instruction stringlengths 15 26.1k |
|---|
Do you roll back the maturities and schedules when backtesting VaR for portfolios of bonds, options or future contracts? |
https://www.tradingview.com/support/solutions/43000502040-volume-profile/
Ideally, the volume profile should be computed using tick data. But such data may not be readily available. Given only OHLCV data, is there any research on what is the best way to compute volume profile (in stock daily chart)? |
What is the standard to compute volume profile using OHLCV data? |
I am trying to use the mean-variance (MV) optimization framework. When I change the mean term using future-ground-truth return (I am not supposed to do so), it has a higher effect on the MV optimization than using the future-ground-truth covariance matrix.
Why does the mean term have a higher effect than the covari... |
Why does the mean term have a higher effect than the covariance term in MV optimization? |
ATR is defined without considering the direction of the move. But when the price is going up or going down, just knowing the range loses some of the big pictures. Is there a modified definition of ATR, so that it returns two numbers, one characterizing the upside range, the other characterizing the downside range? |
ATR with direction considered? |
I'm an individual trying to build a trading system which will ideally be eventually scalable to 1-15 second resolution intraday trading strategies. I'm having some trouble understanding the difference between data feeds applied to a backtest and data feeds applied to live trading and I have a few specific questions:
... |
Yes, I recommend making historical backtests and live trading as similar as possible. This leaves you one lesser source of variability when you inevitably see different backtest and live results.
> Do live data feeds and historic datasets typically provide an identical interface in their respective handlers for quer... |
I understand that there exist direct stock plans that allow you to buy shares directly from a company. However, these have obvious and large downsides, so we can disregard them. Furthermore, I am not talking about brokers who give investment advice and similar services, but only referring to a brokerage service or proc... |
How do we define close price for crypto? I am looking at Yahoo price, as we know, the BTC is 24 hours. How does the close price defined in this case? |
studying with a factor model, I get confused more and more as I think about factor exposure and factor return
The concept (or mechanism) I get used to is evaluating a factor's Long Short Return(Q1-Q5) and see whether it gives us statistically significant return by checking t-stat. If t-stat turns out to be valid, th... |
What is the definition of contract notional value for a futures contract (use futures price or spot price)? |
The title describes the question. Below provides more details. Kindly let me know how industry is working on this.
I am a heavy user of Bloomberg excel API, including WAPI and DTK (formula such as bstructure and bprice). Recently I am working on backtesting that relies on a strike solver. (OVME strike solver feature... |
Is it even possible without resorting to gradient descent methods? I can't see any way to algebraically reason around the cumulative normal functions involved in d1 and d2.
Any ideas? |
That is a classic F1 F1 question. It's proprietary software and BBG offers a dedicated help desk.
DTK is not available via BLPAPI. They do offer a premium service called Mars API though. I suggest you reach out to your sales rep and ask him / her about this feature if you are willing to pay (last time I checked, th... |
I do not have enough exposure to Markowitz and mean-variance optimization so please just take this more like a comment than a full answer but lacking of the latter i offer you my view: I remember that i saw an article using an numerical integral of the area below the efficient frontier to approximate the set of stochas... |
I have 600 days of closing prices of a stock. I want to calculate the annualized volatility for 6 day window. How do i do that?
If I calculate the std dev of the first 6 days, i get, say 1%. This is the daily volatility of the first 6 days. To annualize it, should i just multiply 1% with sqrt(252)?
But, say that ... |
Annualized rolling volatility? |
In the paper *Illustrating a problem in the self-financing condition in two 2010-2011 papers on funding, collateral and discounting* (2012) ([link][1]) from Brigo, Buescu, Pallavicini and Liu, the above authors give a detailed description on how to work with the gain process, and how it differs from the price process. ... |
I have 600 days of closing prices of a stock. I want to calculate the annualized volatility for 6 day window. How do i do that?
If I calculate the std dev of the first 6 days, i get, say 1%. This is the daily volatility of the first 6 days. To annualize it, should i just multiply 1% with sqrt(252)? Or, is this 1% th... |
I have 600 days of closing prices of a stock. I want to calculate the annualized volatility for 6 day window. How do i do that?
If I calculate the std dev of the first 6 days, i get, say 1%. This is the daily volatility of the first 6 days. To annualize it, should i just multiply 1% with sqrt(252)? Or, is this 1% th... |
I'm currently trying to gather more information on option pricing in very inefficient markets. By inefficient, I mean markets with consequential bid-ask spreads (5% or more) and limited liquidity.
Do you have any resources that talk about this subject? I have tried finding research papers or talks about this subject... |
I remember that i saw an article using an numerical integral of the area below the efficient frontier to approximate the set of stochastically dominant portfolios for a given mean-variance combination of a given portfolio. As the paper correctly assumed that they cannot know the percise preferences and thus the optimal... |
The futures for Dallas Heating Degree days for July 2022 are [trading around 6.83][1]<br>
But Dallas is hot in July and does not typically get [any heating degree days][2]<br>
So, what does the 6.83 for July 22 correspond to?
[1]: https://futures.tradingcharts.com/futures/quotes/H5.html?cbase=H5
[2]: https:... |
What do "heating degree day" prices actually measure? |
The futures for Dallas Heating Degree days for July 2022 are [trading around 6.83][1]<br>
But Dallas is hot in July and does not typically get [any heating degree days][2]<br>
So, what does the 6.83 for July 2022 correspond to?
[1]: https://futures.tradingcharts.com/futures/quotes/H5.html?cbase=H5
[2]: http... |
New to this. In [this Investopedia article on Delta](https://www.investopedia.com/terms/d/delta.asp) the following looks like a typo -
> How Do Options Traders Use Delta?
Delta is used by options traders in several ways. First, it tells them their directional risk, in terms of how much an option's price will change... |
New to this. In [this Investopedia article on Delta](https://www.investopedia.com/terms/d/delta.asp) the following looks like a typo -
> How Do Options Traders Use Delta?
Delta is used by options traders in several ways. First, it tells them their directional risk, in terms of how much an option's price will change... |
The CAPM is basically mean variance optimisation plus equilibrium.
Mean variance optimisation answers a simple question: what portfolios have minimum variance for a given expected return? Those are the efficient portfolios. The set of efficient portfolios is convex: any portfolio of efficient portfolios is efficient... |
The CAPM is basically mean variance optimisation plus equilibrium.
Mean variance optimisation answers a simple question: what portfolios have the greatest expected return for a given variance? Those are the efficient portfolios. The set of efficient portfolios is convex: any portfolio of efficient portfolios is effi... |
I have 600 days of closing prices of a stock. I want to calculate the annualized volatility for 6 day window. How do i do that?
If I calculate the std dev of the first 6 days, i get, say 1%. This is the daily volatility of the first 6 days. To annualize it, should i just multiply 1% with sqrt(252)? Or, is this 1% th... |
1. Is this right?
No. $\beta_{i,M} = \frac{\sigma_i \rho_{i,M}}{\sigma_M}$ (note the correlation $\rho_{i,M}$ that is missing from your formula.)
The first formula (CML) is only for portfolios on the CML, namely those portfolios mean-variance investors would actually hold (when there is a risk-free asset): portf... |
The CAPM is based on mean-variance utility: investors chose their portfolio based only on its mean and variance.
This is an entirely different approach than expected utility maximisation.
Now, you can express the expected utility using its Taylor approximation around the expected wealth, with $\mu = E[W], \Delta ... |
New to this. In [this Investopedia article on Delta](https://www.investopedia.com/terms/d/delta.asp) the following looks like a typo -
> How Do Options Traders Use Delta?
Delta is used by options traders in several ways. First, it tells them their directional risk, in terms of how much an option's price will change... |
In the following practice problem:
> Is the futures price of a stock index greater than or less than the
> expected future value of the index? Explain your answer.
The answer given is as follows:
> The futures price of a stock index is always less than the expected
> future value of the index. This follows... |
Future price of an index always less than expected index future value? |
In the following practice problem:
> Is the futures price of a stock index greater than or less than the
> expected future value of the index? Explain your answer.
The answer given is as follows:
> The futures price of a stock index is always less than the expected
> future value of the index. This follows... |
In most (all?) practical cases, Delta is a model-dependent measure; you need a model to compute it. Black-Scholes, Heston, ... each model has a formula for the (call) option price $C$ and its Delta $\Delta$ , and each model depends on a set of contractually fixed parameters (strike, maturity date $T$), quasi-observable... |
In most (all?) practical cases, Delta is a model-dependent measure; you need a model to compute it. Black-Scholes, Heston, ... each model has a formula for the (call) option price $C$ and its Delta $\Delta$ , and each model depends on a set of contractually fixed parameters (strike, maturity date $T$), quasi-observable... |
In most (all?) practical cases, Delta is a model-dependent measure; you need a model to compute it. Black-Scholes, Heston, ... each model has a formula for the (call) option price $C$ and its Delta $\Delta$ , and each model depends on a set of contractually fixed parameters (strike, maturity date $T$), quasi-observable... |
The CAPM is based on mean-variance utility: investors chose their portfolio based only on its mean and variance.
This is an entirely different approach than expected utility maximisation.
Now, you can express the expected utility using its Taylor approximation around the expected wealth, with $\mu = E[W], \Delta ... |
That is a classic F1 F1 question. It's proprietary software and BBG offers a dedicated help desk.
DTK is not available for free via BLPAPI. Connecting DLIB to an API requires a premium service called Mars API (which will work via DAPI, but also BPIPE and the like, depending on your needs). I suggest you reach out t... |
Are you sure these futures are trading? There is no data on BBG - or the [CME](https://www.cmegroup.com/markets/weather/temperature/us-monthly-weather-heating.quotes.html).
I have no experience with these products, but I am almost certain that there are no quotes (and hence no trading) for July weather futures for ... |
I have 600 days of closing prices of a stock. I want to calculate the annualized volatility for 6 day window. How do i do that?
If I calculate the std dev of the first 6 days, i get, say 1%. This is the daily volatility of the first 6 days. To annualize it, should i just multiply 1% with sqrt(252)? Or, is this 1% th... |
I'm currently trying to gather more information on option pricing in very inefficient markets for the underlying. By inefficient, I mean markets with consequential bid-ask spreads (5% or more) and limited liquidity.
Do you have any resources that talk about this subject? I have tried finding research papers or talks... |
I have the following expression for which I wish to find the $\vec{w}$ which minimizes it:
$$
L = \frac{\vec{w}^TA\vec{w}}{\vec{w}^TB\vec{w}} - \lambda(\vec{w}^T\vec{1} - 1)
$$
The partial derivates with respect to $\vec{w}$ and $\lambda$ are as follows
\begin{align*}
\frac{\partial L}{\partial \vec{w}} &= ... |
### Usually `float32` is enough
For most applications in finance, `float32` is plenty of precision. This is generally suitable for naively achieving about 5-6 significant figures of accuracy. There are so many sources of error, that to trust results beyond this are moot. Consider for example:
- The model error (... |
I recently a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I've been ... |
I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I'v... |
I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I'v... |
I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I'v... |
I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I'v... |
I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an important theme heading into the futures roll cycle and the senior trader asked me to look into a Monte Carlo Simulation. I'v... |
What is the proper way to caluclate sharpe ratio for the long short portfolio? When I calculate daily return with no cost, I use this formula: (return for long k.mean()+ (-1)*(return for short k.mean())/2
So can I use this formula to get daily sharpe ratio?: all daily return with no cost/all daily return's std
If thi... |
I’d say you have the right ideas, and I’ll make a few comments:
A) yields have been very volatile for the last couple months, and might be expected to be volatile for the next few cycles also. Therefore using historical data for the last 2yrs might underestimate future volatility. Maybe weight it towards recent dat... |
Are there optimal portfolio theories than instead of the expected value they were based on the **Mode** of distributions?
During my engineer student days I saw the Markowitz theory for portfolio selection and there is something that always bothers me, and it is that are based on maximizing the expected return... let... |
Are there optimal portfolio theories than instead of the expected value they were based on the **[Mode](https://en.m.wikipedia.org/wiki/Mode_(statistics))** of distributions?
During my engineer student days I saw the Markowitz theory for portfolio selection and there is something that always bothers me, and it is th... |
Are there optimal portfolio theories than instead of the expected value they were based on the **[Mode](https://en.m.wikipedia.org/wiki/Mode_(statistics))** of distributions?
During my engineer student days I saw the Markowitz theory for portfolio selection and there is something that always bothers me, and it is th... |
For any futures contract at the CME, under "Margins" tab, we can see a table like the one below.
My question is: what are the two columns named "Start Period" and "End Period"? Does it represent maturity months of futures contracts, or levels of maintenance margin for all futures in future periods? For example, does... |
What do "Start Period" and "End Period" mean for maintenance margins of futures at the CME Group? |
I was studying return measures such as NPV and IRR from Damodaran's "Applied Corporate Finance" and one thing that he continuously mentioned was that NPV is biased towards projects with longer lives while IRR is biased towards projects with small initial investment. While the second point seems valid given that IRR is ... |
Why is NPV a biased measure? |
Are there optimal portfolio theories than instead of the expected value they were based on the **[Mode](https://en.m.wikipedia.org/wiki/Mode_(statistics))** of distributions?
During my engineer student days I saw the Markowitz theory for portfolio selection and there is something that always bothers me, and it is th... |
[This answer](https://quant.stackexchange.com/a/17144/41821) claims that
$$\sigma^2_{ATM}\approx E^Q\left(\frac{1}{T}\int_0^T\sigma^2_t dt\right)$$
ie implied ATM vol = risk-neutral expectation of integrated variance.
Is there some proof available? Where does this approximation come from? Is it model independent (... |
So I am currently doing some analysis on CDS Data and I am using Markit to extract this data. However, I am a bit confused regarding the quotation standards here. I want to investigate the relationship between Sovereign and Banking CDS using some standard regressions.
Through Markit, I can get the Par Spread, the C... |
In the book "The Concepts and Practice of Mathematical Finance" author M. Joshi writes on page 12 the following:
> "From the point of view of risk, we can regard an option as an attempt
> to encapsulate a specific piece of risk. *As the option is purer in its
> risk*, its value is more sensitive to market changes,... |
The option is "purer" in its risk---what is meant by this? |
I'm looking for a (hopefully exhaustive or at least extensive) list of behavioral biases that are currently observable in the stock market. I'm well aware and replicated some of the evergreens such as underdiversification and disposition effect that are well known for quite some time- what i'm looking for are some more... |
I am trying to find the most/least "populated" futures instrument based on public data. I managed to estimate retail/institutional proportions by aggregating OI data from COT reports.
But I am not confident that OI percentage reflects real situtation. I would prefer to know how long on the average each groups holds ... |
I am trying to find the most/least "populated" by retail futures instrument based on public data. I managed to estimate retail/institutional proportions by aggregating OI data from COT reports.
But I am not confident that OI percentage reflects real situtation. I would prefer to know how long on the average each gro... |
I am trying to find the most/least "popular with retail futures traders" instrument based on public data. I managed to estimate retail/institutional proportions by aggregating OI data from COT reports.
But I am not confident that OI percentage reflects real situtation. I would prefer to know how long on the average ... |
I recently came across an article that described how big market participants like GS, JPM, etc. take off large equity positions (block trades) of their clients, and putting that risk on their own balance sheet. Then they use their prop models to compute what assets they have to short to essentially be market/delta neut... |
Are there optimal portfolio theories than instead of the expected value they were based on the **[Mode](https://en.m.wikipedia.org/wiki/Mode_(statistics))** of distributions?
During my engineer student days I saw the Markowitz theory for portfolio selection and there is something that always bothers me, and it is th... |
I have an `(n,m)` array (specifically containing asset returns over `n` days for `m` assets). I'm trying to calculate the rolling exponentially-weighted covariance matrix for these assets over this time frame, but I want to limit how much data with which each covariance matrix is calculated.
To be more specific, I'... |
First, let me say that barring another post, Kevin should get accepted as the answer, but I wanted to add a class of biases that are in the literature, but not in the social science literature. In other words, this is known, but unknown to economists.
As a background, I have been making the technical argument that ... |
Let's assume stock "A" yields a 5% return and stock "B" yields a 6% return, they both have standard deviations of 10% (per annum) and a correlation factor of 0.5.
You decide to short stock "A" and long stock "B", let's assume you short "A" for an equivalent of 50% of your portfolio's value and use the proceeds (inclu... |
Let's assume stock "A" yields a 5% return and stock "B" yields a 6% return, they both have standard deviations of 10% (per annum) and a correlation factor of 0.5.
You decide to short stock "A" and long stock "B", let's assume you short "A" for an equivalent of 50% of your portfolio's value and use the proceeds (inclu... |
If I understand you correctly, you are aiming to compute a series of covariance matrices based on windows of your return data. To this end, let $X$ denote the $n\times k$ matrix of observed returns for $n$ dates and $k$ instruments. Further, you have a window of length $h<n$.
Then, the typical entry $(k,l)$of each ... |
I have an `(n,m)` array (specifically containing asset returns over `n` days for `m` assets). I'm trying to calculate the rolling exponentially-weighted covariance matrix for these assets over this time frame, but I want to limit how much data with which each covariance matrix is calculated.
To be more specific, I'... |
I was studying Miller-Modigliani theorem and one of the stated assumptions was that there will be no bankruptcy cost to the firms.
Does the assumption of **"no bankruptcy cost"** assume that in MM world, no company would go bankrupt or is it that the firms can go bankrupt but they may not face direct (such as legal... |
From the book [**Active Portfolio Management**][1] there is a use of lingo I don't understand.
Take this quote from pg. 100
"Why are institutional money managers willing to accept the benchmark portfolio with 20 percent
risk and loath to take on a portfolio with 21.00 percent risk."
In this context what do t... |
What does a portfolio risk of 20% mean? |
I'm looking at this video: https://www.youtube.com/watch?v=fZmuJ2A9TC8 @4:43 but the issue is more general.
Here the speaker is taking monthly active returns and averaging them
`(8% + 3.6% + ... + 3.7%) / (# months)`
This seems near meaningless to me. It's the equivalent of the average return _**if**_ we star... |
Why are monthly active returns averaged? Should they not be multiplied? |
I am a option market maker.
Say at some point in the time, I end up having only but ITM options in my portfolio and I want to reduce my risk exposure ( delta, Vega, gamma), what can I do to make profit out of those ITM options, or at least reduce the portfolio risk ?
My question rises because I don't know what would ... |
My research is to explain stock returns in a regression model. My dependent variable is raw returns and abnormal returns calculated from 3-factor model (Fama and French). **Besides regressing against my main explanatory variables, should I include betas of MKT, SMB and HML from abnormal returns estimation into the regr... |
Should I include factor loadings as explanatory variables for regression of abnormal and raw returns? |
I'm trying to construct a model which shows how much the closing price of a security ($P_t$) differs from the VWAP of that security on that day ($VWAP_t$). I'm calling this measure the "VWAP Premium": $$VWAP_{premium} = \frac{VWAP_t}{P_t}-1$$
By simply plotting this for the MSCI ACWI ETF, I see that it exhibits hetero... |
I read Markowitz, OOi, Pederson's Time series momentum and volatility scaling (2012).
But I don't know exactly how the above equation is calculated.
[![enter image description here][1]][1]
1. I am not sure about the period of the return reflected in the volatilty calculation above.
Since the Time series momentu... |
The model for a stock price
$$
dS_t=\mu dt + \sigma dB_t
$$
where $B_t$ is a Brownian motion on $(\Omega, \mathcal{F},P)$, is commonly attributed to the work that Bachelier has carried out in his [PhD thesis][1].
However, it is not until much later that the concept of Brownian motion is formalized by Einstein and/or ... |
How did Bachelier characterize the Brownian motion? |
I read Markowitz, OOi, Pederson's Time series momentum and volatility scaling (2012).
But I don't know exactly how the above equation is calculated.
[![enter image description here][1]][1]
1. I am not sure about the period of the return reflected in the volatilty calculation above.
Since the Time series momentu... |
I read Markowitz, OOi, Pederson's Time series momentum (2012).
.
[![enter image description here][1]][1]
1. I am not sure about the period of the return reflected in the volatilty calculation above.
Since the Time series momentum consists of a portfolio based on 12 months of return, does it mean to calculate ge... |
I read Markowitz, OOi, Pederson's Time series momentum (2012).
.
[![enter image description here][1]][1]
1. I am not sure about the period of the return reflected in the volatilty calculation above.
Since the Time series momentum consists of a portfolio based on 12 months of return, does it mean to calculate ge... |
I read Moskowitz, Ooi, Pedersen's [*Time series momentum*][1] (2012).
The ex-ante volatility estimate (equation (1) in the paper) is
[![enter image description here][2]][2]
1. I am not sure about the period of the return reflected in the volatilty calculation above.
Since the Time series momentum consists o... |
I'm trying to estimate intraday volatility for some ETFs, but don't have the intraday data to actually calculate it. I do, however, have historical daily OHLC data for the ETFs. I thought I saw somewhere that one could estimate/approximate intraday volatility with OHLC data, but I'm struggling to find it now. Does anyb... |
I'm reading through [Active Portfolio Management][1], and I can't get my head around Information Ratio's real world applicability.
In table 5.6 it lists some empirical infomation ratios:
[![enter image description here][2]][2]
However, there is no discussion of whether these are stable over time. Is there an... |
Do managers information ratios exhibit autocorrelation? Ie. are they stable over time? |
# Empirical analysis of realized measures
The paper [Does anything beat 5-minute RV? A comparison of realized measures across multiple asset classes](https://www.sciencedirect.com/science/article/pii/S0304407615000329) [[LPS2015]](https://www.sciencedirect.com/science/article/pii/S0304407615000329) does a very good ... |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.