Quantitative Finance Weekly Newsletter

Quantitative Finance newsletter

Top new questions this week:

Why do volatility and correlation increase in times of crisis?

can somebody please explain to me why volatility and correlation increase in times of crisis? It is connected somehow to the herding effect. But I cannot really explain it. And also why are negative ...

volatility correlation  
asked by ani 7 votes
answered by volcompt 0 votes

portfolio optimization averaging weights

I'm playing around with different portfolio optimization techniques. Amongst others I was also looking at the resampling method, especially the one described in Meucci. I have two general questions ...

modern-portfolio-theory portfolio-optimization  
asked by user8 4 votes

How to price a path dependent exchange option using?

Assume you have two stocks $S$ and $P$ so that at initial time $t = 0$: $S_0 > P_0$. You bought an option which pays off $S_T - P_T$ as long as $S_t > P_t$ through the time $0 < t < T$. ...

options option-pricing no-arbitrage-theory  
asked by meg1806 3 votes
answered by meg1806 2 votes

Calibrating stochastic volatility model from price history (not option prices)

For stochastic volatility models like Heston, it seems like the standard approach is to calibrate the models from option prices. This seems a bit like a chicken and an egg problem -- wouldn't we ...

volatility stochastic-volatility  
asked by EpicAdv 2 votes
answered by Sharapolas 0 votes

Clarify a derivation in Pat Hagan's Convexity Conundrums

I am looking for help in understanding the algebraic derivation to go in between some of the lines in Pat Hagan's famous Convexity Conundrums paper e.g. how he goes from 3.4a to 3.5a.

asked by Randor 2 votes

Equivalent Definitions of Self-Financing Portfolio

Consider a multi-period model with $t=0,...,T$. Suppose there is a bond with $B_0=1$ and $B_t=(1+R)^t$ and a stock with $S_0=s_0$ and $$ S_{t+1}=S_t\,\xi_{t+1}, $$ with $\xi_t$ iid random ...

portfolio no-arbitrage-theory self-study  
asked by DP1981 2 votes
answered by Gordon 0 votes

How does Algorithmic Differentiation work and where can it be applied?

The title says it all, but let me expand on it. Algorithmic differentiation seems to be a method that allows a program / compiler to determine what the derivative is of a function. I imagine it's a ...

greeks algorithmic-derivative  
asked by Olaf 2 votes
answered by Tyler Olsen 3 votes

Greatest hits from previous weeks:

What is a stationary process?

How do you explain what a stationary process is? In the first place, what is meant by process, and then what does the process have to be like so it can be called stationary?

stochastic-calculus time-series stationarity  
asked by user40 25 votes
answered by Shane 26 votes

Switching from C++ to R - limitations/applications

I've only recently begun exploring and learning R (especially since Dirk recommended RStudio and a lot of people in here speak highly of R). I'm rather C(++) oriented, so it got me thinking - what are ...

r development  
asked by Karol Piczak 42 votes
answered by Johann Hibschman 20 votes

Can you answer these?

Comparing volatility using GARCH

Hi, I am investigating if the policy of inflation targeting lowers the volatility of inflation. I have ran the GARCH regression: Inflation(t) = C + Inflation(t-1) + Inflation(t-2) + Error, but ...

volatility time-series garch econometrics inflation  
asked by Kunal Chauhan 1 vote

Fair Price CDS Spread for a Bank

I have been using CreditGrades to calculate fair one year CDS spreads for firms. However, the authors of the model explicitly say that the model does not hold for banks or financial firms. If I need ...

derivatives cds default  
asked by varun chandra 1 vote

Validating a Credit Scoring Model without Data

Fellow Quants, Suppose you have a credit scoring model that is developed without the aid of statistics, because (unfortunately) there is no historical default/loss data in your portfolio. The ...

models credit credit-scoring validation  
asked by dmanuge 1 vote
Subscribe to more Stack Exchange newsletters

Unsubscribe from this newsletter or change your email preferences by visiting your subscriptions page on stackexchange.com.

Questions? Comments? Let us know on our feedback site. If you no longer want to receive mail from Stack Exchange, unsubscribe from all stackexchange.com emails.

Stack Exchange, Inc. 110 William St, 28th Floor, NY NY 10038 <3