instruction stringlengths 15 26.1k |
|---|
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
The question is inspired by a short passage on the LMM in [Mark Joshi's book][1].
The LMM cannot be truly Markovian in the underlying Brownian motions due to the presence of state-dependent drifts. Nevertheless, the drifts can be approximated 'in a Markovian way' by using predictor-corrector schemes to make the ra... |
When is the LIBOR market model Markovian? |
I'm trying to build a simple risk model for stocks using PCA. I've noticed that when my dimensions are larger than the number of observations (for example 1000 stocks but only 250 days of returns), then the resulting transformed return series (returns rotated by eigenvectors or factor returns) have non-zero correlatio... |
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
About a year ago I say a presentation by Attilio Meucci in London. The twist of his work is a little bit different compared to yours but the general approach is similar and there is lot to be learned from his accompanying paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1358533
Here he is also using PCA ... |
They essentially perform the same function, but CTM is newer (Oasys Global is being retired at the end of 2012). According to Omgeo's FAQ:
**What is the difference between this [CTM] workflow and the OASYS Global Contract-Level
workflow?**
The OASYS Global Contract Level workflow requires investment managers and... |
About a year ago I saw a presentation by Attilio Meucci in London. The twist of his work is a little bit different compared to yours but the general approach is similar and there is lot to be learned from his accompanying paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1358533
Here he is also using PCA ... |
I have a few thoughts, but no real answers :).
- You take the returns from the DAX, which isn't normal, then make it normal and apply normal noise to it. It seems that you could be slightly better off just applying the noise to the original, non-normalized DAX.
- Have you considered the t-distribution? There are ... |
About a year ago I saw a presentation by Attilio Meucci in London. The twist of his work is a little bit different compared to yours but the general approach is similar and there is lot to be learned from his accompanying paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1358533
Here he is also using PCA ... |
I have a trading system I would like to test for the S&P 500, or another very similar instrument. I'm looking to make approximately 10-15 trades per month. I know if you have a Vanguard account, you can trade their ETFs for no commission, but them limit you to 25 trades in a 12 month period. Are there any other broker... |
Over the past few days, I've been musing about how correlation and cointegration compare/contrast and how their relationship(s) might be expressed conceptually and/or mathematically. Today I realized this it may be an interesting question for quant.SE.
One thing that's been a stumbling block for me is that I usuall... |
Correlation and Cointegration: similarities, differences, relationships? |
I know there are similar questions but I don't think there are any identical ones.
Basically, I'm looking for one of these two things.
1. Delayed market data feed. A tick by tick feed, but delayed by anything between 0 and 30 minutes. So at 12:30pm I'd be able to get a quote for 12:00pm, but at a tick-by-tick or ... |
Using total return calculations is critical in developing security selection models.
The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the standard method here:
http://www.investopedia.com/ask/answers/06/adjustedclosingprice.asp
Essentially, capital di... |
Using total return calculations is critical in developing security selection models.
The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the standard method here:
http://www.investopedia.com/ask/answers/06/adjustedclosingprice.asp
Essentially, capital di... |
Using total return calculations is critical in developing security selection models.
The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the standard method here:
http://www.investopedia.com/ask/answers/06/adjustedclosingprice.asp
Essentially, capital di... |
This isn't really an answer, but it's too long to add as a comment.
I've always had a real problem with the correlation/covariance of __price__. To me, it means nothing. I realize that it gets used (abused) in many contexts, but I just don't get anything out of it (over time, price has to generally go up, go dow... |
I've read documents that claim that SWIFT and FIX are **not competing protocols** for financial transactions and messaging. And yet, **I have not come across a clear articulation of when to use SWIFT versus FIX**. For example, I know that FIX can be used for most **trading activities**, e.g. getting a quote, placing an... |
When should we use SWIFT versus FIX? |
This isn't really an answer, but it's too long to add as a comment.
I've always had a real problem with the correlation/covariance of __price__. To me, it means nothing. I realize that it gets used (abused) in many contexts, but I just don't get anything out of it (over time, price has to generally go up, go dow... |
This isn't really an answer, but it's too long to add as a comment.
I've always had a real problem with the correlation/covariance of __price__. To me, it means nothing. I realize that it gets used (abused) in many contexts, but I just don't get anything out of it (over time, price has to generally go up, go dow... |
This isn't really an answer, but it's too long to add as a comment.
I've always had a real problem with the correlation/covariance of __price__. To me, it means nothing. I realize that it gets used (abused) in many contexts, but I just don't get anything out of it (over time, price has to generally go up, go dow... |
This isn't really an answer, but it's too long to add as a comment.
I've always had a real problem with the correlation/covariance of __price__. To me, it means nothing. I realize that it gets used (abused) in many contexts, but I just don't get anything out of it (over time, price has to generally go up, go dow... |
I plan to develop a neural network to trade commodities futures, but while messing around with some code, a few questions came up. If I understand correctly, people use various economic indicators with their networks (moving average, MACD, etc.). However, how do these come into play in a NN context? Should I just give ... |
How can I find the delta of a convertible bond to be used for hedging?
Thanks |
I will break up your question in to some parts to make answering easier.
*"people use various economic indicators with their networks (moving average, MACD, etc.) However, how do these come into play in a NN context?"*--the 'indicators' MA, MACD etc. come from the data. They are measures of the data capturing some a... |
What are the advantages / disadgantages of the ANTICOR algorithm? |
What are the advantages / disadvantages of the ANTICOR algorithm? |
Most quantitative investment strategies focus on the changing prices of a commodity or equity over time. Derivatives, however, make this more complicated. How can I apply quantitative strategies to something that is not a single product with a single price, but rather separate products for each month (each with their o... |
One of the major assumptions is that you have zero transaction costs. Another one is that your returns are tax-free. Otherwise it looks to me to be a windowed version of CBAL (constant rebalanced).
A more technical analysis can be found at:
Castonguay, [Portfolio Management: An empirical study of the Anticor alg... |
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 stocks and 100 bonds. The main target is to preserve something similar to a realistic correlation structure within the ... |
Would it be considered appropriate risk-management or overkill to utilize multiple brokers to manage a given trading strategy?
A couple specifics:
- I'm interested in what a reasonably-sized hedge fund might typically do, not an individual day trader.
- Let's assume major equities and that either broker could... |
Is it common to use multiple brokers for risk reduction? |
**Motivation**: I am running a quantitative analysis that requires long-term, exchange rate data.
**Problem**: Does anyone have methods for dealing with the EURUSD exchange rate prior to the Euro's existence? Is there some "natural" weighting scheme of the various European currencies prior to the Euro that I might ... |
I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same:
1. Based on daily returns? Monthly? Weekly?
2. Computed based on log returns or relative returns?
3. How should the result be annualized (I can think of a wro... |
Should Sharpe ratio be computed using log returns or relative returns? |
I don't feel I can give you an authoritative answer on what the "standard" approach is, maybe someone with more hands-on experience will be able to help. But my quick thoughts.
As to the period, I've seen **both daily and monthly returns** being used. Weekly probably not that often. But in the end you **annualize th... |
I don't feel I can give you an authoritative answer on what the "standard" approach is, maybe someone with more hands-on experience will be able to help. But my quick thoughts.
As to the period, I've seen **both daily and monthly returns** being used. Weekly probably not that often. But in the end you **annualize th... |
Can someone provide (or point me to) a summary of back office processing nuances specific to FX trading? For example, I know that there are several FX-specific risks that must be managed. They include transaction risk, translation risk, and short- and long-term exposure risks. GAAP and IFRS have published guidelines fo... |
I don't feel I can give you an authoritative answer on what the "standard" approach is, maybe someone with more hands-on experience will be able to help. But my quick thoughts.
As to the period, I've seen **both daily and monthly returns** being used. Weekly probably not that often. But in the end you **annualize th... |
I watched every documentary on the financial crisis and CDOs, tried to understand Wikipedia etc.. but still not getting the full picture as examples seem to be limited (or complicated).
Say Local-Bank-A starts providing mortgages to US subprime, big marketing campaign and sweet offer 100% mortgage, offer start 1 Ju... |
> *When the bank sell these mortgages on who is responsible for collecting the monthly payments and handling redemptions etc..? Do US mortgages have a separate handling fee to a 3rd party entity like $10 a month? Who answers the phone when changing repayment amounts etc..*
This would be the "servicer." They are fr... |
Ladies and Gents,
Im writing a quick routine to calculate implied vols for options on EUR$ futures with Bloomberg data. My question concerns the part where I have all my inputs and am ready to pass them to my implied vol function. Assume we have the following market quotes (example ticker: EDK1C 98.750 Comdty):
S... |
> *When the bank sell these mortgages on who is responsible for collecting the monthly payments and handling redemptions etc..? Do US mortgages have a separate handling fee to a 3rd party entity like $10 a month? Who answers the phone when changing repayment amounts etc..*
This would be the "servicer", which is ofte... |
> Where they do they get the money from first to finance 10,000 mortgages. Do they borrow US$ 1 billion and from where? When they borrow from other banks what collateral do they accept?
It sounds like you're missing a basic understanding of how banking works here. In the fractional reserve system, a bank doesn't nee... |
I'm reading Natenberg's book, and he says that all options trades should be delta neutral.
I understand that this prevents small changes in the underlying price from changing the price of the option, but couldn't there be a case where you would want that?
I (think I) also understand that if you're betting against... |
Why are options trades supposed to be delta-neutral? |
I haven't read Natenberg but it of course depends on your side in the trade:
Are you a market maker or a risk taker? So do you live on the spread (first) or are trying to make money based on e.g. forecasts on direction (second).
This is the great divide in QuantFinance!
Only in the first case will all your opt... |
Say I'm given I set of monthly returns over 10 years on monthly basis. What is the correct way to find the geometric returns of this data? I ask because a classmate and I are on different sides of the coin. I found the cumulative returns of each year, then found the geometric mean of the 10 years, where as they foun... |
Correct way to find the mean of annual geometric returns of monthly returns? |
Where can I find European and Scandinavian convertible bond prices? |
Say I'm given I set of monthly returns over 10 years on a monthly basis. What is the correct way to find the geometric returns of this data? I ask because a classmate and I are on different sides of the coin.
I found the cumulative returns of each year, then found the geometric mean of the 10 years. He found the cum... |
Totally new to the world of quant finance, so perhaps this is an odd question...
Does there exist an American equivalent to the German style "knock out zertifkate"?
Not even exactly sure what they are, but the nearest thing I could find on Wikipedia was:
http://en.wikipedia.org/wiki/Turbo_warrant
If there is... |
Totally new to the world of quant finance, so perhaps this is an odd question...
Does there exist an American equivalent to the German style "knock out zertifkate"? (The name might be slightly wrong.)
Not even exactly sure what they are, but from what I did learn about their behavior, the nearest thing I could... |
In my quest for simulated data, I am trying to generate prices for Total Return Swaps by calculating the NPVs of the fixed and floating leg. My problem: Given the fixed leg, how do I set the spread on the floating leg so that the value of the swap at the beginning equals Zero?
On a more technical side: Using RQuant... |
Suppose I want to build a linear regression to see if returns of one stock can predict returns of another. For example, let's say I want to see if the VIX return on day X is predictive of the S&P return on day (X + 30). How would I go about this?
The naive way would be to form pairs (VIX return on day 1, S&P return ... |
From [Optimal Trading Strtategies][1] :
> There are two main reasons why traders
> execute orders using a VWAP trading
> strategy. First, a VWAP strategy is
> the trading strategy that minimizes
> market impact cost. Traders executing
> orders utilizing VWAP strategies are
> interested in participating with
... |
From [Optimal Trading Strategies][1] :
> There are two main reasons why traders
> execute orders using a VWAP trading
> strategy. First, a VWAP strategy is
> the trading strategy that minimizes
> market impact cost. Traders executing
> orders utilizing VWAP strategies are
> interested in participating with
>... |
Reading from "www.nadex.com" - the copy reads "Binaries are similar to traditional options but with one key difference: their final settlement value will be 0 or 100. This means your maximum risk and reward are always known and capped.".
Isn't that true when you are using traditional options? (Assuming the markets a... |
Do binary options make any sense? |
Reading from "www.nadex.com" - the copy reads "Binaries are similar to traditional options but with one key difference: their final settlement value will be 0 or 100. This means your maximum risk and reward are always known and capped.".
Isn't that true when you are using traditional options? (Assuming the markets a... |
A factor to take into account: there are algorithms searching for other VWAP algorithms present in the market and then gaming them.
http://www.qsg.com/PDFReader.aspx?PUBID=722
|
Is there a quantitative method in monitoring trades to reduce the possibility of correlated trades? |
Let me expand on the problem scope a little, to include company information and stock quotes as well.
German company information
--------------------------
- [BaFin has an English page][1]
Norwegian company information
-----------------------------
- [Newsweb][2]; choose your company
name from the ... |
in their paper "European Real Options: An intuitive algorithm for the Black and Scholes Formula" Datar and Mathews provide a proof in the appendix on page 50, which is not really clear to me. It's meant to show the equivalence of their formula $E_{o}(max(s_{T}e^{-\mu T}-xe^{-rT},0))$ and Black and Scholes.
They refe... |
Let the Black-Scholes formula be defined as the function `f(S, X, T, r, v)`.
I'm curious about functions that are computationally simpler than the Black-Scholes that yields results that approximate `f` for a given set of inputs `S, X, T, r, v`.
I understand that "computationally simpler" is not well-defined. But ... |
What are some useful approximations to the Black-Scholes formula? |
Let the Black-Scholes formula be defined as the function `f(S, X, T, r, v)`.
I'm curious about functions that are computationally simpler than the Black-Scholes that yields results that approximate `f` for a given set of inputs `S, X, T, r, v`.
I understand that "computationally simpler" is not well-defined. But ... |
This one is the best approximation I have ever seen:
> If you hate computers and computer
> languages don't give up it's still
> hope! What about taking Black-Scholes
> in your head instead? If the option is
> about at-the-money-forward and it is a
> short time to maturity then you can
> use the following appr... |
in their paper "European Real Options: An intuitive algorithm for the Black and Scholes Formula" Datar and Mathews provide a proof in the appendix on page 50, which is not really clear to me. It's meant to show the equivalence of their formula $E_{o}(max(s_{T}e^{-\mu T}-xe^{-rT},0))$ and Black and Scholes.
They refe... |
Why is the ratio of Hi-Low range to Open-Close range close to 2? |
I have recently seen a paper about the Boeing approach that replaces the "normal" Stdev in the BS formula with the Stdev
$\sigma'=\sqrt{\frac{ln(1+\frac{\sigma}{\mu})^{2}}{t}}$,
$\sigma$ and $\mu$ being the "normal" Stdev and Mean, respectively. (both in absolute values, resulting from a simulation of the pay-off... |
I have recently seen a paper about the Boeing approach that replaces the "normal" Stdev in the BS formula with the Stdev
\begin{equation}
\sigma'=\sqrt{\frac{ln(1+\frac{\sigma}{\mu})^{2}}{t}}
\end{equation}
$\sigma$ and $\mu$ being the "normal" Stdev and Mean, respectively. (Both in absolute values, resulting f... |
In the paper "<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1012075">Why We Have Never Used the Black-Scholes-Merton Option Pricing Formula</a>" (<a href="http://en.wikipedia.org/wiki/Espen_Gaarder_Haug">Espen Gaarder Haug</a>, <a href="http://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb">Nassim Nicholas T... |
What are important model and assumption-free no-arbitrage conditions in options trading? |
In the paper "<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1012075">Why We Have Never Used the Black-Scholes-Merton Option Pricing Formula</a>" (<a href="http://en.wikipedia.org/wiki/Espen_Gaarder_Haug">Espen Gaarder Haug</a>, <a href="http://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb">Nassim Nicholas T... |
Put-call parity is given by $C + Ke^{-r(T-t)} = P + S$.
The variables $C$, $P$ and $S$ are directly observable in the market place. $T-t$ follows by the contract specification.
The variable $r$ is the risk-free interest rate -- the <i>theoretical</i> rate of return of an investment with zero risk.
In theory th... |
Setting the r in put-call parity? |
Assume a stock Foo with a single share class.
Furthermore, assume a dual class stock Bar with classes I and II with different voting rights.
The shares in the different classes have equal cash flow rights.
The market for shares in class I are substantially more liquid than the market for shares in class II.
... |
How are dual class shares different from non dual class shares from a market makers' perspective? |
In a very, very general sense, what Renaissance Technologies does well [and others try to do, many do less well] is understand where the "true" signal is (i.e. where prices should be) and what is noise (i.e. over-/under-reactions by others in the market) in the total signal of market prices. Generally, trading profit... |
In a very, very general sense, what Renaissance Technologies does well [and others try to do, many do less well] is understand where the "true" signal is (i.e. where prices should be) and what is noise (i.e. over-/under-reactions by others in the market) in the total signal of market prices. Generally, trading profit... |
Reading from "www.nadex.com" - the copy reads "Binaries are similar to traditional options but with one key difference: their final settlement value will be 0 or 100. This means your maximum risk and reward are always known and capped.".
Isn't that true when you are using traditional options? (Assuming the markets a... |
Unfortunately, I cannot answer fully your question. Though I'll give you my partial answer.
First of all, using entire price history of an index (from Yahoo), this is what I got:
Daily Weekly Monthly
DJIA 2.91 2.37 2.33
NASDAQ 100 1.74 1.94 ... |
I am looking at closed-form options approximations, in particular the [Bjerksund-Stensland model][1].
I have run into a very basic question. How should I scale the input variables in regard to time? My assumptions would be:
- r (riskless interest rate) should be an annual rate, so if the 3-month T-bill yields 0.... |
in their paper "European Real Options: An intuitive algorithm for the Black and Scholes Formula" Datar and Mathews provide a proof in the appendix on page 50, which is not really clear to me. It's meant to show the equivalence of their formula $E_{o}(max(s_{T}e^{-\mu T}-xe^{-rT},0))$ and Black and Scholes.
They refe... |
in their paper "European Real Options: An intuitive algorithm for the Black and Scholes Formula" Datar and Mathews provide a proof in the appendix on page 50, which is not really clear to me. It's meant to show the equivalence of their formula $E_{o}(max(s_{T}e^{-\mu T}-xe^{-rT},0))$ and Black and Scholes.
They refe... |
I've read [N. Taleb. Dynamic hedging][1] for exactly the same reason and found it quite helpful. You can find a preview at [Google Books][2] to examine the context - The greatest thing about this book that N. Taleb tries to show how things work in pracice not just how to derive another forumla (what is a subjsect for o... |
I've read [N. Taleb. Dynamic hedging][1] for exactly the same reason and found it quite helpful. You can find a preview at [Google Books][2] to examine the content - the greatest thing about this book that N. Taleb tries to show how things work in pracice not just how to derive another forumla (what is a subjsect for o... |
I've read [N. Taleb. Dynamic hedging][1] for exactly the same reason and found it quite helpful. You can find a preview at [Google Books][2] to examine the content - the greatest thing about this book that N. Taleb tries to show how things work in pracice not just how to derive another formula (what is a subjsect for o... |
I have recently seen a paper about the Boeing approach that replaces the "normal" Stdev in the BS formula with the Stdev
\begin{equation}
\sigma'=\sqrt{\frac{ln(1+\frac{\sigma}{\mu})^{2}}{t}}
\end{equation}
$\sigma$ and $\mu$ being the "normal" Stdev and Mean, respectively. (Both in absolute values, resulting f... |
We all know it does mean revert. The question is why. What's making volatility mean-revert? Is it some sort of cyclical behaviour of option traders? The way it's calculated? Why? |
Why is volatility mean-reverting? |
Do you believe it would be otherwise? Certainly we wouldn't expect low volatility to revert upwards, so you must be asking about why volatility spikes are short-lived.
Volatility spikes are often news related, either micro (merger announcement, bankruptcy notice, patent rejected, etc) or macro (rate changes, commodi... |
i have a one year transition matrix for three consecutive years.
multiplying these three matrices together yields the three year transition matrix.
i want to obtain the average transition matrix for the three years (average^3 = 3yrtransition)
what is the procedure to be used? is this possible at all? (i kind o... |
Assume a scalper/market maker who is operating on an exchange with $N$ shares with different characteristics such as current market value, average bid-ask spread, average daily volume and historical volatility.
Due to constraints imposed on this market maker he can only engage in $n$ of the $N$ shares on the exchan... |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.