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.
16,761 documents
The document asks how to apply the PRIIPs category 3 methodology to an index-linked bond product. The proposed workflow is to collect daily historical yield-curve log returns, use principal component analysis to retain the three largest components,…
This exchange discusses whether Stata can estimate a BEKK-GARCH model and clarifies when that model is appropriate. One answer says it is not aware of a Stata implementation and points to R software that can fit a BEKK(1,1) model, while noting that…
The document explains two ways to construct a constant-maturity sovereign bond yield series. A rolling series records the yield of whichever specific bond is currently designated on-the-run for a maturity. When the benchmark bond changes, the series can jump…
The discussion offers practical considerations for choosing historical and recurring market data when starting quantitative research on a limited budget. It suggests weighing the desired accuracy and breadth of coverage, including the number of markets and…
The document considers whether adding Bitcoin to a stock-market proxy improves a CAPM test. The questioner reports applying a GRS test to ten industry portfolios and finding jointly significant alphas with a stock-based market proxy. Adding Bitcoin at a 2.1%…
The document explains the joint-test problem in empirical tests of market efficiency. A researcher does not observe market efficiency directly; instead, the test evaluates whether returns contain statistically significant abnormal performance relative to an…
This note diagnoses a warning from a rolling GARCH estimation in R. The example computes returns from SPY closing prices with `ROC`, then passes them to `ugarchroll` for repeated model estimation. The key issue is that the first return is missing because a…
The document proposes ways to fill an early gap in monthly total returns for a German government bond maturity bucket of ten years and above. One approach constructs a proxy using a chosen long tenor, with twenty years offered as a practical example. It uses…
The document describes a way to maintain adjustment factors for saved historical price data obtained through Interactive Brokers. It distinguishes the provider’s TRADES series, which reflects stock splits but not dividends, from ADJUSTED_LAST, which reflects…
The document considers how to defend a historical simulation model when external changes, such as a financial crisis or tax policy shift, cause its predictions to diverge from observed outcomes. The example is a non-performing loan rate model that may lag…
The document asks how to estimate covariance when optimizing a minimum-variance portfolio over weekly or fortnightly cumulative returns. It contrasts calculating covariance directly from returns sampled at the target frequency with scaling a daily covariance…
The document considers how to handle missing monthly returns for stocks selected into a portfolio. It outlines simple treatments, including assigning zero, the risk-free rate, or a strategy-neutral return, and skipping months across assets. It also describes…
The document presents ways to simulate multiple price series whose log prices share stationary long-run relationships. One approach specifies an error-correction mechanism: deviations from a chosen cointegrating combination pull the series back toward…
The document asks how to calculate measures such as maximum drawdown, Sharpe ratio, and Treynor measure from a strategy’s returns. Replies point to several Python tools: Backtrader for a broader backtesting environment with analyzers, empyrical for risk and…
The document compares two ways to estimate the distribution of an hour of USDJPY one-minute returns: repeatedly convolving an empirical histogram and Monte Carlo sampling sums of 60 observed moves. The simulated sums produce a wider distribution, while the…
The discussion explains how to solve the Black–Scholes partial differential equation directly with a finite-difference scheme, without first transforming it into the heat equation. A European option’s payoff at maturity supplies the terminal condition;…
The document asks how to benchmark covariance forecasting methods used to build minimum-variance portfolios. The strategy described estimates covariance from historical daily returns, forms portfolio weights, and rebalances weekly. For a perfect-information…
The document describes an attempt to reproduce simulated regression results from research on long-horizon predictability. It sets up annual returns as unpredictable shocks and models the predictor as an AR(1) process, with correlated predictor and return…
The document presents a Python implementation intended to price a European option under the Kou double-exponential jump-diffusion model. The author reports a call value that differs from a reference value and asks for help locating the error. The code…
The document asks how to combine two return series when holding a long position in one asset and a short position in another, with capital weights of 0.7 and 0.3. The response describes converting each period’s return into a gross return factor, applying a…
The document describes an implementation problem with Least Squares Monte Carlo (LSM) pricing of American vanilla puts. The questioner follows Longstaff and Schwartz’s setup, including simulated paths with antithetic variates and regressions using weighted…
The discussion asks what to do when a historical Value-at-Risk model fails conditional coverage or independence backtests. It recommends treating the failure as a prompt to investigate the model and its inputs, rather than assuming that changing the return…
The document explains a spreadsheet simulation that draws a lognormal value and subtracts one. The key interpretation is that the lognormal draw can represent a gross price ratio, such as the ending price divided by the starting price. Subtracting one…
The document presents a measure-change approach to estimating a very small standard normal tail probability. It shifts the sampling distribution toward the rare event by using a normal distribution centered at the threshold, where exceedances become much…