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Dokumentumok száma: 20,364
The document discusses how to combine rolling-window estimation with the two-stage Fama–MacBeth method. The questioner estimates portfolio factor exposures over rolling five-year samples, producing many sets of estimates, and asks which exposure estimates…
The document shows how to model a private equity clawback when the value relevant to limited partners consists of a risky net asset value component and a fixed amount of past distributions. It represents the net asset value as a geometric Brownian motion and…
The document addresses whether a project’s discount rate should be set by its financing source. It argues that debt financing, equity financing, or a blend of the two does not by itself determine the rate: the rate should reflect the risk of the project’s…
The document explains how no-arbitrage reasoning bounds the price and strike sensitivity of a vertical call spread. For strikes K1 < K2, the spread formed by buying the lower-strike call and selling the higher-strike call has a payoff between zero and K2 −…
The document raises questions about local volatility models used for equity derivatives. It asks why forward smiles under local volatility are said to become flatter and higher, whether the model’s calibration to an initial volatility surface makes its…
The document explains a first-order condition for an investor maximizing expected utility by allocating wealth between a risk-free asset and risky assets. Writing terminal wealth as initial wealth grown at the risk-free rate plus positions in each asset’s…
The discussion derives the stochastic differential of the exponential density used in a Girsanov change of measure and explains its connection to the stochastic exponential of a continuous local martingale. The key correction is that replacing the stochastic…
The document explains how to estimate volatility from five-minute EUR/USD price observations and distinguish the estimation window from the horizon used to annualize the estimate. Consecutive price ratios minus one give simple five-minute returns; a rolling…
The document explains why an increase in net working capital is subtracted when estimating free cash flow. Working capital represents resources needed to run the business. When operating current assets rise relative to operating current liabilities, more…
The document explains how an incoming order that is large relative to the visible book interacts with resting orders. A market order generally consumes available liquidity across price levels until its requested size is filled or no executable liquidity…
The document asks how to calculate a 10-day, 99% relative normal VaR for a short GBP zero-coupon bond when its value is measured in euros. The central issue is that the position’s euro-denominated profit and loss reflects both changes in the bond’s price and…
The document describes a data-access problem involving Nasdaq Data Link’s CHRIS continuous futures datasets. A user could retrieve other datasets with a valid API key but received access-denied errors when requesting historical daily futures data intended…
The document asks how to choose a stop-loss boundary automatically from a trade log containing entry and exit times, profit or loss, maximum adverse excursion, and maximum favorable excursion. The suggested approach frames threshold selection as an…
The document derives the self-financing portfolio interpretation of a vanilla call when the stock is used as numeraire. Starting from a martingale representation for the call price divided by the stock, it applies Itô's formula to relate changes in the…
The document explains an adapted stochastic process in financial mathematics through the information represented by a filtration. At each time, the process value must be measurable with respect to the sigma algebra available at that time. Intuitively, this…
The document asks how to estimate the variance of returns on a risky fixed income investment when the default-free yield and the yield shortfall attributed to defaults are known. Its central recommendation is to obtain historical loss yields or specify a…
The document asks which market instruments can help construct the short end of the SOFR curve, given the questioner’s impression that swaps are unavailable below a one-year maturity. The response points to trading in one-month and three-month SOFR futures.…
The document raises a question about simulating future interest-rate forward curves under a T-forward measure. It contrasts centering a simulated rate at its expectation under the measure associated with time t with using the forward rate observed at the…
The document asks how to interpret the Merton structural credit model when the probability of default is 50%. Under the stated setup, this corresponds to d2 being zero, but it does not imply that d1 is also zero. The relationship between the two quantities…
The document describes a replication of an equity statistical-arbitrage strategy in which a stock is hedged with a basket of ETFs. Regression residuals provide the trading signal, and regularized regression estimates the ETF hedge coefficients. The…
The document considers buying a call and selling a higher-strike call below the spread’s theoretical value, then delta-hedging through expiry. One response says that under Black–Scholes dynamics, with the hedge using the true volatility, the initial pricing…
The document poses a derivatives-pricing question: how to value a maturity payoff equal to the inverse of a non-dividend-paying stock price assumed to follow geometric Brownian motion. The proposed approach starts with the stock’s risk-neutral dynamics,…
The document compares portfolio objectives that penalize variance with objectives that penalize a power of portfolio risk, while retaining transaction costs and portfolio constraints. It explains that when the risk penalty is a convex increasing function,…
The note asks whether one theory can explain momentum across securities, sectors, and asset classes, and discusses why behavioral, informational, market-friction, rotation, and tax explanations may overlap. The proposed attribution question is whether…