Quantitative Finance Weekly Newsletter

Quantitative Finance newsletter

Top new questions this week:

American Call: when it's European?

It is a rather well-spread fact that in Black-Scholes (BS) model for a stock with no dividends that follows Geometric Brownian Motion (GBM), the price of American call coincides with that of its ...

american-options  
asked by Ulysses 5 votes
answered by Mark Joshi 3 votes

Models crumbling down due to negative (nominal) interest rates

Dear Stackexchange users, given that the negative interest rates on a lot of sovereign bonds with maturity under 10 years are trading in the negative (nominal) interest rate territory (recently also ...

interest-rates finance modeling modern-portfolio-theory  
asked by user3612816 5 votes
answered by eraoul 0 votes

References on Statistical Arbitrages

Is there any basic materials (books, papers) to read on Statistical Arbitrage? I certainly understand much of the useful information is in the industry. I just want to get some understanding on the ...

statistics arbitrage pairs-trading  
asked by CodeNoob 3 votes
answered by noob2 0 votes

What are the main market efficiency measures?

I'm going to test for the effect of the change in market efficiency on the stock market portfolio, and, I want to know what are the main measures known in the academic literature in order to compare ...

market-microstructure testing market-efficiency  
asked by Quantopic 3 votes

How to infer correlation?

Let's say a have a correlation matrix $\Omega$ for 25 assets which I use to generate a Monte-Carlo simulation. Let's assume that $\Omega$ is valid (i.e positive-semi-definite, etc...) and estimated ...

correlation-matrix  
asked by SRKX 3 votes
answered by Richard 0 votes

Unsmoothing of returns

The following problem arises in the context of private equity, which typically report "smoothed" returns (think of it as a moving average). As you can imagine, "smoothed" returns would have a much ...

time-series estimation moving-average  
asked by vdesai 3 votes
answered by Aksakal 2 votes

Why is the variance of a portfolio a quadratic form?

I was reading about MPT http://en.wikipedia.org/wiki/Modern_portfolio_theory and notices that the total variance of a portfolio is $x' \Sigma x$, where x is the weighting of the assets and $\Sigma$ ...

risk-management modern-portfolio-theory  
asked by nickponline 3 votes
answered by Mark Joshi 3 votes

Greatest hits from previous weeks:

How to compute Implied Volatility Calculation?

We all know if you back out of the BS option pricing model you can derive and solve what the options is "implying" as its volatility. However, what is the formula used to derive Implied Volatility ...

options implied-volatility  
asked by jessica 7 votes
answered by Brian B 11 votes

What is the difference between volatility and variance?

How do volatility and variance differ in finance and what do both imply about the movement of an underlying?

volatility variance  
asked by Jaydles 18 votes
answered by Dirk Eddelbuettel 16 votes

Can you answer these?

Comprehensive List of Regime Switching/ Change Point Models

I am looking for a comprehensive list of regime switching/change point models/techniques which can be used to model different regimes / change points in financial time series. What I found so far are: ...

econometrics market-regimes  
asked by chuchikaeschtli 2 votes

Machine learning to build top 3 price scenarios over n days

I have a time series of closing prices for a given stock. I would like to formulate possible future scenarios for the price. My intention is not to use these "likely" scenarios to take any position. ...

time-series risk-management forecasting econometrics machine-learning  
asked by mickG 1 vote

Pricing a zero with Vasicek model

I'm trying to understand bond pricing with the Vasicek interest rate model. I'm using McDonald's book for this purpose (not homework). Recall that Vasicek dynamics are \begin{equation*} ...

interest-rates bond vasicek  
asked by nomen 1 vote
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