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Dokumentumok száma: 20,364
The document solves a conditional expectation involving two values of standard Brownian motion given an earlier value. Although the later values have different marginal conditional distributions, their product expectation depends on their shared path and…
The document discusses a pairs strategy that recalculates a hedge ratio from a rolling window of prices, forms a spread, and tests it for stationarity with the augmented Dickey–Fuller test. The central question is whether a failed test should force an exit…
The document discusses how to broaden a mathematical finance reference sheet that is focused mainly on stochastic calculus and derivative pricing. The responses suggest adding topics that serve distinct parts of quantitative finance: risk management,…
The document explains why the DV01 of a fixed income swap is not constant across interest rate levels. A simplified rule of thumb discounts each future annual payment using a single rate, then sums the discounted sensitivities. Under that approximation, a…
The document reviews an R workflow for fitting an ARMA mean and a GARCH(1,1) volatility model with a skewed Student distribution, then calculating value at risk for two return series. Its response clarifies that the quantile of fitted model results…
The document describes an R approach to minimizing a linear portfolio objective while imposing limits on net exposure, individual asset weights, total absolute exposure, and portfolio volatility. It suggests using the nonlinear optimizer in Rsolnp, even…
The discussion considers how an ETF market maker might earn a spread while hedging exposure with the underlying basket or a related instrument. It distinguishes capturing a favorable price difference from realizing that profit: a hedged position can remain…
This discussion explains why a fixed rate bond’s net present value can differ from its dirty price in QuantLib. The key distinction is the discounting date: NPV uses the discount curve’s reference date, while dirty price is expressed at the bond’s settlement…
The document asks how to extend a concave shape in bid implied volatility data to strikes beyond those observed. It also asks whether bid volatility should approach zero as the strike approaches zero or infinity. These are posed as questions; the document…
The document investigates why an implied volatility calculation for a long-dated S&P 500 index call returns zero. The response checks whether the observed option price is consistent with intrinsic value under the selected interest rate. Using the supplied…
The document explains the theoretical cost of hedging a written call by repeatedly adjusting a stock position to match the option’s delta. Under the Black–Scholes assumptions, dynamic hedging replicates the option payoff, but the hedge trades generate a…
The document derives how many shares a fixed budget can purchase when each successive share raises the price by a constant multiplicative factor. It represents the total spend as a finite geometric series, with the first share priced at the initial stock…
The document explores why barrier options in the Black-Scholes framework can be priced with the usual pricing PDE while incorporating barrier behavior through boundary conditions. Unlike path-dependent products such as Asian options, the barrier feature can…
The document considers how to price term interest-rate exposure in Poland as contracts move away from WIBOR, asking whether WIRON can support forward-looking term rates. Its answer argues that a term rate generally depends on a sufficiently active…
The document discusses how to perform Markowitz mean-variance portfolio optimization in R when expected returns and risk estimates are supplied by the researcher rather than computed directly from a return history. It notes that the `portfolio.optim`…
The document asks how to apply a Cholesky factor to simulated normal draws when generating two correlated geometric Brownian motion processes. It compares a Matlab pattern that stores time steps in rows and processes in columns with a Python pattern that…
The document considers how to classify mutual funds into low, medium, and high volatility groups without choosing fixed volatility thresholds in advance. The answer proposes unsupervised clustering with k-means: provide the funds’ volatility measurements and…
The document distinguishes using a bootstrapped interest rate curve from using a stochastic model of rate dynamics. A market curve built from instruments such as forward rate agreements and swaps is sufficient to price simpler contracts through no-arbitrage…
The document addresses a Python QuantLib error encountered while pricing a European credit default swap option with a Black-style option engine. The reported constructor error indicates that the engine expects its volatility input as a quote handle rather…
The document examines a proposed strategy that combines a three-times inverse equity ETF with the underlying index to create a nominally hedged position. The questioner argues that, assuming zero volatility, the inverse fund’s interest-rate-related growth…
The document explains how to estimate 95% value at risk for long and short European calls when simulated terminal stock prices and their option payoffs are already available. Rather than applying a stock-return standard deviation and z-score through a delta…
The document examines a SABR calibration on Ethereum option data where the fitted alpha parameter changes substantially when strikes and the forward are expressed at a different scale, even though the implied volatilities are unchanged. The questioner…
The document clarifies how to approach an implicit finite-difference exercise for a European call when volatility varies over time. The stated example uses a linear volatility function, while the exercise also provides a Black–Scholes approximation that…
The document compares direct exchange connections with a consolidated market data vendor for someone seeking daily data and possibly delayed or real-time tick data. It explains that direct feeds require building and maintaining exchange-specific handlers,…