instruction stringlengths 15 26.1k |
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I'm sure this falls short of proper philosophical precision, but here goes. Hark back to a slightly modified rehash of Donald's Rumsfeld's infamous:
*Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also kno... |
As @stans already said in the comments to your question, the existence of the market portfolio hinges on the existence of a risk free rate $r_f$, where *risk free*, in this context, means that its value can be perfectly contracted for the relevant return horizon, e.g. you will with probability one get that rate for 1 m... |
Most institutional brokers, and certainly prime brokers, offer a range of automated execution strategies. You can check out the list of [algos](https://www.interactivebrokers.com/en/index.php?f=4985) supported by IB to get started. The basic algos split large orders into randomized quantities executed at random interva... |
What do you mean by "historical data is not the same as realized correlation"? If you compute historical correlation, it will be the historical realised correlation. Of course it will probably differ from future realized correlation. But if there was some implied correlation market there would be no reason for implied ... |
If I wanted to compare the relative volatilities of options on 2 different commodities, but the deltas are not provided, is it sufficient to compare by the % each cmdty's strike is in or out of the money?
For example: Compare a $1 out of the money NG put to a $15 out of the money power put, when both strikes are 40%... |
I have a data set of house prices and their corresponding features. Among these features, I have the sold date. The aim is to create a model that can use the historic data to estimate the price a house would sell for today. I am struggling to find a way to incorporate the sold date in the gradient boosting model.
I ... |
Let's say a pension fund guarantees an annual return of at least 5% to their customers/investors, such that the investors face a payoff like the one of a call option (no downside). For this guarantee the investors pay a premium. From the fund's point of view, this guarantee is like a short put as they only face a downs... |
Valuation of the minimum guaranteed return that (some) pension funds provide - how would you do it? |
Most institutional brokers, and certainly prime brokers, offer a range of automated execution strategies. You can check out the list of [algos](https://www.interactivebrokers.com/en/index.php?f=4985) supported by IB to get started. The basic algos split large orders into smaller order with randomized quantities execute... |
Here's a bit of an iterative answer. If market makers couldn't make money then why would any of them go to all of the effort and cost to become a Designated Primary Market Maker?
Not all market making involves delta neutral hedging. There are arbitrages available where the MM has zero risk (conversions, reversa... |
(Disclaimer: I'm not in finance. I'm just curious)
Some news sources were saying today that 140% of GameStop shares have been shorted. How can the journalists or anyone else know this number? |
How can anyone know how many shares have been shorted? |
Assumptions: There is a limited number of shares in any given company. Someone that holds shares cannot be forced to sell them if they don't want to. In theory, it's possible for someone to buy out all shares in a company and hold them without ever agreeing to sell them, causing a short squeeze.
What happens to a sh... |
What happens to a short seller if there are no shares available for sale under any price when it is time to return the shares they borrowed? |
Assumptions: There is a limited number of shares in any given company. Someone that holds shares cannot be forced to sell them if they don't want to. In theory, it's possible for someone to buy out all shares in a company and hold them without ever agreeing to sell them, causing a short squeeze.
What happens to a sh... |
Why is it more common for Institutional Traders to short sell stocks when they have a bearish stance instead of Buying Puts? The limited loss potential of Buying Puts seems like a better choice. |
Why do institutional Traders prefer Short Selling instead of Buying Puts? |
For example, if we take a call option on some stock priced using an option pricing model such as Black-Scholes and assume that volatility stays constant and the underlying stock moves according to the assumptions of the model (geometric Brownian motion, constant interest rates, etc.), what can we expect the value of th... |
What is the expected return of a "correctly" priced option if volatility stays constant? |
I don't completely understand why the NYSE suspended [Piggly Wiggly Co.](https://www.newyorker.com/magazine/1959/06/06/a-corner-in-piggly-wiggly), because I don't think the NYSE suspends stocks for short sellign in general? I boldened the key sentence below. Will the NYSE do the same for GameStop [GME] or other short s... |
When will a stock exchange suspend trading because of a short squeeze? |
The second para. below confirms that "Porsche's takeover demand would target the latter [ordinaries] rather than the former [preference]." Then why did investors like Albert Bridge Capital "short the ords and long the prefs"?
Perhaps I will ask this as a separate question...I also don't grasp why VW's ["share price... |
Why did investors believe that Volkswagen's preference and ordinary shares would converge in price? |
In general exchanges' business models rely on them being able to provide safe, transparent and liquid markets with the credibility of being trustworthy and honest.
Whilst I myself am very skeptical on the woolly definition that is 'spoofing' there are rules put in place that prevent this, and other kinds of market-m... |
I agree this is off topic so let me try to reign it in with general response.
A common solution to financial and probabilistic problems is to reduce them to explore more simpler cases, from which you may be able to deduct patterns.
1) *Consider only one die*
If you only had one die the flipping is irrelevant. ... |
I have a data set of house prices and their corresponding features (rooms, meter squared, etc). An additional feature is the sold date of the house. The aim is to create a model that can estimate the price of a house as if it was sold today. For example a house with a specific set of features (5 rooms, 100 meters squar... |
I'm reading a book called "[The Laundromat][1]" about Mossack-Fonseca and The Panama Papers "scandal" (was it really a scandal;?).
I understand the point of having an offshore company and offshore bank account. You use it to "own" money that you don't want to pay taxes on, or don't want other people to know about.
... |
How do people transfer money to offshore accounts while avoiding any connection with that money? |
I am trying to build a quarterly forward curve with 3 month USD Libor swap rates from 1Y to 50Y as inputs.
From other posts I have looked at, I have managed to come up with this code so far:
`terms =['1',
'2',
'3',
'4',
'5',
'6',
'7',
'8',
'9',
'10',
'12',
'15',
'20',
'25',
'30',
'... |
I understand that most market makers maintain non directionality i.e. they always aim to be perfectly hedged. So if they take a long position in X, they will take an offsetting short position in a hedge Y. My question is however, say that a market maker has inventory of 100 google stocks and he sells 50 google stocks f... |
I am doing some reading on the derivation of credit rating migration/transition matrices and probability of default term structures. I understand that a homogeneous Markov chain can be either discrete-time or continuous-time.
In the discrete-time case, the one year transition matrix can be derived using the cohort m... |
Suppose we have a European-style call option on some stock, and it was priced according to Black-Scholes. Everybody agrees on the stock's volatility and expected return. What's the expected return (and volatility) of buying this option? |
Expected return on Black-Scholes priced option? |
Most institutional brokers, and certainly prime brokers, offer a range of automated execution strategies. You can check out the list of [algos](https://www.interactivebrokers.com/en/index.php?f=4985) supported by IB to get started. The basic algos split large orders into smaller orders with randomized quantities execut... |
Have you looked through Gautham's excellent tutorial on term structures in quantlib python: http://gouthamanbalaraman.com/blog/quantlib-term-structure-bootstrap-yield-curve.html? You can then modify his code to build any other kind of term structure (eg. swap...etc). |
I am trying to build a quarterly forward curve with 3 month USD Libor swap rates from 1Y to 50Y as inputs.
From other posts I have looked at, I have managed to come up with this code so far:
terms =['1', '2', '3', '4', '5', '6', '7', '8',
'9', '10', '12', '15', '20', '25', '30', '40', '50']
rate ... |
Option trading translates into stock trading via market maker hedging. For instance, if I buy a call option, the market maker will have to buy the stock to delta hedge. Thus, this should translate into an upward pressure on the stock's prices.
I imagine that the impact of option trading is larger on some stocks tha... |
What kind of stock's prices are most affected by option trading? |
Option trading translates into stock trading via market maker hedging. For instance, if I buy a call option, the market maker will have to buy the stock to delta hedge. Thus, this should translate into an upward pressure on the stock's prices.
I imagine that the impact of option trading is larger on some stocks tha... |
At the risk of making maybe three obvious points:
1- Many funds' investment theses are not predicated on a particular price point on a specific expiry date. They simply believe that X is too high relative to Y, which is too low relative to X. Expressing this view via an options position would implicitly require to t... |
At the risk of making maybe three obvious points:
1- Many funds' investment theses are not predicated on a particular price point on a specific expiry date. They simply believe that X is too high relative to Y, which is too low relative to X. Expressing this view via an options position would implicitly require them... |
At the risk of making maybe three obvious points:
1- Many funds' investment theses are not predicated on a particular price point on a specific expiry date. They simply believe that X is too high relative to Y, which is too low relative to X. Expressing this view via an options position would implicitly require them... |
At the risk of making maybe three obvious points:
1- Many funds' investment theses are not predicated on a particular price point on a specific expiry date. They simply believe that X is too high relative to Y, which is too low relative to X. Expressing this view via an options position would implicitly require them... |
This has been really, really useful, thank you. I've applied this to an RL algorithm (just the DSR metric) and I have a few things to ask if this thread is still active.
1) What do you do about the first steps? it seems like the values are unstable at the beginning of the sequence.
2) Also, at what values would y... |
Many friends can't afford a Bloomberg terminal, particularly when the pandemic has unemployed some of them. They probably don't need one as amateurs. But [this answer](https://quant.stackexchange.com/a/60768) can't assist them. How else can amateur investors determine the number of shorted shares for a corporation?
... |
Without Bloomberg, how can retail investors know how many shares have been shorted daily? |
Actually, the issue is fundamental to quantitative finance, even though most people never go deep enough to notice. It has to do with the axiomatic foundations of Frequentist and Bayesian statistics. The Black Swan is a different thing and is not related to Knightian uncertainty.
Frequentist methods are founded on... |
If I wanted to compare the relative volatilities of options on 2 different commodities, but the deltas are not provided, is it sufficient to compare by the % each cmdty's strike is in or out of the money?
For example: Compare a 1-dollar out of the money NG put to a 15-dollar out of the money power put, when both str... |
Carry is coupon income + pull-to-par - financing cost. Pull to par is derived as ytm-coupon. So carry can be rewritten as ytm - financing costs. Carry cash value is the current dirty price minus the cash flows in period x discounted at the current yield to maturity. So let's say you have a bond with annual coupon $2.5$... |
If I wanted to compare the relative volatilities of options on 2 different commodities, but the deltas are not provided, is it sufficient to compare by the % each commodities strike is in or out of the money?
For example: Compare a 1-dollar out of the money NG put to a 15-dollar out of the money power put when both ... |
Forgive me for any violations of posting rules, I’m new to this forum.
I’ve written an algorithm that checks the order book for the price point that would completely fill my entire available balance, and then runs it’s an analysis on that price point to determine if it is a signal to open an order.
I’ve been cre... |
Many friends can't afford a Bloomberg terminal, particularly when the pandemic has unemployed some of them. [This answer](https://quant.stackexchange.com/a/60768) can't assist them. How else can amateur investors determine the number of shorted shares for a corporation?
This [Investopedia](https://www.investopedia.... |
I am trying to model the **price impact in stress** for a period of several days.
Specifically, I am looking for a *function/model* that predicts the price movement
1. Given a set of *ex-ante* factors (e.g: market depth/liquidity, implied volatility, etc.) and
2. As a function of the volume size (proxy for the... |
I have a specific Portfolio frontier. Can someone provides me with details about how can I calculate the market portfolio from the efficient frontier? I know that I have to draw the tangent line from the risk free asset, but how? is there any specific formula to calculate the risk free asset? Any help will be appreciat... |
Just go directly to the exchange's web site. You don't need Bloomberg for this.
For example, go to NASDAQ https://www.nasdaq.com/
Search for a ticker symbol, for example AAPL
This will take you to Apple's page:
https://www.nasdaq.com/market-activity/stocks/aapl
Click on "short interest" on the left. This ... |
Just go directly to the exchange's web site. You don't need Bloomberg for this.
For example, go to NASDAQ https://www.nasdaq.com/
Search for a ticker symbol, for example AAPL
This will take you to Apple's page:
https://www.nasdaq.com/market-activity/stocks/aapl
Click on "short interest" on the left. This ... |
Just go directly to the exchange's web site. You don't need Bloomberg for this.
For example, go to NASDAQ https://www.nasdaq.com/. Search for a ticker symbol, for example AAPL. This will take you to [Apple's page](https://www.nasdaq.com/market-activity/stocks/aapl).
Click on "short interest" on the left. This wi... |
At the basis of an algorithm, I need an Excel/CSV file containing the world's top 500 companies (with respect to market cap, preferably free-float if possible) by Name, Country, Market-Cap (in USD, or weight points, just something consistent).
Do you know where I can get this data for free?
I was able to find r... |
There are two different data items. "**Short volume**" (generally available daily) measures the number of shares that have been shorted in the given period of time, while "**short interest**" (generally available twice a month) is the number of shorted shares that have yet to be closed out or covered by the investors.
... |
There are two different data items. "**Short volume**" (generally available daily) measures the number of shares that have been shorted in the given period of time, while "**short interest**" (generally available twice a month) is the number of shorted shares that have yet to be closed out or covered by the investors.
... |
Would following approach be suitable:
First calculate European option price (does it even make sense to do so, if we are talking about less than 30 dte?), take the diff between European and American option price, after which you regress on strike against put-call parity and solve for funding, borrowing, etc.
I am... |
There are two different data items. "**Short volume**" (generally available daily) measures the number of shares that have been shorted in the given period of time, while "**short interest**" (generally available twice a month) is the number of shorted shares that have yet to be closed out or covered by the investors.
... |
Say I am looking at the S&P 500, what is a quantitative way to determine whether the index is currently volatile or not? For example, if volatility > x, it is highly volatile. If volatility <= x, it is lowly volatile. I imagine without referring to another security or index, "low" and "high" would have to be determined... |
Determining relative volatility without referring to an index or another security? |
Since nobody has answered yet, I'll consolidate what noob2 wrote in the comments and what I've read elsewhere.
Settlement in the U.S. normally takes at least two days from the time the trade actually occurs. I don't know exactly what happens during those two days, but it sounds like no details on exactly which share... |
Since nobody has answered yet, I'll consolidate what noob2 wrote in the comments and what I've read elsewhere.
Settlement in the U.S. normally takes at least two days from the time the trade actually occurs. This is called T+2. I don't know exactly what happens during those two days, but it sounds like no details on... |
**Edit**: my answer below assumed that when the OP asks "there might be assets that are above or bellow the market line", he's referring to the Capital Market Line. In fact OP's question seems to be about the Security Market Line, so the answer below is somewhat redundant. Regard the below as an "alternative" view of t... |
MBS are of various types. Ones that are most rate sensitive are typically agency mortgages.
**Rate Sensitivity**
Rate sensitivity in mortgages comes from two parts:
1. Its a stream of cashflow and like any other stream of cashflow
(example treasury bond), it is sensitive to rates. This is referred
t... |
Parabolic PDEs (e.g. heat equation) are closely linked to finance via the Feynman Kac Theorem.
Do other types of PDEs appear in quant finance? Elliptic PDEs don't contain a time dimension (so perhaps for perpetual options?) I can't think of an example for the wave equation (two time derivatives) or other hyperbolic ... |
Does anyone recognise this seemingly mean-reverting stochastic process? |
I'm working on a balanced, binary classification problem in a time-series (financial) dataset. I am using K-fold cross validation that is adapted for time-series (so that I'm never using future data to predict past data).
I have tried many algorithms, such as SVM, RandomForest and K-Nearest Neighbors. While all of t... |
I'm working on calculating implied volatility for historical options data taken from the [tradier api][1]. I'm using Davis Edwards fantastic python implementation of options pricing models to get individual implied volatility and greeks calculations for individual options, but am trying to understand how to get the mon... |
The first time I read about local volatility, implied volatility turned out to be the average volatility from today to the option's expiry date.
Let we have two Call options, $C_1$ and $C_2$, expiring on $T_1 = 15$ days and $T_2 = 45$ days and we extract the implied volatilities: $\sigma_1 = 40\%$ and $\sigma_2 = 3... |
One obvious answer, but not the one you'll probably want to hear is that maybe there is no single distribution for the variable you're trying to explain. It might be for want of a less-bad metaphor "regime-driven".
Being simplistic for simplicity's sake, imagine you were looking at the relationships between stock, ... |
I'm reading age 35 of "Advances in Machine Learning" by de Prado.
> Consider an IID multivariate Gaussian process characterized by a
> vector of means μ, of size Nx1, and a covariance matrix V, of size
> NxN. This stochastic process describes an invariant random variable,
> like the returns of stocks, the changes... |
One obvious answer, but not the one you'll probably want to hear is that maybe there is no single distribution for the variable you're trying to explain. It might be for want of a less-bad metaphor "regime-driven".
Being simplistic for simplicity's sake, imagine you were looking at the relationships between stock, ... |
I have this BQL query to grab a list of Russell 3000 members and get the firm names. Is there any way I can grab other data with the company names such as industry/sector name, total assets, EPS, etc...? If so what is the structure/syntax to do that?
=BQL.Query("get(name()) for(members(('RAY Index')))","showheaders=... |
I have this BQL query to grab a list of Russell 3000 members and get the firm names. Is there any way I can grab other data with the company names such as industry/sector name, total assets, EPS, etc...? If so what is the structure/syntax to do that? I am not new to Excel or modeling just new to Bloomberg. I have a cou... |
I have difficulty with the duration of a 5 year investment (like GIC). In such an investment, the investment (GIC) rate is reset as the current market rates. So the market value is equal to the face amount at the beginning of each rolling period. The investment is automatically renewed every 5 years in the future. Now ... |
What is the duration of a rolling 5 year investment? |
My view is that the equation has nothing to do with Bayes' theorem, except that its form looks like it is derived from Bayes' theorem.
As shown below, the equation can be derived using the concept of *odd*, which is used in the realm of default probability models.
*Note*: I only address how the equation, I think,... |
First, we are few quants and academics to use the full toolkit of machine learning: stochastic algorithms, to optimal trading. Here are at least two papers:
- [Optimal split of orders across liquidity pools: a stochastic algorithm approach, Sophie Laruelle (PMA), Charles-Albert Lehalle, Gilles Pagès (PMA)][1]
- [... |
"Excess funds in the banking system had juiced leverage in financial markets by driving China’s overnight repo rate to a record low of 0.59% in December. The cheap short-term financing enabled bond traders to make a killing buying sovereign debt with borrowed cash."
https://www.bloomberg.com/news/articles/20... |
By [Bayes' rule for conditional expectation][1] (or [here][2]),
$$E_{\mathbb Q}[X_t | \mathscr F_u] E[L_T| \mathscr F_u] = E[X_tL_T| \mathscr F_u]$$
$$ \to E_{\mathbb Q}[X_t | \mathscr F_u] L_u = E[X_tL_T| \mathscr F_u]$$
$$\to E_{\mathbb Q}[X_t | \mathscr F_u] = E[\frac{X_tL_t}{L_u}| \mathscr F_u]$$
$$= \f... |
I am trying to undertand the reltionship between EUR/JPY options and USD/EUR and USD/JPY options.
Vol(USD/EUR)=S1, Vol(Usd/JPY)=S2, Vol(EUR/JPY)=S3
The actual Vol follows S3^2=S1^2+S2^2-2*corr(correlation between S1 and S2)*S1*S2
But looking at the skew of EUR/JPY and trying the above formula, there are differences ... |
I am trying to undertand the reltionship between EUR/JPY options and USD/EUR and USD/JPY options.
Vol(USD/EUR) = $S_1$, Vol(Usd/JPY) = $S_2$, Vol(EUR/JPY) = $S_3$
The actual Vol follows:
\begin{align}
S_3^2 = S_1^2 + S_2^2 - 2 \rho(S_1,S_2) S_1 S_2
\end{align}
where $\rho$ is the implied correlation. But lookin... |
I am trying to undertand the relationship between EUR/JPY options and USD/EUR and USD/JPY options.
Vol(USD/EUR) = $S_1$, Vol(Usd/JPY) = $S_2$, Vol(EUR/JPY) = $S_3$
The actual Vol follows:
\begin{align}
S_3^2 = S_1^2 + S_2^2 - 2 \rho(S_1,S_2) S_1 S_2
\end{align}
where $\rho$ is the implied correlation. But looki... |
In Lopez de Prado's Advances in Financial Machine Learning, Chapter 3, Prof. Lopez de Padro talks about dropping rare labels:
Some ML classifiers do not perform well when classes are too imbalanced. In those
circumstances, it is preferable to drop extremely rare labels and focus on the more
common outc... |
In Lopez de Prado's Advances in Financial Machine Learning, what is meant by "unnecessary labels"? |
I'm starting to learn resistance / support.
I'm trying to calculate it, but i'm not sure to understand something.
Let say i have an array of 5 last trades done (i can have much more, it's just for the example) : `[[1611965400000, 107.145, 107.434, 107.0, 107.029, 230.9], [1611965700000, 107.033, 107.182, 106.714,... |
I have purchased data for EOD settlements of options prices for USA futures for personal use. I will not need multiple user access or real time access. I am not an expert programmer but use C# and R fairly regularly. Each future (say SPX) will have several option 'chains' each day. If a single date in the Time Serie... |
In Prof. Andrew Lo's book, Adaptive Markets: Financial Evolution at the Speed of Thought, in the section The Origin of Risk Aversion in Chapter 6, he uses the tribble example to illustrate how risk aversion comes about. But I am a bit confused by the math here. He supposes that each tribble is faced with two possible a... |
How is the Arrow Debreu Price related to Green's function at an intuitive level and how is this used in practice? |
A stock short seller promises to pay back a stock at a certain date, but what is the mechanism that actually forces them to buy the stock?
I've read that it is the broker who will do a margin call and buy the stock for them, but that seems only to redefine the question, since the broker is then forced to buy the sto... |
I wouldn't sweat this one. He's just making a simple "on average" assumption and not examining the wings of the actual distribution. Below is the actual quote you're referring to; and why this one isn't quite right in this case.
But the point he's trying to make isn't invalid just because he chose a bad example to ... |
Lets start from basics as to why this happens.
**why?**
If an economy is struggling, central bank through monetary policies attempt to increase money supply. For example, they reduce Fed Fund rate/over night repo rates and introduce other measures of quantitative easing. As a result, money is available for borrow... |
You are right that for any carry trade to be profitable, cost of funding or leverage cost using repo has to be lower than the investment yields (in this case yields on sovereign bonds). However, for a more detailed explanation, let's start from basics as to why this happens and how does it usually ends.
**why?**
... |
You are right that for any carry trade to be profitable, cost of funding or leverage cost using repo has to be lower than the investment yields (in this case yields on sovereign bonds). However, for a more detailed explanation, let's start from basics as to why this happens and how does it usually ends.
**why?**
... |
I am trying to model the **price impact in stress** for a period of several days.
Specifically, I am looking for a `function/model` that predicts the price movement
1. Given a set of ***ex-ante* factors** (e.g: market depth/liquidity, implied volatility, etc.) and
2. As a function of the **volume size** (proxy... |
I am trying to model the **price impact in stress** for a period of several days.
Specifically, I am looking for a `function/model` that predicts the price movement
1. Given a set of ***ex-ante* factors** (e.g: liquidity, implied volatility, etc.) and
2. As a function of the **volume size** (proxy for the inte... |
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