instruction stringlengths 15 26.1k |
|---|
**The Problem:**
Suppose I have a simple jump model for an asset price
$$ dS = S(t-)[\mu dt + YdN(t)] $$
where $N(t)$ is a Poisson process and $Y_i$ are the jump sizes (assume independece of $N(t)$ and $Y_i$). Also for simplicity assume that $Y_i$ can only take two values, lets say $a$ and $b$. What constraint... |
An argument I often hear (which was [repeated here](https://quant.stackexchange.com/a/53154/8164)) against sending orders through "pay-for-flow" wholesalers is that those wholesalers can potentially determine if you are an "informed" trader (as opposed to an "uninformed" retail investor), in which case they can use the... |
Can a pay-for-order-flow wholesaler front-run orders it sees? |
**I am looking for some theory of strategy selection. My problem:**
- suppose I have a large set of trading strategies, derived from varying the parameters of a trading algorithm
- for each strategy I have the historical daily returns and I can calculate various performance metrics
- now, I must pick 1 sing... |
Mean, Sharpe, Calmar, ... Which metric has the most predictive power? |
**I am looking for some theory of strategy selection. My problem:**
- suppose you have a large set of trading strategies, derived from varying the parameters of a trading algorithm
- for each strategy you have the historical daily returns and you can calculate various performance metrics
- now, you must pic... |
I am using a simulation approach to compare the performances achievable by naive diversification and mean-variance optimization for portfolio selection. My problem is that my results indicate that naive diversification outperforms mean-variance optimization. Is this possible or is there most likely an error in my simul... |
**I am looking for some theory of strategy selection. My problem:**
- suppose you have a large set of trading strategies, derived from varying the parameters of a trading algorithm
- for each strategy you have the historical daily returns and you can calculate various performance metrics
- now, you must pic... |
Which has the most predictive power: Mean, Sharpe, Calmar, ...? |
**Suppose you have created a new trading algorithm:**
- by varying the parameters of the algorithm, you have a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you have the historical daily returns and you can calculate vario... |
Which metric has the most predictive power: Mean, Sharpe, Calmar, ...? |
Which metric is most predictive: Mean, Sharpe, Calmar, ...? |
**Suppose you have created a new trading algorithm:**
- by varying the parameters of the algorithm, you have a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you can calculate the historical daily returns and/or various per... |
**Suppose you have created a new trading algorithm:**
- by varying the parameters of the algorithm, you have a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you can calculate the historical daily returns and/or various per... |
**Suppose you have created a new trading algorithm:**
- by varying the parameters of the algorithm, you have a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you can calculate the historical daily returns and/or various per... |
**Suppose you created a new trading algorithm:**
- by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you can calculate the historical daily returns and various historical perfo... |
**Suppose you have created a new trading algorithm:**
- by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. different trigger thresholds, different stop loss threshold, etc.)
- for each strategy you can calculate the historical daily returns and various historical ... |
I recently was made aware of the existence of Contingent Capital Instruments like CoCo Bonds. I was wondering if there are other robust options available for Big Banks in this domain? |
What are some robust Contingent Capital Instrument available? |
**Suppose you have created a new trading algorithm:**
- by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. slightly different trigger thresholds, stop loss thresholds, etc.)
- for each strategy you can calculate the historical daily returns and various historical ... |
If you know the price levels of the two neigbouring data points, as well as their returns, then you can directly imply the missing return. However, I suspect this is not what you have, and it is quite an obscure corner case anyway. In addition, in real life you could easily have several missing values in sequence.
T... |
The **sortino ratio** is also important for evaluating trading strategies. also the **omega ratio**.
The question is a poor one though. Each of the mentioned ratios will be the most predictive at predicting ... THEMSELVES! respectively. you don't use the calmar to predict the sharpe. ok, what you are probably actu... |
The **sortino ratio** is also important for evaluating trading strategies. also the **omega ratio**.
The question is a poor one though. Each of the mentioned ratios will be the most predictive at predicting ... THEMSELVES! respectively. you don't use the calmar to predict the sharpe. ok, what you are probably actu... |
The **sortino ratio** is also important for evaluating trading strategies. also the **omega ratio**.
The question is a poor one though. Each of the mentioned ratios will be the most predictive at predicting ... THEMSELVES! respectively. you don't use the calmar to predict the sharpe. ok, what you are probably actu... |
The **sortino ratio** is also important for evaluating trading strategies. also the **omega ratio**.
The question is a poor one though. Each of the mentioned ratios will be the most predictive at predicting ... THEMSELVES! respectively. you don't use the calmar to predict the sharpe. ok, what you are probably actu... |
The **sortino ratio** is also important for evaluating trading strategies. also the **omega ratio**.
The question is a poor one though. Each of the mentioned ratios will be the most predictive at predicting ... THEMSELVES! respectively. you don't use the calmar to predict the sharpe. ok, what you are probably actu... |
I am reading John Hull's book, and am a bit confused about the explanation regarding the cost of delta hedging.
Here is the background: a financial institute is selling call options with strike price $K$, and it is applying delta hedging by adjusting number of purchased stocks to hedge the risk (of stock price going... |
where does the cost of delta hedging come from? |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
Let's say you want to test the hypothesis that given a signal reaches some threshold, some asset will have some return over the next period.
Here we have two unknowns.
- One, the value of your threshold - that triggers the trade
- Two, the time period to measure your return after your signal occurs.
What ap... |
How do you build a model with uncertain time range? |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
I need data to test some mathematical models. So far I have the level 2 over 120 layers, but I can't pay for the time and sales. Is it possible to extract the time and sales from the level 2? |
**Asset returns** are the most common data type used in finance. They are derived from **closing price** data. Ordinary stock data not only consists of closing prices, but also **gross volume** traded in the security, however, which is the absolute sum of both the number of shares that were bought *and* sold by end-of-... |
Does asset volume, rather than asset returns, predict performance? |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
**Asset returns** are the most common data type used in finance. They are derived from **closing price** data. Ordinary stock data not only consists of closing prices, but also **gross volume** traded in the security, however, which is the absolute sum of both the number of shares that were bought *and* sold by end-of-... |
**Asset returns** are the most common data type used in finance. They are derived from **closing price** data. Ordinary level 1 data for stocks not only consists of closing prices, but also **gross volume** traded in the security, however, which is the absolute sum of both the number of shares that were bought *and* so... |
I need data to test some mathematical models. So far I have the level 2 over 120 layers, but I can't pay for the time and sales. Is it possible to extract the time and sales from the level 2?
The level 2 is the one offered by data.nasdaq.com. Here is a little picture
[![enter image description here][1]][1]
So ... |
I need data to test some mathematical models. So far I have the level 2 over 120 layers, but I can't pay for the time and sales. Is it possible to extract the time and sales from the level 2? By layers I mean market depth, with layer 1 being the top-level quote in queue.
The level 2 is the one offered by data.nasdaq... |
In this statement Hull provides a **theoretical** justification for the initial value $c$ of the option. Why is $c$ equal to a specific number and not some other number? Where does $c$ come from?
The option by itself as you say is risky because its value depends on the chance that the final stock price $S_T$ is abov... |
What is the difference between ^GSPC and ^SPX in yahoo finance? |
This is a very tough problem and there are no definitive answers.
Of course you can try brute force, but you may very well overfit. One simple way to do this is to label each period in your time series with 1 if the return after X periods is above a desired threshold, 0 otherwise. Compute your strategy’s precision fo... |
I am reading John Hull's book, and am a bit confused about the explanation regarding the cost of delta hedging.
Here is the background: a financial institute is selling call options with strike price $K$, and it is applying delta hedging by adjusting number of purchased stocks to hedge the risk (of stock price going... |
In Marcos Lopez de Prado's book, Advances in financial machine learning, he recommends using the combinatorial purged cross-validation(CPCV) for backtesting. His motivation is sensible. Through the method, we can test our trading strategy with more scenarios and we can reduce the false discovery rate.
Our training ... |
I am reading John Hull's book, and am a bit confused about the explanation regarding the cost of delta hedging.
Here is the background: a financial institute is selling call options with strike price $K$, and it is applying delta hedging by adjusting number of purchased stocks to hedge the risk (of stock price going... |
I am searching for some paper that models the regulations of market makers in stock or OTC markets. Is there anybody who have seen some marekt microstructure paper for modeling regulations and what are these regulations? Since the crises of 2009 occured, many regulations have changed in the stock and OTC markets. I am ... |
let's suppose a stock 'X' is quoted in a particular market with a specific bid and ask price.
I would like to see for all transactions within a day on stock X:
1. The transaction time (in milliseconds)
2. The transaction type (Bid (Sell) or Ask (Buy))
3. The transaction price
4. The transaction quantity
... |
To find prices for FTSE stocks on Alpha Vantage you stick the `.LON` suffix on the symbol:
e.g.
```
curl https://www.alphavantage.co/query?function=GLOBAL_QUOTE&symbol=AZN.LON&apikey=APIKEY
``` |
Some litterature states that, for instance for the Heston model, the characteristic function is given by:
$$\varphi_{\mathrm{H}}(u, t, T)=\exp \left(A(u, t, T)+B(u, t, T) V(t)+i u X(t)\right)$$
Other litteratur states that the characteristic function is given by
$$\varphi_{\mathrm{H}}(u, t, T)=\exp \left(A(u, t, T... |
>Consider a two-period binomial model, with one risky asset. The are two types of options:
> - call option with strike price $K$, i.e., the payoff is given by $g(S_T)=(S_T-K)^{+}$
>- option with payoff given by the average of prices, i.e., $g(S_T)=(\frac12(S_0+S_T)-K)^{+}$
>where $X^{+}=\max\{X,0\}$.
>Assume ... |
Some literature states that, for instance for the Heston model, the characteristic function is given by:
$$\varphi_{\mathrm{H}}(u, t, T)=\exp \left(A(u, t, T)+B(u, t, T) V(t)+i u X(t)\right)$$
Other literature states that the characteristic function is given by
$$\varphi_{\mathrm{H}}(u, t, T)=\exp \left(A(u, t, T)... |
In finance, it is widely known that the volatility of asset returns ($\sigma$) are easier to predict than the expected value of asset returns ($\mu$) , otherwise known as the average return or mean.
Is this partly due to the fact that asset volatility is restricted to be a positive value ($\sigma \in (0,+\infty)$),... |
Are asset return means difficult to predict because they have no lower bound? |
As far as I know, we usually use log returns( $ln\frac{p_{t+1}}{p_{t}}$ ) in quantitative finance.
For example, let's say we have lots of monthly log returns data, $R_m$.
Then, we can get the mean of monthly log return, $\mu_{month}=mean(R_m)$ and volatility of log return $\sigma_{month}=std(R_{m})$
From $\mu,... |
Is there an (open) way to map Bloomberg's 2-letter exchange code to MIC identifiers, e.g. `UN` to `XNYS`? |
This question is about a leveraged trade involving index futures.
Let's use an example of buying two contracts YM futures and selling three contracts RTY futures. CME will give the trade a margin credit under the variance margin rules (SPAN). This is the current hedge ratio and so it will earn ~75% margin reductio... |
In general, call/put options are quoted with respect to their Black-Scholes volatility.
In the FX market we define the risk reversal volatility as $$\sigma_{25-RR} = \sigma_{25-Call} - \sigma_{25-Put}$$
**Question** : is this the value to input in a Black-Scholes formula to get the price of a risk reversal option ... |
I am new to IRS. Pay 2Y HKD-USD IRS spread. It is a trade idea recommendation. Can someone explain what this trade entails? Does it mean paying fixed and receiving 3m USD LIBOR over 2 years? Please advise.
Thanks.
Zach |
In general, call/put options are quoted with respect to their Black-Scholes volatility.
In the FX market we define the risk reversal volatility as $$\sigma_{25-RR} = \sigma_{25-Call} - \sigma_{25-Put}$$
**Question** : is this the value to input in a Black-Scholes formula to get the price of a risk reversal option ... |
Suppose we consider simple case that only par is protected against base price index, so it is with zero coupon floor feature. How do we value this option given that there is no inflation floor instruments tradable? |
In quantitative finance tasks (asset pricing, portfolio optimization, option pricing, volatility forecasting, etc), there are frequentist, likelihoodist and Bayesian approaches or interpretations to solving the same financial problem. For the common finance tasks listed or others, could someone give an outline or summa... |
Financial data is usually structured with time bars. Other **sampling techniques** include:
- tick bars
- volume bars
- dollar bars.
These are so-called sampling techniques to better identify signals and trends in financial data.
But if they are sampling techniques, then how do they compare to sampling ... |
Does anyone know a reference where one can read up on different aspects of modelling when simulating the stock market?
Moreover I am looking to evaluate an options strategy on a entire index if anyone has some suggestions on which model to pick in that situation. |
Is there a simplified framework to consider for modelling the stock market? |
A good reference book for FX conventions can be found from the book [Foreign Exchange Option Pricing][1] by Iain Clark. The 25% risk-reversal quote $\sigma_{25-RR}$ satisfies the system of equations
\begin{align*}
\begin{cases}
\Delta_{call}(k_{25-call}, \sigma_{25-call}) &\!\!\!= 0.25\\
\Delta_{put}(k_{25-put}, \... |
A good reference book for FX conventions can be found from the book [Foreign Exchange Option Pricing][1] by Iain Clark. The 25% delta risk-reversal quote $\sigma_{25-RR}$ satisfies the system of equations
\begin{align*}
\begin{cases}
\Delta_{call}(k_{25-call}, \sigma_{25-call}) &\!\!\!= 0.25\\
\Delta_{put}(k_{25-p... |
Where are companies like [finhub.io][1] or finance portals getting their data from?
Do they fetch the historical stock quotes from the exchanges directly? If so, the have to collect the data from a lot of different exchanges over the world, which must be quite expensive because if the prices the exchanges charge.
... |
Does anyone know a reference where one can read up on different aspects of modelling when simulating the stock market? i.e what is known as "stylized facts" and which of these fact that are more interesting then others in different situations.
Moreover I am looking to evaluate an options strategy on a entire index i... |
Where are companies like [finnhub.io][1] or finance portals getting their data from?
Do they fetch the historical stock quotes from the exchanges directly? If so, the have to collect the data from a lot of different exchanges over the world, which must be quite expensive because if the prices the exchanges charge.
... |
I can't really grasp the similarities and differences between Statistics and Econometrics.
Is Econometrics includes every Statistical models inside it? or is there areas of Statistics outside of the scope of Econometrics, or it's the other way around? |
What's the difference between Statistics and Econometrics? |
I'm currently reading Michael Lewis' Flash Boys, which is about high-frequency trading. It was published in 2014 and it says that there are 150 types of orders on exchanges (mainly built for HTF traders).
I know the basic ones, like limit and market or good-till-cancel, but what are others that are less frequently ... |
What are the main types of orders on an exchange? |
I've been doing that manually for 2 months successfully (40% ROI) with SPX 0-1dte options, both puts and calls. I might be just lucky so I purchased some data to do backtesting with 15m timeframe. I didn't complete the test yet but I can calculate probabilities of certain events happening that confirm my strategy. I am... |
Can one successfully daytrade 0dte options based on RSI? |
Is it possible to use bid-ask spreads on contracts from a specific tenor to estimate risk aversion and use it to transform risk-neutral density into real-world density?
|
Are there institutions that will fill stock trades after the close (from stock on their order book) at the official close price? If so, would it be significantly more expensive to execute a trade this way than to send a market-on-close order to the same institution? |
I've been doing that manually for 2 months successfully (40% ROI) with SPX 0-1 DTE (Days To Expiration) options, both puts and calls. I might be just lucky so I purchased some data to do backtesting with 15m timeframe. I didn't complete the test yet but I can calculate probabilities of certain events happening that con... |
As @chrisaycock mentioned, there's many permutations of parameters, especially when it comes to venue routing instructions, so it's hard to write an exhaustive list. But most of time, the exceptions you're looking for tend to fall into 4 categories.
### 1. Intermarket sweep orders (ISOs)
This allows a destination... |
As @chrisaycock mentioned, there's many permutations of parameters, especially when it comes to venue routing instructions, so it's hard to write an exhaustive list. But most of the time, the exceptions you're looking for will fall into 4 categories.
### 1. Intermarket sweep orders (ISOs)
This allows a destinatio... |
I know that $\frac{dW_t}{dt}$, with $W_t$ a brownian motion, does not exist. However, does $\frac{dt}{W_t}$ exists? Or does it even make sense? I am trying to calculate the quotient of two differentials of Ito processes, specifically, given $V_t$ and $S_t$ Ito processes, I require $\frac{dV_t}{dS_t}$ and the quotient I... |
Ideally this question is very similar to <https://quant.stackexchange.com/questions/10048/whats-the-meaning-of-the-intercept-in-asset-pricing-model>
I am regressing a "buys minus sells" portfolio returns to the Carhart factors.
The intercept is coming out to be positive and significant.
However this portfolio ... |
This question is about the pre-requisites to the pre-requisite math needed to become a front desk quant. I have done research online and I found that there are a lot of recommended books as a pre-requisite to become a quant. A great answer has been given by Daneel Olivaw in [this thread][1]. Some of them are
1. Opti... |
today's 3m usd libor (US0003M) is 0.3625%
6m usd libor (US0006M) is 0.5484%,
so from here, the implied 3m USD libor 3m forward is about 0.73%,
today's EDU0 quote is 99.71 (implied 0.29% rate).
The above 2 rates are roughly referring the same period, but why are they so diffrent?
Thanks
|
I am building a performance attribution tool on Python to help us understand the asset allocation, stock selection effects of our fund.
We are using daily price data for each component within the fund, daily asset allocation (to account for any changes made within the fund) and also have similar data available for t... |
In HJM model (framework), the drift of the forward is determined by its diffusion coefficient:
$$
\mu(t,s) = \sigma(t,s)\int_t^s \sigma(t,v)^Tdv
$$
My understanding, is that the change of measure under Grisanov theorem for continuous-time semi-martingales only affect the finite variation part (i.e. drift for HJ... |
I am quite new to rates modeling and I have a question on the pros and cons of calibrating to larger set of vanilla instruments v/s calibrating to an exotic's 'natural' hedges. For example, I could value a Bermudan with a 1F model calibrating to co-terminal Europeans; or I could use a LIBOR market model to calibrate to... |
I am an amateur reading Hull's Options, Futures and other Derivatives.
I have encountered an issue similar to the one here:
<https://quant.stackexchange.com/questions/37414/how-to-tail-a-hedge-question-3-26-from-hull-edition-10?rq=1>.
The author initially presents a formula for the minimum variance hedge ratio f... |
I know that $\frac{dW_t}{dt}$, with $W_t$ a brownian motion, does not exist. However, does $\frac{dt}{dW_t}$ exists? Or does it even make sense? I am trying to calculate the quotient of two differentials of Ito processes, specifically, given $V_t$ and $S_t$ Ito processes, I require $\frac{dV_t}{dS_t}$ and the quotient ... |
I am using a simulation approach to compare the performances achievable by naive diversification and mean-variance optimization for portfolio selection. My problem is that my results indicate that naive diversification outperforms mean-variance optimization. Is this possible or is there most likely an error in my simul... |
I've been doing that manually for 2 months successfully (40% ROI) with SPX 0-1 DTE (Days To Expiration) options, both puts and calls. I might be just lucky so I purchased some data to do backtesting with 15m timeframe. I didn't complete the test yet but I can calculate probabilities of certain events happening that con... |
Much of financial theory seems to assume that assets have a price, for example the concepts of return or volatility. Is there some way to operationalize these concepts for assets which don't have a well defined price, for example private equity? |
I've been going back and forth with how I should work to find an event effect. would be so grateful for some clarification.
I have daily time series of exchange rates for different countries ( 1 for each country). the period is from jan1, 2018 to dec 31, 2019. I want to know if a certain event that had multiple ann... |
Much of financial theory seems to assume that assets have a price, for example the concepts of return or volatility. Is there any way to operationalize these concepts for assets which don't have a well defined price, for example private equity? |
Today's 3m usd libor (US0003M) is 0.3625% and 6m usd libor (US0006M) is 0.5484%,
so from here, the implied 3m USD libor 3m forward is about 0.73%.
Today's EDU0 quote is 99.71 (implied 0.29% rate).
**The above 2 rates are roughly referring the same period, but why are they so diffrent?**
|
Suppose we have a floating-rate bond with arbitrary face value.
I am given to understand that the value of such a bond is the face value, at the time it is issued and also after each coupon payment.
As an example, let the face value be 100, and let the interest rate at the time of issuance be 5%, so the coupon pa... |
Suppose we have a floating-rate bond with arbitrary face value.
I am given to understand that the value of such a bond is the face value, at the time it is issued and also after each coupon payment.
As an example, let the face value be 100, and let the interest rate at the time of issuance be 5%, so the coupon pa... |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.