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In his paper, Eugene Fama gives the definition of a "fair game" as given below. I disagree. AFAIK, a martingale has the following property: $E[X_{t+\tau} | X_t] = X_t$. What am I missing?
[![enter image description here][1]][1]
Footnote 9 says:
[![enter image description here][2]][2]
[![enter image descriptio... |
I'm pondering over the following (rather standard) problem:
> We have \$10 million invested in government bonds and are concerned with highly volatile interest rate over the next six months. We want to use the 6-month T-bond futures to protect the value of the portfolio.
> - Duration of the bond portfolio is 6.80... |
Given two Brownian motions $W_t^1, W_t^2$, we can have them correlated by
$$W_t^1 = \rho W_t^2+\sqrt{1-\rho^2}Z_t$$
where $W_t^{2}$ and $Z_t$ are independent of each other.
My question then: is there any similar relationship between fractional Brownian motions? In other words, given $W_t^{H_2}, Z_t^{H_3}$ two ind... |
I'm pondering over the following (rather standard) problem:
> We have \$10 million invested in government bonds and are concerned with highly volatile interest rate over the next six months. We want to use the 6-month T-bond futures to protect the value of the portfolio.
> - Duration of the bond portfolio is 6.80... |
I'm pondering over the following (rather standard) problem:
> We have \$10 million invested in government bonds and are concerned with highly volatile interest rate over the next six months. We want to use the 6-month T-bond futures to protect the value of the portfolio.
> - Duration of the bond portfolio is 6.80... |
I'm pondering over the following (rather standard) problem:
> We have \$10 million invested in government bonds and are concerned with highly volatile interest rate over the next six months. We want to use the 6-month T-bond futures to protect the value of the portfolio.
> - Duration of the bond portfolio is 6.80... |
Is your question about the early exercise boundary (B0 and B_inf)? The B0 boundary can be questionable when cost of carry is the same as risk free rate (r=b for options on non dividend-paying equity underlier). If cost of carry equals risk free rate, I will have to assume a small value for r-b to get the boundary B0. ... |
Let's say I have a stock in Japan that I wish to regress on the S&P 500 index using daily data for 1 year. Since the Japanese stock market has different holidays than the US, the dates might not correspond to each other.
For example :
US -> 2008-01-02 2008-01-03 2008-01-04 2008-01-05
Japan -> 2008-01-01 2008-01-03... |
I am calibrating the Heston model with sequential quadratic programming algorithm. It turns out that the volatility surfaces I am calibrating to can be fit very well with extreme values of mean reversion $\lambda$ and vol of vol $\xi$, such as $\lambda=11000$ and $\xi = 2000$. The values are legitimate since the only c... |
Let's say I have a stock in Japan that I wish to regress on the S&P 500 index using daily data for 1 year. Since the Japanese stock market has different holidays than the US, the dates might not correspond to each other.
For example :
US trading dates -> 2008-01-02 2008-01-03 2008-01-04 2008-01-05
Japa... |
I am calibrating the Heston model with sequential quadratic programming algorithm. It turns out that the volatility surfaces I am calibrating to can be fit very well with extreme values of mean reversion $\lambda$ and vol of vol $\xi$, such as $\lambda=11000$ and $\xi = 2000$. The values are legitimate since the only c... |
I am calibrating the Heston model with sequential quadratic programming algorithm. It turns out that the volatility surfaces I am calibrating to can be fit very well with extreme values of mean reversion $\lambda$ and vol of vol $\xi$, such as $\lambda=11000$ and $\xi = 2000$. The values are legitimate since the only c... |
Simply, the P/B ratio is the ratio of what the market assumes for the value of the bank were it wound down vs. the value it has a on its own books. Don't forget, also, that a banks has huge leverage: you may think of it's value as being driven by the small amount by which the value of the assets differs from the value... |
I'm going over the paper *-Partial Differential Equation Representation of Derivatives with Bilateral Counterparty Risk and Funding Costs-* from Burgard and Kjaer. There the following SDE is given for a defaultable bond:
$$ dP(t) = r(t)P(t)dt - P(t)dJ(t), $$
where $r(t)$ is an adapted process, and $J(t)$ is a jump ... |
Can you please explain `Martingale Representation Theorem` in a non-technical way that what is it and why is it required?
Most of the stuffs I studied so far are quite technical, and I failed to grasp the underlying intuition. |
It is not clear you want to regress changes or indexes themselves? If you regress the indexes, then the 12 hour time difference will not matter. If you regress changes,
you better take as the "x" variable the series that leads and as "y" series that lags (by 12 hours). It means that if you want to take d(Nikkei) = a*d... |
The Bloomberg USD swap curve (YCSW0023 Index) had changed and bloomberg put a Financial commodity future.
Why changes? What the factor make this changes? Why bloomberg put into a financial commodity future.
[![enter image description here][1]][1]
*This is not the complete curve...
[1]: https://i.stack... |
Why Bloomberg USD swap curve (YCSW0023 Index) changes last month?? and why put a Financial commodity future into this curve? |
I am developing an algorithm to calculate XIRR, and I found some differences between excel and my algorithm, so I decided to compare other software that have the XIRR formula.
I found the following differences
-0.0014968440379778700 Google Sheets
-0.0014968440379778900 My algorithm
-0.001496844... |
Let's say I have a return of a stock in Japan that I wish to regress on the S&P 500 index using daily data for 1 year. Since the Japanese stock market has different holidays than the US, the dates might not correspond to each other.
For example :
US trading dates -> 2008-01-02 2008-01-03 2008-01-04 2008-01-... |
Suppose $S_t$ follows the process:
$$ S_t := S_0 + \int_{h=t_0}^{h=t}\alpha(\mu -S_h)dh + \int_{h=t_0}^{h=t}\sigma S_h dW(h) $$.
I actually don't know how to solve the above SDE using Ito's lemma. I tried the following:
(i) $F(S_t) := ln(S_t)$. This produces:
$$ F(S_t) := F(S_0) + \int_{h=t_0}^{h=t} \left( ... |
Suppose $S_t$ follows the process:
$$ S_t := S_0 + \int_{h=t_0}^{h=t}\alpha(\mu -S_h)dh + \int_{h=t_0}^{h=t}\sigma S_h dW(h) $$.
I actually don't know how to solve the above SDE using Ito's lemma. I tried the following:
(i) $F(S_t) := ln(S_t)$. This produces:
$$ F(S_t) := F(S_0) + \int_{h=t_0}^{h=t} \left( ... |
Suppose $S_t$ follows the process (notice the $S_t$ term in the diffusion part):
$$ S_t := S_0 + \int_{h=t_0}^{h=t}\alpha(\mu -S_h)dh + \int_{h=t_0}^{h=t}\sigma S_h dW(h) $$.
I actually don't know how to solve the above SDE using Ito's lemma. I tried the following:
(i) $F(S_t) := ln(S_t)$. This produces:
$$... |
Assuming we have the fair value of the July straddle on a certain strike, what would be the implied July-Oct forward vol if an order comes in to sell the July-Oct Put Spread (on the same strike) for a certain price?
I'm wondering how one would go about solving this problem, assuming we have complete information on ... |
**Context:**
Most emerging/frontier markets have no or very thinly traded volatility surfaces for their equity markets (single name and indices alike), furthermore, they usually have restrictions on Short-Selling and Capital Controls
**Question:**
How would you approach pricing/EoD MtM for simple european cal... |
I am working on a structured product where I am investing some percentage of invested amount in futures contract. I have created a bull put strategy and I will calculate the delta positions of that and take that many positions in the futures contract. Now I want to ensure I have enough money left as buffer to service t... |
Can you predict MTM gain or losses on future contract? |
I have used AlphaVantage in the past to get data for the Stockholm Stock Exchange: I don't remember exactly the symbol I used, but it was something along the line of OMX:ABB or STO:ABB (for, say, ABB).
I am now trying to once again using AlphaVantage to pull Swedish stock data, but I cannot find any swedish ticker a... |
Did AlphaVantage drop the swedish stock exchange? |
Why is the bid-ask spread of a in-the-forward/money American call (put) much larger than the out-of-the-forward/money American put (call)? I suppose the answer to the same corresponding question regarding the European option would be the put-call parity which makes one equivalent to the other. But there are only inequa... |
Assume deterministic and constant interest rates.
For an investor in the foreign economy i.e. a market participant that can only trade assets delivering a payout *in the foreign currency*, let us define
$$ \tilde{X}_t = \tilde{X}_0 \exp \left(\left(r_f-r_d-\frac{\sigma_\tilde{X}^2}{2}\right)+\sigma_\tilde{X} W_t^... |
if I do a periodical rebalance of my portfolio based on sharpe ratio optimization, how many historical data should I take in account for optimizing with respect to the frequency of rebalancing?
For example, let's say I rebalance once every month. Do I have to perform sharpe ratio optimization based on data from the ... |
I am really interested in Granger-causality.
Can anyone think of a paper that uses a bivariate VAR model in economics or finance?
|
I am new to the topic of Constant Proportion Portfolio Insurance, and have implemented it in `R` for the first time.
Now if I calculate the cumulative return of the CPPI portfolio corresponding to different floors ($100$%, $95$%, ..., $0$%) i get the following result:
For $100$%, I obviously invest everything in... |
Markowitz's definition of an efficient portfolio is one that minimizes portfolio risk for a given level of expected return. He therefore calls portfolios along the efficient frontier frontier portfolios as well as efficient portfolios.
There also exist well-performing strategies called heuristic portfolios including... |
Are heuristic portfolios efficient portfolios? |
Consider the case where at t=0, I calibrate my model to the market, but at t=1 my model is no longer able to recover the price in the market, so it needs recalibration. Say I have delta hedged my position. Consider my portfolio PnL in the following 2 situations:
1. I re calibrate my model, and therefore get some PnL... |
There are many margins, you have to be more specific. Are you interested in CCP (Counterparty Clearing House) margin, OTC products margin? The former are CCP-specific, and the latter are governed by the [SIMM ISDA model][1].
[1]: https://www.isda.org/2019/09/03/isda-publishes-isda-simm-v2-2/ |
Markowitz's definition of an efficient portfolio is one that minimizes portfolio risk for a given level of expected return. He therefore calls portfolios along the efficient frontier "frontier portfolios" as well as "efficient portfolios".
There also exist well-performing strategies called heuristic portfolios inclu... |
Consider Black-Scholes model with constant interest rate r and stocks with prices $S_t^A$ and $S_t^B$ that satisfy the SDE's $dS_t^A = S_t^A(\mu^A dt + \sigma^A dB_t)$ and $dS_t^B = S_t^B(\mu^B dt + \sigma^B d\tilde{B}_t)$. I am owner of option A and want to trade with one stock A for one B at time T. What is the arbit... |
To download the European countries' equity (stocks) data from CRSP database, I need individual stocks ticker symbols. Can anyone help me regarding how can I get the list of ticker-symbols of European countries stocks? I can manage to download ticker symbols of NASDAC, AMEX, and NYSE stocks from this link:
https://w... |
Why is the bid-ask spread of a in-the-forward/money American call (put) much larger than the out-of-the-forward/money American put (call)? I suppose the answer to the same corresponding question regarding the European option would be the put-call parity which makes one equivalent to the other. But there are only inequa... |
I was told to move this question here from [Money Stack Exchange][1], where some people have already provided some feedback.
This is a very basic question about the Stock Exchange, and I was looking for some concrete answers with a general understanding of how it works.
When a Stock Exchange is open for business ... |
Is this how stock trading works? |
I want to match talib's RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar. https://i.imgur.com/6UUTWNO.png
Anyone has any suggestions?
In the code snippet below, you can comment out all the relevan... |
Is it possible to match talib's RSI results down to machine precision using just python? |
I want to match [talib][1]'s RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar. https://i.imgur.com/6UUTWNO.png
Anyone has any suggestions?
In the code snippet below, you can comment out all the re... |
I want to match [talib][1]'s RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar.
[![enter image description here][2]][2]
Anyone has any suggestions?
In the code snippet below, you can comment ... |
I'm doing some academic work on volatility forecasting. I've got 1-minute bar data. It is not clear to me what model is best suited for forecasting volatility when higher frequency data is available.
I understand the following options exist:
1. (G)ARCH family models
2. Stochastic Volatility
3. Implied Volati... |
I'm doing some academic work on volatility forecasting. I've got 1-minute bar data. It is not clear to me what model is best suited for forecasting volatility when higher frequency data is available.
I understand the following families/classes of volatility models exist:
1. (G)ARCH family models
2. Stochastic ... |
The local volatility graph tomorrow doesn't change, unless the implied volatility surface tomorrow is not the same as today. LV takes the implied vol surf today as input, and outputs a instantaneous volatility function of spot and time, which can price vanilla options today exactly the same as the market prices.
In ... |
The local volatility graph tomorrow doesn't change, unless the implied volatility surface tomorrow is not the same as today. LV takes the implied vol surf today as input, and outputs a instantaneous volatility function of spot and time, which can price vanilla options today exactly the same as the market prices.
In ... |
The local volatility graph tomorrow doesn't change, unless the implied volatility surface tomorrow is not the same as today. LV takes the implied vol surf today as input, and outputs a instantaneous volatility function of spot and time, which can price vanilla options today exactly the same as the market prices.
In ... |
I have some data which contains Bid and Ask prices as well as the number of units at the Bid and Ask. Since I'm just messing around and I don't have price of a trade, I will use mid price. But what's the best way to estimate the volume that is traded in a given trade?
I can see the units changing on the bid/ask side... |
How to estimate traded volume at each tick, given the quotes and the volume at the bid and ask? |
Due to COVID's remote work situation I found myself unable to access my physical terminal so I've had to use *bloomberg anywhere (bba)*, the issue I'm having is that when I try to use python's xbbg on my mac to extract intraday tick data i get a `"ConnectionError: Cannot connect to Bloomberg"`
Does anyone know a way... |
(*Note:* not necessarily a recent question, but expected to be asked - I flunked the replication pricing part that the interviewer was obviously enamored with; this is covered by both [Brigo/Mercurio's book][1], in the context of FRA pricing, and by [Andersen/Piterbarg's book][2], forward bond price.)
**Question:**... |
(*Note:* not necessarily a recent question, but expected to be asked - I flunked the replication pricing part that the interviewer was obviously enamored with; this is covered by both [Brigo/Mercurio's book][1], in the context of FRA pricing, and by [Andersen/Piterbarg's book][2], forward bond price.)
**Question:**... |
**Question:** A contract pays
$$ P(T,T+\tau) - K$$
at $T$, where $K$ is fixed and $P(\cdot,S)$ is the price of a $S$-maturity zero-coupon bond (ZCB).
What is $K$ for which the contract's time $t$ price is null?
**Answer:**
*Replication pricing:*
At time $t$, we go *long* *one* $T+\tau$-maturity ZC... |
- "match the prices of vanilla options"
- It means you need to reprice all vanillas with your LV model using monte carlo sims. If all prices are exactly equal to the market prices, your LV model is well calibrated
I think there is a typo in your formula, it should be
$$S_{t+1}=S_t\ exp((r-\frac{\sigma(S_t,t)^2}{2}... |
I am about to understand the valuation of a TRS. The approach I am applying derives risk neutral survival / default probabilities from the ratio between risk free and spread adjusted rates and uses them to adjust the respective TRS cash flows like interest rate payments made by the TRS receiver and the cash flow from t... |
Consider the following types of financial time series for a single publicly-listed stock:
1. Price data
2. Log returns
3. Cumulative returns
Each is computed from the item listed before it: log returns are based on differences of prices, and cumulative returns are cumulative products of log returns.
- W... |
Which financial time series have a PDF and/or CDF? |
Why does the bond price under the Vasicek model increase as the rate volatility increases? What is the intuition behind this? |
While deriving the delta hedge error if we hedge with implied vol, and the true vol is different, we say that the PnL of the call option is:
$$dC=C_tdt+C_SdS+0.5C_{ss}<QV>dt$$
Where $<QV>$ is the 'realised quadratic variation' of the stock price, and not the incorrect implied vol. While I understand this from the... |
I am trying to calculate the FX carry on let's say USDILS for a task. I was given the 3M Forward Implied Yield (ILSI3M CMPN Curncy on Bloomberg) and I need to use this in order to calculate my FX carry on this pair. I have looked up the WCRS function on Bloomberg to see how they calculate it, however it does not feel r... |
1. You can 'realize' this PnL $dC$ by selling the option tomorrow
2. If there is no liquidity tomorrow, that means your call does not have a market quote to calculate its new implied vol. Of course you can use the yesterday's implied vol can calculate the delta, gamma and theta P&L and estimate the theo value of t... |
1. You can 'realize' this PnL $dC$ by selling the option tomorrow
2. If there is no liquidity tomorrow, that means your call does not have a market quote to calculate its new implied vol. Of course you can use the yesterday's implied vol can calculate the delta, gamma and theta P&L and estimate the theo value of t... |
I am looking at the daily returns of the VIX index (dVIX ) and the daily returns of the S&P 500 (dS).
I am running a linear regression (using 0 intercept) and get a regression slope of -1.4, i.e.
dVIX = -1.4 * dS/S + epsilon
R^2 is around 70%.
Now I am looking at dVIX + 1.4 * dS/S. The way I think about ... |
VIX vs S&P: Drift in the hedging residual? |
While deriving the delta hedge error if we hedge with implied vol, and the true vol is different, we say that the PnL of the call option is:
$$dC=C_tdt+C_SdS+0.5C_{ss}<QV>dt - (1)$$
Where $<QV>$ is the 'realised quadratic variation' of the stock price, and not the incorrect implied vol. While I understand this fr... |
Hope this answers your qs, Denote $C_{model}(S,t)=e^{-rT}E_{{model}}[(S_T-K)^+]$
- We model the spot dynamics $S$ with different models, e.g.
- In BS,
$$\frac{dS}{S}=rdt+\sigma dW$$
- $dC_{BS}(S,t)=\frac{\partial C_{BS}}{\partial t}dt+\frac{\partial C_{BS}}{\partial S}dS+\frac{1}{2}\frac{\partial^2 C_{BS}}{\... |
When considering rolling returns of a stock, the distribution of returns could be multimodal. What is the appropriate way to describe the volatility of the stock? Is it (1) a set of 2-tuples, where the first value of each 2-tuple is the index of the mode (e.g., 1, 2, 3, etc.) and the second value is the volatility of t... |
I'd like to generate scenarios (simulate several paths of the process) for several stocks using multinomial Geometric Brownian Motion under Stochastic volatility assumption. I'm going to use it in my portfolio optimization task. Firstly, I tried to model stochastic volatility using Copula-GARCH model (because it is es... |
Studying asset pricing, I often hear the terms cashflow risk and discount risk but I'm not sure what they mean? The Campbell/Shiller (1988) decomposition includes cashflows (future dividends) and discount rates (expected returns) and hence identifies both risks?
Apparently, the long run risk model from [Bansal and Y... |
Interesting debate and `Not to wake sleeping dogs`, the world has moved quite a bit in the 1.5 years, and the data space has exploded.
I would like to recommend some new technologies and at the same time share a few of my experiences in this space.
As @madilyn is trying to explain: It all depends on your use case... |
In finance models that use historical returns for inputs, including option pricing models, forecasting and portfolio optimization, only the statistical moments of the returns distribution, $\mu$ and $\sigma$ (expected value, or mean, and standard deviation), are used as inputs because the moments summarize a return ser... |
Is it always better to use the entire distribution of a financial dataset, not just mu and sigma? |
I am looking for free historical intraday data (e.g., 30 mins, 1 hour) and I have came up to this website finam.ru, which is in Russian but it can be translated.
The link to download the data is the following:
https://www.finam.ru/profile/akcii-usa-bats/google-inc/export/?market=25&em=20590&code=GOOG&apply=0&df=17&... |
I am modeling a portfolio of correlated assets whose lack of liquidity can be reasonably described by a Markov-switching model. That is, not only is movement size among assets correlated, but so is whether there is any movement at all. For example: Asset B generally moves only when Asset A moves, and when they do move,... |
I want to match [talib][1]'s RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar.
[![enter image description here][2]][2]
Anyone has any suggestions?
In the code snippet below, you can comment ... |
I saved [a file][1], which has fitted 1-year real yield sampled at monthly frequency. It's my own calculation; feel free to use it. The best alternative sources for this kind of data tend to be bank research portals (e.g., JPMorgan's research website has similar data).
I thought I'd provide some unsolicited thoughts... |
Here are two examples:
Büyükşahin, B., Harris, J.H., 2011. Do speculators drive crude oil futures prices?. Energy J. 32 (2), 167–202.
Fujihara, R.A., Mougou, M., 1997. An examination of linear and nonlinear causal relationships between price variability and volume in petroleum futures markets. J.
Futures Mark. ... |
Take $x_1, x_2, \ldots, x_T$ to be the price of a stock, indexed by $t=1, 2, \ldots, T$. Define rate of return at time $t>W$ for a window size of $W$ to be
$$r_t = \frac{x_t - x_{t-W}}{x_{t-W}}$$
Rolling returns for a shift $\delta$ are thus given by the series $r_{t}, r_{t+\delta}, r_{t+2\delta}, \ldots, r_T$ (for $... |
I saved [a file][1], which has fitted 1-year real yield sampled at monthly frequency. It's my own calculation; feel free to use it. The best alternative sources for this kind of data tend to be bank research portals (e.g., JPMorgan's research website has similar data).
I thought I'd provide some unsolicited comments... |
[![SPY Initial Reference Value][1]][1]
[![Purchased Call Options][2]][2]
[1]: https://i.stack.imgur.com/DQdmg.jpg
[2]: https://i.stack.imgur.com/RQbjy.jpg
98% of the initial reference value is .98 x 267.88 dollars, which equals ***262.52 dollars***. However, the market value of each call contract they... |
Why are these deep in-the-money FLEX options seemingly bought at a discount? |
Assume standard Black-Scholes model,
$$dS(t)=S(t)(rdt+\sigma dW(t))$$
where $\sigma$ is a constant and $W(t)$ is a Brownian motion under the risk neutral measure.
A call option is replicable, so if we are long a call and continuously (in theory) trade according to the negative of the delta of the option, we shoul... |
This is somewhat of a broad question, but I think we all would like to find signals that predict something in the future. However, often times, we are just left with cross-sectional relationships (both variables go up in the same time frame, but lagged terms cannot predict each other).
- What are some things we ca... |
What can one do with cross-sectional relationships? |
What is the disadvantage using the edge ratio? |
Let me try to answer, this topic is much deeper than my answer
**1. Why are these models like this unpopular?**
- First, these models produce marginal distributions that does not fit the market, which means they cannot reproduce vanilla option prices traded in the market
- SV models, e.g. Heston model, may fit to ... |
Let me try to answer, this topic is much deeper than my answer
**1. Why are these models like this unpopular?**
- First, these models produce marginal distributions that does not fit the market, which means they cannot reproduce vanilla option prices traded in the market
- SV models, e.g. Heston model, may fit to ... |
The generalized Black Scholes Model refers to a stock dynamic that satisfy
$$
dS(t)=S(t)(\mu_t dt+ \sigma_t dW(t))
$$
By martingale representation theorem, it seems that if there is a risk neutral probability measure, then all stock dynamic is enclosed by the GBS.
Are there exceptions? |
Are there stocks dynamic that cannot be represented by Generalized Black Scholes model? |
I am looking for free historical intraday data (e.g., 30 mins, 1 hour) and I have came up to this website finam.ru, which is in Russian but it can be translated.
The link to download the data is [here][1].
However, after the download is completed I get a txt file (or csv) with this strange message:
> ¬˚ Á‡ÔÓÒË... |
Your question is very unclear, are these 5 different vanilla options? If so just use the given volatility associated with each of the maturities, t_1, t_2, t_3... to find their prices. Unless you are trying to find the price of an option one year from now, that expires in two years from now I don't see why you would ne... |
Like in the title, I am working on running Monte Carlo simulations to price options with the Local Volatility model as a project. I just want to make sure that I am understanding the process, especially the discretization correctly.
The risk neutral dynamics under the Local Volatility model is:
$$ \frac{d S_t }{... |
I would recommend Marc Wildi's work on [signal extraction](http://web.archive.org/web/20150102135036/http://www.zhaw.ch/de/engineering/institute-zentren/idp/forschung/finance-risk-management-and-econometrics/signal-extraction-and-forecasting/signal-extraction.html).
The link above points to the web archive, since th... |
We all know fixed income seucirties have default risk which can be generated from CDS market. However, I am curious if the market trading price of a bond (say, $105) imposing any recovery assumption?
Using recovery of 0 or 40%, the bond price could diff by more than 10 bucks. What is the real meaning out there from ... |
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