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20,364 dokumenter
The discussion asks how to combine robust optimization, fixed transaction costs, and discrete portfolio constraints such as limits on the number of selected assets. It points to work on robust second-order cone formulations and a heuristic for portfolio…
The document considers whether wavelet analysis can smooth noisy prices in illiquid instruments and whether higher time frame data could add context to lower time frame estimates. It explains that wavelets decompose a time series into components at different…
The document describes a simple DV01 hedge for a five-year Treasury bond using a strip of three-month Eurodollar futures. First calculate the bond’s price sensitivity to a one-basis-point yield change. Then sum the DV01 of one contract at each maturity in…
The document explains how a one-dimensional version of Girsanov’s theorem in Shreve’s stochastic calculus text follows from a more general formulation. The key identification is to take the Brownian motion as the local martingale and use the negative…
The document weighs alternatives to Value at Risk (VaR), especially Expected Shortfall and TailVaR, while discussing why VaR can give an incomplete picture of losses beyond a chosen threshold. One response notes growing attention to tail-sensitive measures…
The document asks how to prepare E-mini S&P 500 and Nasdaq futures prices for a cointegration test when their contract multipliers differ. One proposed method multiplies each quoted price by its contract multiplier, producing notional values that can be…
The document discusses how accounting knowledge can matter across different quantitative finance roles. Its answers distinguish work focused on short-horizon research or derivatives pricing from roles involving fundamental equity selection, credit and…
The document challenges a proposed rule linking an option’s time value to its delta. The claim is that when time value makes up at least a specified fraction of an option’s price, delta must be below a corresponding threshold. A Black–Scholes call example…
The document describes a calculation of the probability that a price following geometric Brownian motion exceeds a threshold. The questioner reports a probability of one where the supplied solution gives a lower value, then identifies the source of the…
The document describes a proposed zero-investment stock portfolio in which each asset's weight depends on observable state variables, such as factors related to stock performance. This is the parametric portfolio policy approach associated with Brandt and…
The document asks how to estimate Student-t distribution parameters for Value-at-Risk analysis of assets whose returns are not normally distributed. One answer connects the Student-t degrees of freedom to the tail shape exponent and suggests estimating that…
The question considers estimating a portfolio Value-at-Risk from correlated asset returns assumed to follow a multivariate normal distribution. It proposes finding the portfolio's worst return on a probability ellipsoid determined by a chi-square cutoff,…
The document addresses how changes in a portfolio or risk measure might be traced to movements in its underlying risk inputs. It uses expected loss as a simplified stand-in for risk-weighted assets and represents expected loss as the sum of exposure at…
The document addresses a measurement problem for high-frequency trading: a return-based Sharpe ratio can be hard to define when the amount of capital deployed is unclear. The question considers whether posted margin can serve as the capital base or whether a…
The document explains which stocks qualify for the annual Fama–French size and book-to-market portfolio sorts. Portfolios are formed at June end using market equity for size and book-to-market information based on prior fiscal-year book equity and December…
The document considers how to include valuation data in a regression when some companies have no meaningful positive price-to-earnings ratio because they are unprofitable. It raises two possible treatments: assigning those firms an artificially high P/E, or…
The document asks how to plot a one-month implied volatility smile when call and put implied volatilities and option deltas are available, but spot and strike prices are missing. It notes that volatility smiles are often displayed against delta, so the…
The document explains how to estimate a stock’s exposure to the Fama–French SMB and HML factors. The proposed method is a linear regression of the stock’s returns on the relevant factor returns; the resulting coefficients are the estimated factor betas.…
The document considers a funded equity collar for a shareholder seeking cash against an existing stock position. The proposed structure combines a margin loan secured by pledged shares, a purchased put, and a written call with a nearby strike. The bank would…
The document asks how to solve a three-dimensional backward Black–Scholes PDE with time- and state-dependent coefficients. Applying a Crank–Nicolson scheme across all three state variables at once creates a difficult coupled system. The response points to…
The document raises a research question about measuring the stability of factor loadings in models such as Fama–French or Carhart. It frames loading stability as a criterion for evaluating alternative ways to construct a risk factor, using a possible climate…
The document asks how to turn the output of a Johansen cointegration test into a spread for a two-stock pairs trading strategy. The trader contrasts the method with a spread formed from an ordinary least squares hedge ratio, where one stock is reduced by a…
The document asks whether a position in three-month sterling LIBOR futures should be hedged with GBP/USD futures by matching the contracts’ full notionals. The reply challenges that approach by distinguishing a contract’s notional amount from the actual…
The document describes an attempt to assess a GARCH model fitted to S&P 500 returns. It shows a rolling backtest setup and reports difficulty using mean absolute percentage error (MAPE) to compare predicted and realized values. The reply explains that MAPE…