic risk? |
How to calculate unsystematic risk? |
I am exploring de-noising and cleansing of covariance matrices via Random Matrix theory. RMT is a competitor to shrinkage methods of covariance estimation. There are various methods expressed usually by the names of the authors: [LPCB][1], [PG+][2], and so on.
For each method, one can start by filtering the covaria... |
Here are some papers:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1524193
http://www.rmi.nus.edu.sg/conferences/RMC2008/submission/papers/33.pdf
http://www.iaeng.org/publication/WCE2011/WCE2011_pp433-438.pdf
|
I am tweaking a covered call algorithm. The short leg consists of out of the money call options. The goal is to collect the tim premium, but an equally favorable circumstance is when the call decreases in value due to the lower price of the underlying asset in the normal course of market fluctuations. The short leg can... |
I've skimmed through more than one ETF prospectus trying to find the procedure for clamping losses at the limits of an ETF, and so far, no help. Has anyone found a description of the "clamping" procedure?
For example, if the S&P drops 35% in one day, how will Direxion's BGU (3X Bull ETF) "clamp" the loss to that 9... |
What is the procedure to clamp losses when an ETF hits its limits? |
"I am contemplating closing the short leg in favor of selling the call that is now closer to the money. Are there any caveats of doing this?"
- The biggest caveat is the obvious issue of whip-saw. Where right after you roll down, the market turns up again.
- Also, if you are starting with an out of the money cal... |
Latency has been a hot topic for a while, first in the industry and more recently also in academia. It is very common to hear about milliseconds, even microseconds.
While most of the media attention is on equity markets, latency is an important variable in options markets, futures markets, and FX markets (arguably,... |
What are the typical "realized latencies" across different products and infrastructures? |
Is there any published research on estimating the beta of a security with respect to one or more risk factors via Bayesian networks?
I'd like to see if this is a promising angle of research.
|
application of Bayesian networks to beta estimation? |
Has any research used Bayesian networks to estimate risk factor betas? |
One relevant paper is:
> Shenoy, C. and Shenoy, P.P., Bayesian network models of portfolio risk and return, 1999. [**PDF**](http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.142.5138&rep=rep1&type=pdf) |
The term high frequency trading has been used quiet often recently to refers to trade, using realtime, tick data (or aggregated to few seconds), assets, and having an intra day holding period.
But what about medium and low frequency trading strategy? How are they defined?, do they use real-time, intra day data, or d... |
Low vs Medium vs High Frequency..? |
I've skimmed through more than one ETF prospectus trying to find the procedure for clamping losses at the limits of an ETF, and so far, no help. Has anyone found a description of the "clamping" procedure?
For example, if the S&P drops 35% in one day, how will Direxion's BGU (3X Bull ETF) "clamp" the loss to that 9... |
What procedure to leveraged ETFs use to limit losses? |
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