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Документів: 20,364
The document sets out the risk-neutral Heston dynamics for an asset price and its stochastic variance, then asks how to value a European put by discounting its terminal payoff. The author is interested in transforming the put valuation into a form related to…
The document asks whether two state-space formulations used with Kalman filters are equivalent when the latent state has a nonzero mean. One formulation expresses the transition in deviations from a mean; the other uses a direct autoregressive transition and…
The document compares Monte Carlo estimates for discretely monitored variance and volatility swaps under a Variance-Gamma model. It defines the variance swap value as the square root of expected realized variance, while the volatility swap value is the…
The document explains how to estimate alpha for many funds at once using the Fama–French three-factor model. It arranges each fund’s returns in a separate column, subtracts the risk-free rate to form excess returns, and constructs a shared factor matrix with…
The document discusses how to evaluate a market forecasting model when each observation at time T is paired with an outcome measured n days later. Randomly assigning calendar years to training and testing sets can create boundary problems because future…
The document answers how to obtain interest-rate and Treasury yield data for analysis in R. It points to the Federal Reserve Bank of St. Louis economic database, which provides many rate series and can be accessed through the quantmod package. The example…
The document explains that leverage can describe an investment financed partly with borrowed money. Its example compares buying an option entirely with personal funds against financing half the premium with debt. The borrowed portion increases the return on…
The document considers turning an investor’s discretionary stock selection into a systematic screening process. Candidate inputs include institutional holdings disclosures, repurchases, insider trades, expectations, fallen-angel ratings, enterprise value…
The document explains how to price a floating interest rate payoff when its payment date differs from the end of its accrual period. It frames the price under a payment-date forward measure, then changes to the measure associated with the accrual end date.…
The document identifies Bloomberg’s EUR swap curve as the counterpart to its USD swap curve, explaining that both are built using comparable instrument sets and curve construction methods. The curves can be formed with or without OIS discounting. It points…
The document explores how strike selection and time to expiration affect the cost and payoff profile of long options. It considers the intuition that out-of-the-money options cost less and can deliver a larger percentage gain if the underlying moves…
The document explains how to calculate accrued interest on an overnight indexed swap’s floating leg before the accrual period ends, when the final cash flow is not yet known. Accrual is based on compounding the overnight rates observed so far: each rate is…
The document compares forecasting each security’s return and combining the predictions with forecasting a portfolio return directly. Its central point is that, for linear return models, portfolio characteristics or factor exposures are weighted averages of…
The document explains aggregate volatility as an estimated quantity used in studying whether marketwide volatility is priced in stock returns. In the cited research, changes in the VIX serve as a proxy for innovations in aggregate volatility. This is a…
This answer shows how to infer a constant default intensity from a CDS spread by building the contract’s expected premium and protection cash flows over time and solving for the intensity that makes their present values balance. It includes accrued premium…
This exchange clarifies a local relationship between normal and lognormal implied volatility when both models are used to represent the same option prices. The question presents a conversion factor involving the forward or spot level and moneyness, then asks…
This explanation examines why the CBOE dispersion index construction uses a market-cap-weighted sum of constituent variances, even though portfolio variance normally depends quadratically on weights and includes correlations. It defines dispersion as the…
This exchange explains a sign error in valuing a floorlet with the Bachelier normal model. The question uses the call-style payoff expression with the forward rate above the strike, producing a premium far larger than the Bloomberg value. The accepted answer…
This document raises a portfolio-attribution question: how to extend geometric Brinson-style analysis so that overweight and underweight positions in individual securities and groups can be examined separately. It distinguishes the allocation component,…
This collection of answers describes ways to obtain Central Index Key identifiers and associate them with stock tickers and company names. It points to SEC-maintained ticker and company mapping datasets, including a file that adds exchange information, and…
The exchange explains why a power function of the underlying price is a useful trial solution for the differential equation governing a perpetual American put outside its exercise region. The price-scaled derivative terms preserve powers: applying the first-…
This exchange explains why a bond trading below par can rise toward its redemption value as maturity approaches without its credit spread narrowing. The spread compares the risky bond’s yield with a risk-free reference yield of similar maturity; it is not…
The document considers a terminal value problem whose differential operator has second-derivative coefficients corresponding to a two-variable covariance matrix. The terminal condition is a polynomial in the state variables, and the proposed Feynman–Kac…
The document surveys ways to estimate how a large equity order may affect price. It describes a square-root style impact estimate based on trade size relative to trading volume and typical spread, alongside models that distinguish permanent impact from…