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Dokumentumok száma: 20,364
The document surveys several active research questions in quantitative finance. It highlights the transition from interbank offered rates to replacement overnight reference rates, which requires new or adapted pricing and risk models despite limited…
The document distinguishes a positive expected payoff from an arbitrage. In its energy investment example, each unit of generation capacity costs 70 euros and earns either 230 euros or loses 60 euros, depending on the electricity price. The stated…
The answer explains a variance formula for a market maker’s gain per trade using a simple jump model. A price jump has equal probability of being positive or negative, with each direction occurring with probability equal to half the total jump probability.…
The document compares two ways to estimate one-day value at risk for a portfolio of funds: reconstruct and model the underlying assets, or treat each fund as a tradable asset. Modeling holdings directly can provide more information about constituent risk and…
The discussion considers whether triple-barrier labeling should use a flexible vertical horizon alongside volatility-scaled profit and loss barriers. One response frames the vertical barrier as a practical limit on how long a trade event can remain tied to…
The document derives the distribution of a one-period stock price ratio under a geometric Brownian motion model. Taking the ratio cancels the initial price and leaves an exponential of the drift-adjusted return and the Brownian increment. Because the…
The document considers a swap that receives three-month Libor plus a spread and pays a rate that depends on whether Libor is above a strike. The proposed simplification applies when Libor is fixed at the beginning of each three-month accrual period. Under…
The document describes a Black–Litterman portfolio calculation in which market weights and a covariance matrix are used to derive implied returns, then inverted to recover weights. The questioner reports implausibly large recovered weights for an ASX 200…
The document addresses how to evaluate GARCH forecasts, which predict conditional volatility rather than the return level. It outlines an out-of-sample comparison associated with Hansen and Lunde: estimate an ARCH-family model using data through a chosen…
An FX Targeted Accrual Redemption Note (FX TARN) is a structured note whose coupon depends on one or more exchange rates. The example links a coupon to the change in a yen–US dollar rate and ends the note once accumulated coupons reach a target; if the…
The document examines whether bond immunization should account for time decay alongside duration and convexity. One answer models the short rate as a diffusion and derives a bond-pricing partial differential equation. It shows that the time derivative is…
The document asks whether the difference in delta between two options with otherwise identical Black model inputs can be represented by the delta of another option. Its answer gives a first-order approximation instead: treat the option price as a function of…
The document explains why portfolio managers might buy calls or take long exposure to options on a volatility-target index. Such exposure can provide gains in turbulent markets, which may help offset losses in portfolios with a long equity bias when…
The document describes a preliminary Python and QuantLib approach to pricing fixed-fixed GBP-USD and EUR-USD cross-currency swaps with limited market inputs. It builds GBP SONIA and USD SOFR curves, applies a quoted cross-currency basis as a flat shift to…
The document explains how to infer the bid and ask for the reciprocal of a foreign exchange quote. Given a bid and ask for AUD/USD, the implied USD/AUD bid is the reciprocal of the original ask, while the implied USD/AUD ask is the reciprocal of the original…
The document raises a practical data-quality question: why Interactive Brokers historical stock volume can be much lower than figures from other providers. It describes a comparison across several US equities and dates, reporting discrepancies that vary by…
The document examines a Heston stochastic volatility implementation that uses Fourier integration to price a European call. It lays out the characteristic function’s Riccati solution, including alternative algebraic forms intended to handle complex…
The document explains how centering and scaling affect principal component analysis (PCA), in response to a question about why a credit research report recommends normalization for credit default swap data but not for other products. PCA on unscaled…
The document asks whether normalizing a time-changed pure-jump Lévy price process by its conditional expected exponential makes it risk-neutral in the stronger sense of defining an equivalent martingale measure. The proposed price scales the exponential…
The document explains how exchanges form prices from resting limit orders and incoming orders. A matching engine executes marketable orders against the best available quotes, while the best bid is the highest buying price and the best ask is the lowest…
The document considers how to model relationships among international stock-index returns using a general-to-specific sequence of regressions. It starts with a lagged return from one market as the sole predictor, adds the dependent market’s own lag to form a…
The document clarifies how to calculate geometric mean returns from periodic returns: average the logarithms of gross returns, then exponentiate and subtract one. Averaging log returns alone is an approximation for small returns. It also discusses geometric…
The document investigates a sharp increase in a chart’s SPX “Trading Capital,” calculated as price multiplied by volume, beginning in early December 2016. The question interprets the change as a possible surge of money into US equities and asks whether…
The document considers whether market beta should be estimated using raw returns or returns in excess of the risk-free rate. In a single-period setting, subtracting a constant risk-free rate from both asset and market returns does not change their covariance…