Quantitative Finance Weekly Newsletter

Quantitative Finance newsletter

Top new questions this week:

Why is the equity premium not arbitraged away?

The Equity Risk Premium Puzzle concerns the observation that equity returns are generally greater than bond returns. The puzzle is well known and widely studied, what is keeping investors from …

equities fixed-income  
asked by A.L. Verminburger 5 votes
answered by Bob Jansen 3 votes

How to deal with extreme cases in normal random numbers generation?

In order to generate normal random numbers, one usually generates random numbers following a uniform distribution $Z \sim \mathcal{U}(0,1)$ and then applies the reverse CDF function on them …

asked by SRKX 4 votes
answered by emcor 2 votes

Some clarifications on eigenvectors and eigenvalues from PCA

Could somebody tell me whether suggestions in bold true or not? Q # 1: http://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf Chapter 2.2 Interpretation of the …

pca eigenportfolio  
asked by Art 4 votes

How to find optimal look back in quant trading models

I'm in the process of building a quantitative trading model, I want to improve on the way in which I decide upon a look back length for the indicators. I understand the different pros/cons for very …

quant-trading-strategies backtesting models  
asked by user3583437 3 votes
answered by vonjd 5 votes

What happens when bond price is less than the recovery rate

I am simulating various price path of bonds, and one issue that came up is the recovery rate. When a bond defaults, the amount you get back recovery rate * principle. This creates a problem if the …

asked by Sam Li 3 votes
answered by experquisite 4 votes

Brownian Bridge's first passage time distribution

Let's say we have a Brownian Bridge $Y_{b,T}(t)$ such that $Y_{b,T}(0)=0$, $Y_{b,T}(T)=b$. Let's say we are interested in the first passage time of $Y_{b,T}(t)$ at level $b$: $\tau_b = \{\min \tau; …

brownian-motion distribution  
asked by athos 2 votes

Finding a basket of stocks that tracks an index

Given an index, let's say S&P500, I am trying to find a list of maximum n underlyings, which altogether track the index quite well. I am thinking of running a portfolio optimization algorithm, …

asked by Mariska 2 votes
answered by John 2 votes

Greatest hits from previous weeks:

Recommendations for books to understand the math in quantitative finance papers?

Can anyone recommend books that explain the math used in quantitative finance academic papers?

soft-question books mathematics  
asked by Contango 21 votes
answered by Quant Guy 15 votes

What's the difference between volatility and variance?

How do they differ in what they imply about an underlying's (or any variable's) movement?

volatility variance  
asked by Jaydles 16 votes
answered by Dirk Eddelbuettel 15 votes

Can you answer this?

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?

finance cva  
asked by Saurabh 1 vote
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