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20,364 dokumentov
The document explains a 2018 rise in long-term Treasury yields and asks whether market-driven increases in borrowing costs amount to an organic tightening of monetary conditions. The accepted response separates possible causes: it treats fiscal-deficit…
The document explains why par yields can sit below zero-coupon yields when the yield curve slopes upward. Zero rates over longer maturities reflect compounded averages of shorter-period forward rates. When those forward rates rise with maturity, averaging…
The document addresses how to select a risk-free return when portfolio performance is measured monthly. Its central point is that a five-year Treasury yield does not provide a known risk-free return over a one-month holding period: the bond’s market price…
The document explains how to reconcile the portfolio value changes in a textbook example of a financial institution that has written a European call and dynamically bought shares to hedge it. The share position at the later date is found by summing the…
The document examines a hypothetical collapse in USDT’s value and considers its consequences for Bitcoin holders and market pricing. It distinguishes direct self-custody, exchange balances, and exposure through financial intermediaries. Self-custody does not…
The document explains how to assess an arbitrage across venues with different percentage-based and fixed transaction fees. Its suggested method is to adjust each venue’s bid and offer prices for the variable fee, evaluate the resulting arbitrage as usual,…
The document outlines a way to estimate a five-year UK gilt yield, and a potential futures price, when the contract is illiquid and only a few related market quotes are available. It first fits a US Treasury curve to short and longer maturity rate…
The document compares put exercise probabilities under the Black–Scholes–Merton framework. It distinguishes a probability calculated using the stock’s expected return from the risk-neutral probability derived using the risk-free rate, and asks why the…
The document asks for an empirical market impact example and methods for estimating parametric impact functions. Its answer defines market impact in terms of how metaorder flow pressure affects price dynamics. Metaorders are large parent orders, commonly…
The document considers whether combining a strategy with 20% annualized volatility and one with 15% volatility, when their returns have zero correlation, can produce a portfolio with volatility below 15%. The accepted response uses the portfolio variance…
The document asks how to evaluate a calibrated Cox-Ingersoll-Ross short-rate model against historical observations, noting that the ordinary R-squared from a linearized parameter fit may not provide a meaningful goodness-of-fit measure. The response does not…
The document asks what calibration of an option volatility surface means, how often it should occur, and what determines its timing. It starts from the familiar implied volatility smile for one expiry and asks whether a spline with anchor points can…
The document considers how to measure relationships between hedge fund returns when distributions are skewed and heavy-tailed, with particular interest in how funds behave together during market declines. It explains why Pearson correlation may be…
The document asks how stock borrow rates should enter the pricing of short-dated single-stock options. The proposed approach is to compare European and American option values, then use put-call parity relationships across strikes to estimate funding and…
The document considers how to compare two return series when strategies often do not trade and therefore record zero returns. It asks whether zero observations should remain in a correlation calculation and how to compare strategies with different patterns…
The document proves an identity for the variance of a portfolio return. Starting from the portfolio return as a weighted sum of constituent returns, expand its variance into a double sum of weighted pairwise covariances. Covariance is linear in either…
The document explores why correlation between a foreign underlying asset and the exchange rate matters for a quanto option, whose payoff is fixed in the holder’s currency. The questioner compares extreme positive and negative correlation cases in a simple…
The document asks whether backtests of intraday strategies that start and end each day flat understate performance because a trader could stop trading after recognizing a poor market day. It notes that backtest results depend on assumptions about transaction…
The document explains why a factor beta is not simply a standalone measure of nondiversifiable risk. In linear asset pricing, prices can be represented using a stochastic discount factor (SDF), and expected excess returns can be related to exposure to that…
The document considers a short over-the-counter foreign exchange forward hedged with a long exchange-traded currency future when their maturities differ. It identifies counterparty exposure if the forward counterparty defaults while the futures position…
The document explains why a portfolio can beat a benchmark even when its estimated CAPM beta is below one. In a time-series regression of excess portfolio returns on excess benchmark returns, beta measures sensitivity to benchmark movements; it does not by…
The document surveys Python tools for strategy research, backtesting, portfolio analysis, and live trading. It describes backtrader in the most detail: it supports event-style and vectorized runs, multiple assets and strategies, varied data sources and…
The answer proposes using the shape and fit of an implied-volatility smile to flag bad option data. It fits near-the-money observations to estimate an at-the-money volatility, then models the left and right sides separately with quadratic functions of…
The document distinguishes two ways to evaluate a project when debt financing and repayments appear in the cash-flow model. Free cash flow to the firm includes cash flows available to both debt and equity holders, so it is discounted using the weighted…