instruction stringlengths 15 26.1k |
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When pricing a interest rate swap, I use the swap curve to price the instrument and the corresponding OIS curve to discount it. However, for some countries (eg Canada), the IRS curve settles on the same day, while the OIS curve has a 1 day settlement delay. Thereforme, the two curves don't have the same start date, wha... |
I want to better understand the difference between the 1-month and 3-month SOFR rate, and when to use each for cash flow discounting.
For example - I have a 5 year project, and someone has decided to use the 3-month SOFR rate. My question is why? What does this assume about the movement of cash flows?
Furthermore... |
I want to better understand the difference between the 1-month and 3-month SOFR rate, and when to use each for cash flow discounting.
For example - I have a 5 year project, and someone has decided to use the 3-month SOFR rate. My question is why? What does this assume about the movement of cash flows?
Furthermore... |
I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I estimate betas for each firm using time series regressions on monthly data for a 5-year period (2017-2021). Second, I take the vector of estimated betas and use it as a regressor in a cross-sectional regression for January ... |
CAPM yields very poor fit (low R-squared). Is that normal? |
I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I use five years of monthly data (January 2017 to December 2021) to estimate betas for each firm using time series regressions
$$
(r_{i,t}-r_{f,t})=\alpha_i+\beta_i (r_{m,t}-r_{f,t})+\varepsilon_{i,t}
$$
or more briefly,... |
I want to better understand the difference between the 1-month and 3-month SOFR rate, and when to use each for cash flow discounting.
For example - I have a 5 year project, and someone has decided to use the 3-month SOFR rate. My question is why? What does this assume about the movement of cash flows?
Furthermore... |
I'm trying to understand the analogy between the Black-Scholes equation (1) and the heat partial differential equation (2). I understand that (1) can be written in the form of (2) mathematically, but what does this tell us about the nature of the variables involved in (1)? |
What are the parallels between the Black-Scholes equation and the heat equation? |
I cannot find much litterature on the effect of the spot/div correlation or the shape of the spot/div cross gamma concerning the autocallable structures.
In a general way, could someone present an intuitive reasoning, from the point of view of an autocall seller, of the expected impacts wrt to this parameter ?
Than... |
How can I value corporate bonds in default?
I have access to both reuters and bloomberg terminals. |
Alphas from a time-series regression are error terms in the cross-sectional, linear relationship between expected returns and factor betas. If a factor model were correct those error terms (the alphas) would be zero.
### Discussion
A carefully written version of a standard time-series regression of returns in exces... |
Alphas from a time-series regression are error terms in the cross-sectional, linear relationship between expected returns and factor betas. If a factor model were correct those error terms (the alphas) would be zero.
### Discussion
A carefully written version of a standard time-series regression of returns in exces... |
I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I use five years of monthly data (January 2017 to December 2021) to estimate betas for each firm using time series regressions
$$
(r_{i,t}-r_{f,t})=\alpha_i+\beta_i (r_{m,t}-r_{f,t})+\varepsilon_{i,t}
$$
or more briefly,... |
I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I use five years of monthly data (January 2017 to December 2021) to estimate betas for each firm using time series regressions
$$
(r_{i,t}-r_{f,t})=\alpha_i+\beta_i (r_{m,t}-r_{f,t})+\varepsilon_{i,t}
$$
or more briefly,... |
Assuming no fees and interest rate $r=0$%, what is the most you would be willing to pay for a \$103/\$106/\$108 European call fly, regardless of the underlying distribution? Buying the fly in this case mean buying the wing of the fly.
Source: interview |
I'm trying to solve a problem with portfolios, but I cannot get to the solution.
There are three risky assets A, B and C whose betas are respectively 0.6 (A), 1.5 (B) and 1.1 (C). Besides, we know there's a risk-free asset with a 1% return. The market portfolio has a 5% return and a volatility of 13%.
I am asked to... |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a)$$
$$b \sim N(\mu_b,\sigma_b)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_b \sim N(\frac {\mu_b} ... |
If returns are correlated, are Sharpe ratios correlated? |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a)$$
$$b \sim N(\mu_b,\sigma_b)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_b \sim N(\frac {\mu_b} ... |
Can I use L1 norm constraints ($\sum_{i}{|w_i|}=1$) in portfolio optimization, instead of the $\sum_{i}{w_i}=1$ constraint?
Any implications, pros, and cons? |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a^2)$$
$$b \sim N(\mu_b,\sigma_b^2)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_b \sim N(\frac {\mu... |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a^2)$$
$$b \sim N(\mu_b,\sigma_b^2)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_b \sim N(\frac {\mu... |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a^2)$$
$$b \sim N(\mu_b,\sigma_b^2)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_b \sim N(\frac {\mu... |
Consider a path-dependent GBM model for a stock price:
$$dS_t = \mu(t, S_.)S_tdt + \sigma(t, S_.) S_t dB_t,$$
where $\mu, \sigma : [0,\infty)\times C_{[0,\infty)}\to \mathbb{R}$ are previsible path-functionals.
Does anyone know of any references of papers on this generalization and if there are any standard choic... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
Is the time derivative of asset returns expressible as an SDE? |
I am studying some financial modeling put together by the Society of Actuaries in the USA. In it, the following practice problem was given:
> Find the Risk Neutral price of an interest rate caplet with expiry in
> one year with a notional amount of 10,000 on the underlying U.S. 1
> year treasury rate a year from n... |
I am studying some financial modeling put together by the Society of Actuaries in the USA. In it, the following practice problem was given:
> Find the Risk Neutral price of an at-the-money interest rate caplet with expiry in
> one year with a notional amount of 10,000 on the underlying U.S. 1
> year treasury rate ... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
Can someone please explain the difference between strike and spot notional? in the context of equity options trading? |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a^2)$$
$$b \sim N(\mu_b,\sigma_b^2)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples for $t \to \infty$, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_... |
I am trying to get option data from bloomberg api. I got the all available options on a given underlying eg:"ASML NA" and Field "PX_LAST" gave the last traded price for each option. Is there a similar field to get the implied volatility? |
Simple question that I was wondering about over during the weekend.
I have done a little FEM during the last years and my university time and did not spend a lot of time with FDM. For a new job I have started brushing up my numerical skillset a bit again and read up on FDM a bit more in detail.
For derivatives pric... |
For derivatives pricing, does FEM actually ever outperform FDM? |
Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM or a multifactor model. Take the CAPM for simplicity:
$$
r^*_{i,t}=\alpha_i+\beta_i r^*_{m,t}+\varepsilon_{i,t} \tag{1}
$$
where $r^*_i:=(r_{i,t}-r_{f,t})$ is firm's $i$ excess ret... |
Suppose we have two correlated return series:
$$a \sim N(\mu_a,\sigma_a^2)$$
$$b \sim N(\mu_b,\sigma_b^2)$$
$$correl(a,b)=\rho$$
The sample Sharpe ratios of the two series, after $t$ samples for $t \to \infty$, are approximately distributed as:
$$\zeta_a \sim N(\frac {\mu_a} {\sigma_a}, \frac 1 t)$$
$$\zeta_... |
Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM or a multifactor model. Take the CAPM for simplicity:
$$
r^*_{i,t}=\alpha_i+\beta_i r^*_{m,t}+\varepsilon_{i,t} \tag{1}
$$
where $r^*_i:=(r_{i,t}-r_{f,t})$ is firm's $i$ excess ret... |
I am deeply confused right now and hope someone can help me out a bit.
I want to replicate part of a paper from Fama/French (2008), [Dissecting anomalies](https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.2008.01371.x), specifically, Table IV "Average Slopes and t-statistics from Monthly Cross-Section Regres... |
Fama-MacBeth (1973) introduce a two stage cross-sectional regression method (http://en.wikipedia.org/wiki/Fama%E2%80%93MacBeth_regression).
1) If I was to regress stock prices (or returns) on a conditioning set using the Fama-MacBeth regression method, what are the econometric assumptions behind this model?
2) I... |
What are the econometric assumptions in the Fama-MacBeth procedure (1973)? |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM. Using Fama-MacBeth style analysis, we first estimate $N$ time series regressions of the form
$$
r^*_{i,t}=\alpha_i+\beta_i r^*_{m,t}+u_{i,t} \tag{1}
$$
for $i=1,\dots,N$ where $r^... |
Why estimate the (known) market return in the cross-sectional regression of Fama-MacBeth? |
Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM. Using Fama-MacBeth style analysis, we first estimate $N$ time series regressions of the form
$$
r^*_{i,t}=\alpha_i+\beta_i r^*_{m,t}+u_{i,t} \tag{1}
$$
for $i=1,\dots,N$ where $r^... |
I am downloading implied volatilities for some options. I noticed, however, that I am also able to choose "Forward" as an attribute for the option. What is this? Is it an option written on a forward? I wasn't able to find anything in the Help-menu of my provider, but I suspect it is something very general such as IV, V... |
Assuming that the CAPM holds, the total risk of an asset can be partitioned into systematic risk (associated with the market factor) and idiosyncratic risk. Idiosyncratic risk is asset specific. Does that imply that the covariance matrix $\Sigma_t=\text{Var}(\varepsilon_t)$ from a cross-sectional regression
$$
r^*_{... |
Assuming that the CAPM holds, the total risk of an asset can be partitioned into systematic risk (associated with the market factor) and idiosyncratic risk. Idiosyncratic risk is asset specific. Does that imply that the covariance matrix $\Sigma_t=\text{Var}(\varepsilon_t)$ from a cross-sectional regression
$$
r^*_{... |
[![enter image description here][1]][1]
I am currently working on American options.
I saw that we can derive a PDE for American style options in the same way as with BS for European options.
In a textbook, I found that the PDE leads to an inequality because "we can earn no more than the risk-free rate on our p... |
Consider estimating an asset pricing model such as the CAPM or a multifactor model using monthly data. [Petersen (2009)][2] section "Asset pricing application" suggests use of standard errors clustered by time, as this addresses the problem of cross-sectional correlation. (Meanwhile, serial correlation is not much of a... |
Clustered vs. GMM-based standard errors: which ones to use in (basic) asset pricing? |
The notation $\Sigma$ is often used for covariance matrix Var($r_t$).
Using notation $\Psi_t = \text{Var}(\epsilon_t)$, a common modeling assumption is that the residuals are independent, $\epsilon_{i,t} \perp \epsilon_{j,t}, ~i\neq j$. Given this independence assumption, the covariance of residual returns matrix... |
Learning about gamma and am confused about practical gamma trading strategies and struggling to understand how they can be monetized. Is all gamma just about setting limit orders above and below and hoping they hit? or if you could in theory hedge continuously could you still make money? Even if the option is held to e... |
If you continuously delta hedge a long option position will you be flat at expiry regardless of realized vol? |
Consider estimating an asset pricing model such as the CAPM or a multifactor model using monthly data. [Petersen (2009)][2] section "Asset pricing application" suggests use of standard errors clustered by time, as this addresses the problem of cross-sectional correlation. (Meanwhile, serial correlation is not much of a... |
## Short answer
If you're just interested in statistically testing the CAPM, I don't see much of a reason to go beyond testing the joint significance of the hypothesis $H_0: \forall_i \;\alpha_i= 0 $. Run the time-series regressions then run Gibbons Ross Shanken (fancy name for F-test) that all $\alpha_i = 0$ or run a... |
## Short answer
If you're just interested in statistically testing the CAPM, I don't see much of a reason to go beyond testing the joint significance of the hypothesis $H_0: \forall_i \;\alpha_i= 0 $. Run the time-series regressions then run Gibbons Ross Shanken (fancy name for F-test) that all $\alpha_i = 0$ or run a... |
The notation $\Sigma$ is often used for covariance matrix Var($r_t$).
Using notation $\Psi_t = \text{Var}(\epsilon_t)$, a common modeling assumption is that the residuals are independent, $\epsilon_{i,t} \perp \epsilon_{j,t}, ~i\neq j$. Given this independence assumption, the covariance of residual returns matrix... |
The notation $\Sigma$ is often used for covariance matrix Var($r_t$).
Using notation $\Psi_t = \text{Var}(\epsilon_t)$, a common modeling assumption is that the residuals are independent, $\epsilon_{i,t} \perp \epsilon_{j,t}, ~i\neq j$. Given this independence assumption, the covariance of residual returns matrix... |
Anyone know any references on how to estimate transaction costs for a give trading strategy?
In more specific terms, if I want to estimate the returns on an HML value strategy as in Fama-French 1993, how would I go about it? |
## Short answer
If you're just interested in statistically testing the CAPM, I don't see much of a reason to go beyond testing the joint significance of the hypothesis $H_0: \forall_i \;\alpha_i= 0 $. Run the time-series regressions then run Gibbons Ross Shanken (fancy name for F-test) that all $\alpha_i = 0$ or run a... |
Can I use L1 norm equality constraints $\sum_{i}{|w_i|}=1$ (or $\|\mathbf{w}\|_1=1$) in portfolio optimization, instead of the $\sum_{i}{w_i}=1$ (or $\mathbf{1}^T\mathbf{w}=1$) constraint?
Any implications, pros, and cons? |
Can I use L1 norm equality constraints $\sum_{i}{|w_i|}=c,~c>0$ (or $\|\mathbf{w}\|_1=c$) in portfolio optimization, instead of the $\sum_{i}{w_i}=c$ (or $\mathbf{1}^T\mathbf{w}=c$) constraint?
Any implications, pros, and cons?
Thanks for the comments below. I try to summarize what we have for now:
> * L1 norm equ... |
My question is about the following:
[![enter image description here][1]][1]
[1]: https://i.stack.imgur.com/UUkWL.png
1) From my understanding $\Delta_2$ is the sensitive of the option (on the first instrument with underlying $S_1$) with respect to the price of the second instrument $S_2$, I guess this value ... |
Assuming for simplicity deterministic interest rate and dividend yield, then the forward price of an asset is
$$
F = Se^{(r-q)T}
$$
where $T$ is maturity date.
In studying IV skew asymptotics, the behaviour of the quantitites
$$
d_{\pm} = \frac{\log F/K}{I\sqrt T} \pm \frac{I\sqrt T}{2}
$$
is important. For... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
My question is about the following (from Maxime de Bellefroid, Ch. 5 The Greeks):
[![enter image description here][1]][1]
[1]: https://i.stack.imgur.com/UUkWL.png
1) From my understanding $\Delta_2$ is the sensitive of the option (on the first instrument with underlying $S_1$) with respect to the price of th... |
Does QuantLib support valuation of Cross currency swaps ?
Eg. SOFR / SONIA cross currency swap. |
Reading Cochrane ["Asset Pricing"][1] (2005) section 12.2 (p. 241), I got lost in the derivation of the GMM estimator for the single-factor model. Equation $(12.23)$ says the moments are
$$
g_T(b) = \begin{bmatrix} E(R^e_t-a-\beta f_t) \\ E(R^e_t-a-\beta f_t)f_t \\ E(R^e-\beta \lambda) \end{bmatrix} = \begin{bmatrix}... |
How come the cross-sectional CAPM equation produces $N$ moment conditions (not $1$)? |
Assuming for simplicity deterministic interest rate and dividend yield, then the forward price of an asset is
$$
F = Se^{(r-q)T}
$$
where $T$ is maturity date.
In studying IV skew asymptotics, the behaviour of the quantitites
$$
d_{\pm} = \frac{\log F/K}{I\sqrt T} \pm \frac{I\sqrt T}{2}
$$
is important. For... |
I'm trying to get a better understanding of different ways one can test a new factor within the Fama-French framework?
For example, some questions I have are:
1. I want to test if Warren Buffet is in a stock, does that lead to outperformance? How would I test this controlling for the characteristics of that sto... |
Good guide to test a new 'factor' and control using other factors in regression model (like Fama French)? |
I'm trying to get a better understanding of different ways one can test a new factor within the Fama-French framework?
For example, some questions I have are:
1. I want to test if Warren Buffet is in a stock, does that lead to outperformance? How would I test this controlling for the characteristics of that sto... |
Let $W(t)$ be a standard brownian motion and let $Z(t) = \exp (\lambda W(t) - \frac{1}{2}\lambda^2 t).$ In Xinfeng Zhou's Green Book in the section on Brownian Motion (p.130) he writes as part of the proof that $Z(t)$ is a martingale, that $$\mathbb{E}[Z(t+s)]=\mathbb{E}[\exp(\lambda(W(t)+W(s)) - \frac{1}{2}\lambda^2 (... |
Consider the following SDE for $(S_t)_{t\geq 0}$ under $\mathbb{Q}$,
\begin{equation}
\mathop{dS_t}=S_t\left(r\mathop{dt}+\sigma(t,S_t)\mathop{dW_t}\right),
\end{equation}
which (in Langevin form) may be expressed as
\begin{equation}
\dot{S}=S_t\left(r+\sigma(t,S_t)\xi(t)\right),
\end{equation}
such that $W_t$ ... |
I am trying to wrap my head around GMM estimation of a single factor model such as the CAPM. I started by asking [How come the cross-sectional CAPM equation produces $N$ moment conditions (not $1$)?][3] and am now following it up. Equation $(12.23)$ in Cochrane ["Asset Pricing"][1] (2005) section 12.2 (p. 241) says the... |
GMM estimation of the CAPM: why not include sample mean of the market excess return as a moment? |
Reading Cochrane ["Asset Pricing"][1] (2005) section 12.2 (p. 241), I got lost in the derivation of the GMM estimator for the single-factor model. Equation $(12.23)$ says the moments are
$$
g_T(b) = \begin{bmatrix} E(R^e_t-a-\beta f_t) \\ E(R^e_t-a-\beta f_t)f_t \\ E(R^e-\beta \lambda) \end{bmatrix} = \begin{bmatrix}... |
I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to understand this discrepancy.
This is a source for the yield curve: http://www.worldgovernmentbonds.com/country/ukraine/
Oth... |
I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to understand this discrepancy.
This is a source for the yield curve: http://www.worldgovernmentbonds.com/country/ukraine/
Oth... |
Reading Cochrane ["Asset Pricing"][1] (2005) section 12.2 (p. 241), I got lost in the derivation of the GMM estimator for the single-factor model. Equation $(12.23)$ says the moments are
$$
g_T(b) = \begin{bmatrix} E(R^e_t-a-\beta f_t) \\ E[(R^e_t-a-\beta f_t)f_t] \\ E(R^e-\beta \lambda) \end{bmatrix} = \begin{bmatri... |
I am trying to wrap my head around GMM estimation of a single factor model such as the CAPM. I started by asking [How come the cross-sectional CAPM equation produces $N$ moment conditions (not $1$)?][3] and am now following it up. Equation $(12.23)$ in Cochrane ["Asset Pricing"][1] (2005) section 12.2 (p. 241) says the... |
I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to understand this discrepancy.
This is a source for the yield curve: http://www.worldgovernmentbonds.com/country/ukraine/
(inve... |
Consider estimating an asset pricing model such as the CAPM or a multifactor model using monthly data. [Petersen (2009)][2] section "Asset pricing application" suggests use of standard errors clustered by time, as this addresses the problem of cross-sectional correlation. (Meanwhile, serial correlation is not much of a... |
Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM. Using Fama-MacBeth style analysis, we first estimate $N$ time series regressions of the form
$$
r^*_{i,t}=\alpha_i+\beta_i r^*_{m,t}+u_{i,t} \tag{1}
$$
for $i=1,\dots,N$ where $r^... |
I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to understand this discrepancy.
This is a source for the yield curve: http://www.worldgovernmentbonds.com/country/ukraine/
(inve... |
In finance, it is common to price things at their discounted expected value.
What time horizon is the market generally thought to consider?
Is it a "money-weighted" average of expected holding time? |
Suppose we are interested in testing the CAPM using the GRS test. Consider $N$ assets observed for $T$ time periods. Using the notation of Cochrane ["Asset Pricing"][1] (2005), the GRS test amounts to running $N$ time series regressions of the form
$$
R^{ei}_t=\alpha_i+\beta_i f_t+\varepsilon^i_t \tag{12.1}
$$
and ... |
Does the GRS testi account for errors in variables for the betas? |
Does the GRS test account for errors in variables for the betas? |
Suppose we are interested in testing the CAPM using the GRS test. Consider $N$ assets observed for $T$ time periods. Using the notation of Cochrane ["Asset Pricing"][1] (2005), the GRS test amounts to running $N$ time series regressions of the form
$$
R^{ei}_t=\alpha_i+\beta_i f_t+\varepsilon^i_t \tag{12.1}
$$
and ... |
Testing the CAPM: what about errors in variables for the betas? |
I'm implementing the solution with drift from "Dealing with the inventory risk" from Gueant, Lehalle and Tapia. I'm using the link https://arxiv.org/pdf/1105.3115.pdf as reference.
I can reproduce the standard solution with no issues, and then reproduce the surfaces in the paper. I'm trying now to implement the solu... |
I've just placed a LIM OPG order for a NYSE-listed stock, waited until 09:31, and seeing it did not fill, I requested to cancel it (via the API) and, to my surprise, it was successfully canceled.
But what does it even mean to cancel an auction order after the auction has happened? Does it even make any sense?
Doe... |
What does it mean to cancel a NYSE OPG LIM order after open? Does the NYSE open auction not happen in an instant? |
I'm implementing the solution with drift from "Dealing with the inventory risk" from Gueant, Lehalle and Tapia. I'm using the link https://arxiv.org/pdf/1105.3115.pdf as reference.
I can reproduce the standard solution with no issues, and then reproduce the surfaces in the paper. I'm trying now to implement the solu... |
Mean-Variance Optimization trades off expected returns with portfolio variance. The idea is that excess variance is not desirable. But what if you weren't averse to high variance and you wanted to maximize both expected returns and variance. Has there been any research done on this or concepts similar to this?
As an... |
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