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The total wealth of the USA (2019) is $106 Trillion. [\[1\]][1]
The total market capitalization of US companies is $37.6 Trillion. [\[2\]][2]
Okay, other countries can invest in US markets more than we invest in theirs. But supposing that weren't the case, is it numerically possible for the total market cap to e... |
forgive the super beginner question. I have the following code. bench_return_data and my_return data contain daily returns. I am performing a linear regression between them. Am I calculating annualized alpha correctly? Should I be raising it to the 252th power or just multiplying it by 252, or am I completely off?
... |
How to annualize alpha calculated from a daily regression? |
https://www.institutionalinvestor.com/article/b156ty56bcy56q/what-renaissance-technologies-has-that-you-dont
Does this just mean they are aggregating data from vendors like MarketAxess? Or is something more impressive going on? |
How could Renaissance Technologies have near real-time prices on corporate bonds and other debt? |
I want to download historical data for different indices. I am using Python for this. I used the following code.
```
import pandas_datareader.data as web
start = datetime.datetime(1960, 1, 1)
end = datetime.datetime(2020, 4, 30)
SP500 = web.DataReader(['sp500'], 'fred', start, end)
```
It gave me data from... |
Assuming that Libor will fully transition to SOFR by the end of 2021. How are swap rates after 2021 currently priced to reflect this? For example, if I am looking at 5 year US swap rate, doesn't this reflect spot 3-month Libor and a series of eurodollar contracts? But if after 2021, Libor cease to exist, how is the mar... |
I am looking for an explanation of for different types/grades of derivatives.
For example we have various asset classes:
- equities
- FX (currency)
- derivatives, etc.
Or different types of secured debts, like:
1. junior
2. mezzanine
3. senior
4. s-senior.
So my question is about the same t... |
My understanding is that for some of the G10 currencies with negative rates (CHF, EUR), Swaption and Cap / Floor prices are quoted in terms of BOTH, normal and log-normal Vols. That in itself is not controversial, because these vols are self-consistent (you plug the quoted log-normal vol into the (shifted) log-normal f... |
The solution here is very simple. At any point in time, you will be able to retrieve from the internet stock market data at a daily frequency for free, as long as (1) you do not mind a possible delay of a few hours and (2) having only the past few years of data.
So, all you need to do is to find a dataset today that... |
The solution here is very simple. At any point in time, you will be able to retrieve from the internet stock market data at a daily frequency for free, as long as (1) you do not mind a possible delay of a few hours and (2) having only the past few years of data.
So, all you need to do is to find a dataset today that... |
My textbook provides the following definition:
**A Eurodollar futures contract is traded on the Chicago Mercantile Exchange and:
• Is a commitment to deliver a $1mm Eurodollar time deposit with a 3-month maturity;**
I have a very basic question, which might seem too dummy-like but still: What should be the remai... |
I am looking for an explanation for different types/grades of derivatives.
For example we have various asset classes:
- equities
- FX (currency)
- derivatives, etc.
Or different types of secured debts, like:
1. junior
2. mezzanine
3. senior
4. s-senior.
So my question is about the same thin... |
I am trying to write my masters thesis in finance and my topic will be ETF related, i wanted to ask whether it is possible to find data for an empirical analysis for my thesis, i have been searching far and wide on the internet but it seems people either have no idea or not many deal with this topic.
I wanted to ask... |
Where can one get data concerning ETF holdings and changes in their holdings? |
The reservation price is highly influenced by the election of the parameter T isn't it? So, if T is high enough, each step in which q is not zero, the reservation price could be too high (or too low), and so the election of bid and ask quotes (both above or below the mid-price). |
So according to this source here, ETFs are required to publish the type of data that they are looking for, they sometimes go on to publish such data on their own websites https://www.sec.gov/investor/alerts/etfs.pdf. But navigating to each ETFs own website and trying to source all this data is clearly arduous and not w... |
Im working in the Avellaneda-Stoikov implementation usign python. My [implementation](https://github.com/fedecaccia/avellaneda-stoikov) reproduces the authors results, but I dont know how to propertly adapt the algorithm in order to consider a larger time horizon.
From the equation
r = s - q * gamma * sigma**2... |
How to propertly change time horizon in Avellaneda-Stoikov model? |
Sorry if this is an obvious question, but I'm reading the following paper and I have some questions about the formula. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2908494
The formula has the following:
- Cm = market price of call option
- K = option strike
- T = option maturity
- F = forward price ... |
The [S&P500](https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC) started to drop only on Feb 20 2020, and the [Nikkei 225](https://finance.yahoo.com/quote/%5EN225?p=^N225) and the [FTSE 100](https://finance.yahoo.com/quote/%5EFTSE?p=^FTSE) on Feb 21 2020. Yet as early as Jan 120, COVID-19 was reported in Hong Kong, South ... |
Why didn't stock markets drop in response to COVID-19 earlier, way before Feb 21 2020? |
The [S&P500](https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC) started to drop only on Feb 20 2020, and the [Nikkei 225](https://finance.yahoo.com/quote/%5EN225?p=^N225) and the [FTSE 100](https://finance.yahoo.com/quote/%5EFTSE?p=^FTSE) on Feb 21 2020. Yet as early as Jan 120, COVID-19 was reported in Hong Kong, South ... |
There are several considerations here:
1. Is your database server used solely for the purpose of this algorithmic trading? Or is it also used to support an application server?
2. How complex is your technical analysis going to be? Some TA are quite straightforward to implement in both SQL and Python, but I'd ima... |
What literature (books, articles, etc.) should someone hoping to learn basic HFT / arbitrage strategies read first? |
- Julie Segal, [What Renaissance Technologies has that you don't...][1], Institutional Investor, October 17, 2017.
Does this just mean they are aggregating data from vendors like MarketAxess? Or is something more impressive going on?
[1]: https://www.institutionalinvestor.com/article/b156ty56bcy56q/what-ren... |
Sorry if this is an obvious question, but I'm reading the following paper and I have some questions about the formula. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2908494
The formula has the following:
- $C_m$ = market price of call option
- $K$ = option strike
- $T$ = option maturity
- $F$ = forwa... |
I deliberately haven't stipulated the kind of Quant job, as I'm asking in general. [This r/quant comment](https://old.reddit.com/r/quant/comments/92q5ck/the_types_of_math_i_need_to_know_to_be_a_quant/e3vjdte/) answers "what is complex analysis used for in quant finance?":
> Some pricing models, and some analysis of ... |
Ought you study Complex Analysis and/or Variables in university? |
I deliberately haven't stipulated the kind of Quant job, as I'm asking in general. [This r/quant comment](https://old.reddit.com/r/quant/comments/92q5ck/the_types_of_math_i_need_to_know_to_be_a_quant/e3vjdte/) answers "what is complex analysis used for in quant finance?":
> Some pricing models, and some analysis of ... |
I deliberately haven't stipulated the kind of Quant job, as I'm asking in general. [This post](https://quant.stackexchange.com/q/53706/31928) lists examples of Abstract Algebra. But ought you learn it on your own? Or ought you study them in university? I see mixed messages. [bigbadwolf](https://quantnet.com/threads/re... |
Ought you study Abstract Algebra in university? |
I have a series of rolling annual returns and would like to convert these back to quarterly returns, which have not been provided. Is this possible formulaically, or is something like Excel's solver required?
Sample data below, quarterly returns are provided (still need to calculate column four):
+---------+-... |
How can I convert rolling annual returns back to quarterly returns? |
In [Dealing with the inventory risk: a solution to the market making problem][1] (preprint available at [arxiv][2]) we extend the approximation proposed by Marco and Sasha to a rigorous mathematical framework and provide exact steady-state approximation. The bid-ask spread that should be quoted is
$$\psi(q;k,\gamma)... |
Yes, different banks using different models will get different Greeks. Some of them will be right and some of them will be wrong. What do we mean by right and wrong? ‘Right’ means that when the market moves, your Greeks closely predict how the market values of the options are moving. There are multiple examples in ... |
The following time series represents the return stream of a real hedge fund. Which
strategy did the fund most likely follow?
[![enter image description here][1]][1]
I did this data superimposition on Matlab. So, there should be some data analysis process that is able to find the best fit. Regression is not worki... |
Which strategy did the fund most likely follow? |
Apologies if this has been asked before, but I'm interested in understanding the situations when realized volatility may be higher than implied volatility in practice (if these periods exist).
I know in generally up-trending markets ("good times") implied vol tends to be higher than realized vol, in which case a del... |
I wonder if we have n risky assets, does the portfolio with the minimum variance always have non-zero weights or can any weight be 0? |
Do the wallet weights with the minimum variance need to be nonzero? |
I came across a paper that uses Support Vector Machines to classify a `buy/sell/hold` decision each hour at the $\pm$0.5% threshold. The paper can bee seen [here][1]. The paper yielded impressive predictive power as well as high returns. It was noted that during the training phase they created the `[1, 0, -1]` labels b... |
What benefits do using log returns for model training provide? |
I am looking for an explanation for different types/grades of derivatives.
For example we have various asset classes:
- equities
- FX (currency)
- derivatives, etc.
Or different types of secured debts, like:
1. junior
2. mezzanine
3. senior
4. s-senior.
So my question is about the same thin... |
If I place a stop loss order at my provider. Is this order directly forwarded to the stock exchange? Or does my provider implement this logic. If so, do they have to declare any delays that arise by checking the market price and adjusting the at-market order price? Are der big differences in this delay guarantees? |
How does a Stock Exchange Provider implement a Stop-Loss Order? |
I'm not asking about Linear Algebra that's doubtless vital to Finance. I deliberately haven't stipulated the kind of Quant job, as I'm asking in general. [This post](https://quant.stackexchange.com/q/53706/31928) lists examples of Abstract Algebra. But ought you learn it on your own? Or ought you study them in universi... |
I am trying to download data from Interactive Broker using the code below and I am able to create the connection with the Trader Work Station (I get a "True" after `con.connect()`) but there is no output, i.e. the `dataDownload` variable becomes empty.
Anyone know why this can be?
# Adapted from: http://godel... |
How to get positions of your portfolio from Interactive Brokers with python IBPy? |
I am currently a student of a "normal" Finance program and would like to know some more things about quantitative finance in general and especially risk management.
When we derived formulas, such as the Black-Scholes formula, we didn't do it properly. For example, our professor simply gave us the result of Ito's for... |
Hey I have covariance matrix:
$$C=\begin{pmatrix} 0,01 & 0.01 & 0\\ \\ 0.01 & 0,02 & -0.01 \\ \\ 0 & -0.01 & 0,03 \end{pmatrix}$$
So the variance of porfolio is:
$$\sigma_w^2=\begin{pmatrix}w_1 & w_2 & w_3 \end{pmatrix} \begin{pmatrix}0.01 & 0.01 & 0\\0.01 & 0.02 & -0.01\\0 & -0.01 & 0.03 \end{pmatrix} \begi... |
is it possible to get minimum variance line having only covariance matrix? |
I need to conduct the Fama-MacBeth (FM) procedure for my thesis to test the ability of the six-factor model to predict future expected returns. In univariate regressions of expected excess returns on the market excess return, both average intercept and slope coefficients are statistically significant at the 1% level. W... |
Hey I have covariance matrix:
$$C=\begin{pmatrix} 0,01 & 0.01 & 0\\ \\ 0.01 & 0,02 & -0.01 \\ \\ 0 & -0.01 & 0,03 \end{pmatrix}$$
So the variance of porfolio is:
$$\sigma_w^2=\begin{pmatrix}w_1 & w_2 & w_3 \end{pmatrix} \begin{pmatrix}0.01 & 0.01 & 0\\0.01 & 0.02 & -0.01\\0 & -0.01 & 0.03 \end{pmatrix} \begi... |
Take a look at the following note which explains that indeed the dynamic position in the underlying is from delta hedging the options.
I actually still have to complete the note with showing that the aggregate delta of the options portfolio is $1/S_t$, but I have not had time yet.
[F. Rolloos, Delta Hedging and V... |
I am not familiar enough with the theory of option pricing to understand how negative option prices are possible. I found two research papers indicating that negative option prices are indeed possible for callable US treasury bonds:
* [Are Negative Option Prices Possible? The Callable U.S. Treasury-Bond Puzzle](http... |
Why are negative option prices possible for callable US treasury bonds? |
I am not familiar enough with the theories of option pricing to understand how negative option prices are possible. I found two research papers indicating that negative option prices are indeed possible for callable US treasury bonds:
* [Are Negative Option Prices Possible? The Callable U.S. Treasury-Bond Puzzle](ht... |
Hey I have covariance matrix:
$$C=\begin{pmatrix} 0,01 & 0.01 & 0\\ \\ 0.01 & 0,02 & -0.01 \\ \\ 0 & -0.01 & 0,03 \end{pmatrix}$$
So the variance of porfolio is:
$$\sigma_w^2=\begin{pmatrix}w_1 & w_2 & w_3 \end{pmatrix} \begin{pmatrix}0.01 & 0.01 & 0\\0.01 & 0.02 & -0.01\\0 & -0.01 & 0.03 \end{pmatrix} \begi... |
Consider a high frequency trading strategy that trades Bitcoin-USD round the clock 365 days of the year at 5-minute intervals. How would one calculate the annualised Sharpe ratio of such a trading strategy? |
There's a practical answer and a theoretical one.
Looking at a time series of any stock and market, its realised beta will naturally time-vary depending on whether company-specific good or bad news happens to be released on an up versus a down day for the broader market.
Theoretically, this shouldn't happen (as... |
Using Oanda's streaming API I get typical output as shown below:
{"type":"PRICE","time":"2020-05-04T14:18:54.652572124Z","bids":[{"price":"1.09144","liquidity":1000000},{"price":"1.09143","liquidity":2000000},{"price":"1.09142","liquidity":2000000},{"price":"1.09140","liquidity":5000000}],"asks":[{"price":"1.09... |
What are CloseoutBid and CloseoutAsk Prices? |
I’m doing some work around the variance risk premium currently, and I’m interested in understanding the situations when realized volatility is > implied volatility in practice.
I know in generally up-trending markets ("good times") implied vol tends to be higher than realized vol, in which case a delta hedger profi... |
Variance risk premium: When is realized vol higher than implied vol in practice? |
I have 3 risky assets and one risk-free asset. From them I have to determine what the set of portfolios achievable looks like if there is short selling of risk-free asset is not allowed. What does this set looks like on a plane $(\mu,\sigma)?$ |
Since you talk about a variance risk premium, a word about some of the details involved might be important. Technically, your variance premium is the difference between the expected volatility under the physical and risk-neutral measures. In general those quantities aren't equal.
For example, in a stochastic volatil... |
I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central banks, but I am not sure which model is best from a theoretical point of view. I basically have dummy variables and control ... |
**First, a word of caution**
One of the problem with mathematical finance, as well as the related field of financial economics is that there is more than enough to learn to fill your schedule several times over just with this academic side hustle. So, whether you like it or not, there is an issue of choice which is ... |
Note that
\begin{align*}
Call_{\rm BTC}=\frac{1}{S}Call_{\rm USD}.
\end{align*}
The premium adjusted delta $Delta_{PA}$ is defined as the change of $Call_{\rm BTC}$ with respect to the change of the spot in BTC, that is,
\begin{align*}
Delta_{PA} &= \lim_{\Delta S\rightarrow 0}\frac{\Delta Call_{\rm BTC}}{\frac{... |
I am following some work to do with a regression based performance attribution.
The regression is a cross sectional regression. The y vector is the risk free return for say 1000 companies. The X matrix is made up of a constant, some factors like book to price, momentum etc, say we 6 such factors (7 including the con... |
Note that
\begin{align*}
Call_{\rm BTC}=\frac{1}{S}Call_{\rm USD}.
\end{align*}
The premium adjusted delta $Delta_{PA}$ is defined as the change of $Call_{\rm BTC}$ with respect to the change of the spot in BTC, that is,
\begin{align*}
Delta_{PA} &= \lim_{\Delta S\rightarrow 0}\frac{\Delta Call_{\rm BTC}}{\frac{... |
I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central banks, but I am not sure which model is best from a theoretical point of view. I basically have dummy variables and control ... |
In the context of mathematical finance and financial economics, complex analysis naturally arise in derivative pricing. Specifically, some models impose that the conditional characteristic function of the underlying will be affine in all state variables. In those cases, you can generally obtain a quasi-analytical formu... |
I am following some work to do with a regression based performance attribution.
The regression is a cross sectional one. The $y$ vector is the risk free return for say 1,000 companies. The $X$ matrix is made up of a constant, some factors such as book to price, momentum etc, say we 6 such factors (7 including the co... |
In a Full reval scenario, you would 1) identify your risk factors (ATM point? Skew? Surface? SABR?)
Say you want to simulate all surface points. Then, after you have applied your surface returns you need to first make sure that your new IV surface is free of arbitrage. That is an art in itself, though. Then you do ... |
Given I have 3 index values at time $t = 0, 1 , 2$, how would I go about calculating the daily continuously compounded return?
Time: $ 0, 1, 2$
Index Values: $4000, 4086, 4114$
Any help would be much appreciated. Thanks. |
I'm calculating the volatilty of an options market (description of market below) by fitting 2 function:
1. fitting the on book call prices
2. fitting the on book put prices
And i'm getting a strange resulat the volatilty of each function is different i.e. the volatilty for the calls isn't correlated to the volat... |
I'm calculating the volatility of an options market (description of market below) by fitting 2 functions:
1. fitting the on book call prices
2. fitting the on book put prices
And I'm getting a strange result: the volatility of each function is different i.e. the volatility for the calls isn't correlated to the... |
Suppose there is an underlying XYZ trading at \$100.
Suppose I also have the price of exchange traded XYZ options for \$60, \$80, \$90, \$100, \$110, \$120, \$140 with 60 dte, 90 dte, and 120 dte.
Are there methods to extrapolate this data to the price of options with different strikes and dte? Continuing with the ... |
Suppose there is an underlying XYZ trading at \$100.
Suppose I also have the price of exchange traded XYZ options for \$60, \$80, \$90, \$100, \$110, \$120, \$140 with 60 dte, 90 dte, and 120 dte.
Are there methods to extrapolate this data to the price of options with different strikes and dte? Continuing with the ... |
I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central banks, but I am not sure which model is best from a theoretical point of view. I basically have dummy variables and control ... |
Assume that only two companies are listed on an effective capital market:
companies A and company B. Capitalization (market value of all shares) of both companies is the same. Expected rate of return from
shares of company A is 19%, and the expected rate of return on company shares
B is 14%. Standard deviation of th... |
Sorry if this is an obvious question, but I'm reading the following paper *An Explicit Implied Volatility Formula*, Dan Stefanica, Rados Radoicic, International Journal of Theoretical and Applied Finance, Vol. 20, no. 7, 2017
I have some questions about the formula. https://papers.ssrn.com/sol3/papers.cfm?abstract... |
I'm curious about this question both for a parametric "Delta" style approach and a Monte Carlo full revaluation approach and I will lead one question into the next.
Taking the "Delta" approach first. Your calculation looks something like this (?):
$VaR = conf * \sqrt{w * cov*w}$ where conf is your confidence fact... |
I am wondering what strategies that can be used in hedging with forward contracts in commodities market.
I only need to buy the forward contract(long position) , let's say a one month contract.
So my profit/loss depends on the spot price at maturity (St - K) , so should i base my decision only on spot price forecast at... |
Assume that only two companies are listed on an effective capital market:
companies A and company B. Capitalization (market value of all shares) of both companies is the same. Expected rate of return from
shares of company A is 19%, and the expected rate of return on company shares
B is 14%. Standard deviation of th... |
I have designed an algorithm that uses Support Vector Machines to classify the next day's price movement for several prominent cryptocurrencies on a `[1,0,-1] (buy/hold/sell)` basis. These cryptocurrencies are namely Bitcoin, Ethereum & Litecoin. I have desgined a backtest that takes into account fees, spread and depth... |
What metrics should I use to evaluate an ML algo backtest, other than the nominal returns? |
It seems like it would. If so, what are some examples? |
Does the new trend of "no transaction fee" accounts substantively change the academic study of mathematical finance? |
I am wondering what strategies that can be used in hedging with forward contracts in commodities market.
I only need to buy the forward contract (long position), let's say a one month contract. So my profit/loss depends on the spot price at maturity ($S_t - K$).
So should I base my decision only on spot price fo... |
why people say vol swap is short vol of vol?
Say we consider a simple vol swap with 3% strike with two days maturity here:
scenario1: realized vol is 2% on day1 and 4% on day2
scenario2: realized vol is 1% on day1 and 5% on day2
in both scenarios, same mean for vol but scenario2 has higher vol of vol.
In scena... |
I've come across a research paper where for a specific period of time, the portfolio has negative returns (or roughly flat returns). During this same period of time, the portfolio's Fama-French 3-factor alpha is fairly positive.
Here is a photo of the returns from the paper, I'm looking at the 2000-2007ish time fram... |
How can a stock have negative returns but positive 3-factor alpha? |
I've come across a research paper where for a specific period of time, the portfolio has negative returns (or roughly flat returns). During this same period of time, the portfolio's Fama-French 3-factor alpha is fairly positive.
Here is a photo of the returns from the paper, I'm looking at the 2000-2007ish time fram... |
Why would it? Customers are still paying spread and execution slippage - another type of less obvious transaction cost much the same as regular fees, which are magnified by adverse selection associated with trading larger size.
Execution either at midprice, VWAP or TWAP is almost impossible unless you are trading wi... |
I am working on predicting the daily data of a financial time series $[Y(t+1),...Y(t+j)]$ =$f(X_1(t),...X_1(t-i),.....,X_n(t),...X_n(t-i))$ and I used LSTM in order to do that...
I am wondering if an accuracy of one month forcast of **39%** is a good one in order to take a decision to buy a forward contract in order t... |
I am writing a paper in an area where the concept of [Return on Investment](https://en.wikipedia.org/wiki/Return_on_investment) may not be clear. Is there a definitive source for its definition I can cite? |
I am working on predicting the daily data of a financial time series $[Y(t+1),...Y(t+j)]$ =$f(X_1(t),...X_1(t-i),.....,X_n(t),...X_n(t-i))$ where $Y$ is a commodity price $X_i$ are predictor variables and I used LSTM (Long Short-Term Memory networks) in order to do that...
How to judge if this predictor is adequate ... |
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