Quantitative Finance Weekly Newsletter

Quantitative Finance newsletter

Top new questions this week:

Distinction between "risk factor" and "market anomaly"

What are some of the general rules to decide whether a particular factor is a "risk factor" or "anomaly?" Naively speaking, can't you put any anomaly factor on the right-hand-side of the regression ...

factor-models anomalies  
asked by ezbentley 4 votes
answered by vonjd 2 votes

Why Beta Distribution for Credit Migration

When modelling credit migration probabilities (e.g. AAA to AA), research has indicated the use of the Beta Distribution simply because it fits empirical data. My question is; What are some other pros ...

asked by Jim 3 votes
answered by ash 1 vote

Historical Financial Statement to Backtest in R

I would like to preface this by saying I am preparing for an upcoming internship this summer so I am extremely new to Quant Finance. At my university we have access to Datastream by Thomson Reuters ...

equities portfolio-management historical-data financial  
asked by Scott Nunez 3 votes
answered by WaltS 3 votes

What are the empirical limitations to testing market efficiency?

I have encountered a rather elegant argument about the limitations of empirically testing for market efficiency, involving the central point that we do not know whether a result is due to the "true ...

models asset-pricing anomalies emh  
asked by Constantin 3 votes
answered by Evan Wright 4 votes

How to price a futures spread option?

Let's say I have two futures contract $F_1(0,T)$ and $F_2(0,T)$ on two different correlated underlyings. If I assume that both underlying follow a GBM with volatility $\sigma_1$ and $\sigma_2$ ...

option-pricing futures spread-options  
asked by SRKX 2 votes
answered by Rusan Kax 0 votes

Two correlated time series - driver and follower

Say that there are two time series of highly correlated stocks one of which is the driver and the second one follows the first one. What mathematical meassure of formula would you use to identify ...

time-series correlation  
asked by Steef Gregor 2 votes
answered by Rusan Kax 1 vote

Do we need Feller condition if volatility process jumps?

It is fairly known that in affine processes, as Heston model \begin{equation} \begin{aligned} dS_t &= \mu S_t dt + \sqrt{v_t} S_t dW^{S}_{t} \\ dv_t &= k(\theta - v_t) dt + \xi \sqrt{v_t} ...

stochastic-processes stochastic-volatility heston jump affine-processes  
asked by Gabriele Pompa 2 votes
answered by q.t.f. 1 vote

Greatest hits from previous weeks:

Any known bugs with Yahoo Finance adjusted close data ?

Yahoo Finance allows you to download tables of their daily historical stock price data. The data includes an adjusted closing price that I thought I might use to calculate daily log returns as a ...

data equities adjustments yahoo  
asked by Paul 18 votes
answered by user508 13 votes

How does the "risk-neutral pricing framework" work?

I've struggled for a long time to understand this - What is this? And how does it affect you? Yes I mean risk neutral pricing - Wilmott Forums was not clear about that.

risk risk-management  
asked by Jack Kada 18 votes
answered by vonjd 13 votes

Can you answer these?

Ibrokers: reqMktData extremely slow when adding tickers

I am trying to snap prices in R for the latest price for a list of stocks (around 150). When I snap them for 2 stocks, it's almost instantaneous: tickers<- c("YHOO","AAPL") ...

asked by Trexion Kameha 1 vote

Log returns and GARCH models

I try to model currency rates volatility using GARCH models through the RUGARCH package in R. Starting from the observed currency rate series, I compute the log-return through: data <- ...

returns garch currency  
asked by Ludo 1 vote
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