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Dokumentumok száma: 20,364
The document questions a proposed risk-adjusted compound annual growth rate formula that multiplies CAGR by one minus standard deviation. It summarizes the claim that this adjustment leaves CAGR unchanged when standard deviation is zero and reduces the…
The document asks whether option values from Black–Scholes and Black–76 represent prices today or values at expiration. It gives the Black–76 call formula, which discounts the expected payoff expression by the risk-free rate over the option's term. The…
The document raises a conceptual question about the connection between portfolio theory and the Capital Asset Pricing Model. It describes portfolio theory as a framework for comparing portfolios by risk and expected return, accounting for diversification and…
The document asks how to establish the distribution of an Itô integral with a deterministic, square-integrable integrand. It proposes approximating the integral by sums of weighted Brownian increments. Each sum is normally distributed because Brownian…
The document considers whether a point-in-time probability-of-default model can include macroeconomic variables whose effects arrive more than a year later. Its example models next quarter’s default rate using the current default rate and a lagged change in…
This explanation frames interest rate parity as a covered arbitrage linking spot FX, borrowing and lending in two currencies, and a forward FX trade. The parity relationship requires rates that match the financing costs of the arbitrage. Historically,…
This short exchange addresses a data-import error when retrieving Berkshire Hathaway Class B prices through R’s quantmod package. The ticker contains a hyphen, and the question reports that the request returned an HTTP 404 error. The reply suggests checking…
The document questions a claimed definition of open interest for stocks as the number of buy orders submitted before the market opens. It points out that counting orders rather than shares would make the measure change when a fixed quantity is split across…
The document compares two ways to run a prediction market: a limit order book, where participants post orders that wait for counterparties, and an automated market maker that quotes prices and accepts trades. Order books are described as straightforward to…
The document explains who can sell credit default swap protection on debt. Its central distinction is that CDS protection references debt securities, rather than an issuer’s general assets. A company cannot sell protection on its own debt, but it may sell…
The document considers an investor whose primary concern is whether portfolio value ever falls below the initial investment, even if the strategy later earns a positive return. It explains why variance, Sharpe ratio, maximum drawdown, and tail-loss measures…
The document discusses validating a user-built Libor Market Model implementation when calibration to market volatility inputs does not reproduce cap prices. It recommends separating implementation errors from market-data or calibration problems by first…
The document addresses how to construct the investable stock universe that existed at each historical rebalancing date. This matters when backtesting value strategies, because current ticker lists omit delisted securities and can introduce survivorship bias.…
The document explains why a live interest rate swap valuation can request historical index fixings on dates that differ from the schedule dates shown in QuantLibXL. The schedule dates correspond to coupon value dates, while the floating coupon needs the…
The document asks how to estimate the expected one-day move of a spread between two futures contracts using their prices, implied volatilities, and correlation. One answer first estimates each contract’s daily move by scaling price times implied volatility…
The document compares active portfolio optimization framed around residual return and residual risk with formulations that maximize active return relative to tracking error. It focuses on whether a manager should constrain portfolio beta to one to separate…
The document derives the instantaneous forward rate from the continuously compounded zero-coupon spot yield curve. It equates a bond’s price expressed using its maturity-specific spot rate with the same price expressed as the accumulation of forward rates…
The document discusses what counts as an accurate daily closing price for the S&P 500 and other major indices. It distinguishes the regular-session close from the last trade in after-hours trading and notes that data vendors may report different values…
The document poses a decision problem in which a player observes a noisy measurement of an unknown payoff and must decide whether to accept it. It asks how the decision changes when a second player receives an independent noisy measurement and can claim the…
The document explains why bucket Vega multiplied by changes in fixed volatility-surface points can miss P&L when spot moves options to different moneyness levels. Under a sticky-delta interpretation, an option may experience a volatility change from moving…
The document examines formulas for two portfolios defined using a return vector, a covariance matrix, and a budget vector. One portfolio is described as maximizing the Sharpe ratio, while the other is described as minimizing variance. The author asks how…
The document compares two ways of expressing a joint probability density. For independent variables, it gives the familiar factorization into marginal densities. For dependent variables, it describes the chain rule factorization into conditional densities,…
The document clarifies two commonly seen stock-price expressions in the Black–Scholes model. For a geometric Brownian motion with arithmetic drift μ and volatility σ, applying Itô’s lemma gives a log-price exponent that includes the volatility correction,…
The document asks whether a listed option with a matching moneyness and remaining time to expiry can serve as a rough estimate for an option price at a future date. Its example considers a call with a year to expiry and asks whether, after nine months, its…