Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
21,023 documents
The document asks how to combine multiple strategies into one portfolio and why volatility calculated from aggregate asset exposures may differ from volatility calculated using strategy return streams. It describes two views: treat each strategy’s returns as…
The document proposes revisiting the portfolio construction rule at every rebalance instead of committing to one allocation scheme throughout an investment horizon. It contrasts optimized approaches, such as minimum variance and maximum Sharpe portfolios,…
The document asks how to handle zero weights from a Markowitz allocation when every asset must be included, and how to determine the risk-free allocation when constructing a portfolio on the capital market line. The response focuses on selecting the risky…
The document proves convexity for a portfolio risk measure consisting of expected return plus a positive multiple of the expected absolute deviation from expected return. It assumes portfolio return is linear in portfolio weights, so expected return is also…
The discussion distinguishes arbitrage from disequilibrium in models of asset prices. Arbitrage offers a sure profit and creates a strong incentive for market participants to trade it away. By contrast, two stocks with similar volatility but different…
The document examines why the optimal risky portfolio can appear to differ when optimizing with or without access to lending and borrowing at a risk-free rate. Its central correction is that maximizing expected return divided by volatility is not equivalent…
The document addresses fitting a skewed Student t distribution to financial limit order book returns and then simulating from the fitted model. It points to an R distribution-fitting library for maximum likelihood estimation and to a package that implements…
The document explains why multiplying single-period variance by the number of periods can misstate the variance of compounded horizon returns when returns are serially correlated. Under covariance stationarity and a common single-period variance,…
This derivation uses an exponential-affine form for a zero-coupon bond price in the Vasicek short-rate model and substitutes it into the risk-neutral bond pricing PDE. Matching the constant and rate-dependent terms yields differential equations for the time…
This discussion addresses a payoff paid at a later date that uses the underlying price at both an earlier and a later date. The standard risk-neutral valuation formula still applies when the payoff is measurable at the payment date: by then, both observed…
The question asks how correlations in credit default swap data should be interpreted, particularly when researchers use correlations between equity returns to build relationship graphs. The answer cautions that credit correlation can refer to distinct…
The question examines whether a security’s price can be recovered by taking expectations of its dividend-to-price return definition and the rearranged price equation. The answer explains that the apparent conflict with the rule that the expectation of a…
The discussion examines steps in a proof about conditional expectations under two probability measures, P and Q. The question focuses on why a conditional expectation under Q can be treated as measurable with respect to a sigma-algebra G, and how that…
The document presents an equity portfolio-selection problem based on monthly returns for a large stock universe and a market index. Its code estimates each stock's average return, beta, residual risk, and Treynor ratio, then applies a single-index cutoff…
The question asks how to estimate the jump intensity in a Black–Scholes–Merton setting from observed jump counts across three consecutive months. The response points to a compound Poisson process as the model for jumps and directs readers to a statistical…
The example applies Feynman–Kac to a terminal-value partial differential equation with a fourth-power terminal payoff. The PDE contains a second derivative term proportional to the square of the asset price, and the proposed solution represents the value as…
The discussion considers Java options for basic time-series analysis, including moving averages, standard deviations, correlations, charting, and exponential smoothing. Suggestions range from implementing common statistics directly to using libraries that…
The document explains how to value a CMS indexed range accrual when simulated zero-coupon rates follow a short-rate model under the risk-neutral measure, while the desired probability is expressed under the payment-date forward measure. The payoff event is…
The document asks whether hourly observations can be used to estimate dynamics that matter over a horizon of several days, particularly mean reversion or cointegrating relationships. It refers to a proposed analogy between estimating monthly relationships…
The document sets up a structural credit model in which a firm’s asset value follows geometric Brownian motion and default occurs when it reaches an absorbing barrier. A coupon bond pays coupons while the firm survives, pays principal at maturity if it has…
The document distinguishes an asset’s expected arithmetic return from its compounded growth rate. Under the return model described in the question, the expected return over a short interval is given by the drift, while the continuously compounded rate…
The document presents a beginner’s question about why summing rate-of-change values multiplied by trading signals gives a different return from the price change between a stated entry and exit. The example uses Bollinger Bands, stochastic indicators, and…
This collection of answers challenges widely used ideas in quantitative finance, including correlation-based diversification, CAPM as an allocation rule, normally distributed independent returns, value at risk, efficient markets, copulas, and perfect delta…
The question asks whether regional central banks provide programmatic access to their statistical data, after the author encountered CSV downloads and web scraping. The response points to the Federal Reserve Bank of St. Louis’s FRED service as a widely used…