Recent Questions - Quantitative Finance Stack Exchange

I’m trying to understand the technical architecture of the Fedwire Securities Service / National Book-Entry System (NBES). Federal Reserve documentation says that: A participant maintains a Securities Account with a particular Federal Reserve Bank. In 1998, the 12 Reserve Banks moved from 12 separate book-entry applications to a single NBES system. The Fed described NBES as using centralized comp…

Is there any places (like EDGAR) that I can download Earnings Conference Call transcripts in bulk? Thanks.

I've often seen 2-3 different ways factor models are constructed, but I don't understand when do you use one approach, the benefits. I do have some intuition but really looking for some industry context here Long-Short portfolio based on some ranking : Eg. Take P/B ratio sort all stocks and then create a ranking, go long the top quantile and short the bottom. You've a value factor portfolio. Do s…

Given a series of closed trade profits and loses, a quality measure that could be applied is Sortino Ratio multiplied by the square root of N (N being the number of trades). However, according to an online AI chatbot, the N value should be adjusted to account for the trade returns not being i.i.d, i.e. autocorrelated. Is this actually true, and if so, what is the formula for making this adjustmen…

Over the counter, how would you price a put option, say? We know the formula, but the formula requires a risk-neutral volatility, decided by a market that doesn't exist. If two fellas, A and B, want to trade this option, how do they agree on a price?? We can come up with all kinds of fancy vol models, but ultimately they depend on parameters that we need to calibrate to a market that isn't there.…

In QuantLib is there a way to have a day count for the accrued interest and a day count to construct the cashflows in the same bond? For example I have a bond that pays fixed coupons of 2.0 but accrued interest is calculated as ACT/365: import QuantLib as ql from datetime import datetime ql.Settings.instance().evaluationDate = ql.Date(3, 9, 2026) coupon_rate = 0.04 face = 100 issuance_date = dat…

I'm working with Kraken historical ETH-USD trade data from 2017 onward, which includes: Timestamp (Datetime) Trade ID Trade price Trade volume Taker side (buy/sell) Order type (market or marketable limit) My goal is to derive a fair (efficient) price series that's minimally affected by bid-ask bounce with the goal being to use it for execution backtesting and modeling/analysis. I am okay with dow…

From my reading I understand that: The Bitcoin Pi Cycle top indicator signals a top when: 111 day Simple Moving average > 350 day Simple Moving Average * 2 The Bitcoin Pi Cycle bottom indicator signals a bottom when: 150 day Exponential Moving Average <= .745 * 471 day Simple Moving Average The Bitcoin Pi Cycle bottom indicator then indicates the end of the bottoming zone when: 150 day Exponentia…

What is the Risk Neutral Measure? I don't believe this has been answered on the internet well and with all the parts connecting. So: What is the risk neutral measure/pricing? Why do we need it? How we calculate the risk neutral measure or probabilities in practice? What connection has risk neutral pricing to the drift of a SDE? Does this help with 3)?

Working in a professional setting and need a way to be able to get upcoming first notice dates for a variety of commodities and futures. Norgate Data offers this through their API but they do not have professional licenses available.

Reading Gatheral's The volatility surface , page 7. The model they are talking about is $$\begin{align}dS_t&=\mu_tS_tdt+\sqrt{\nu_t}S_tdZ_1\\d\nu_t&=\alpha(S_t,\nu_t,t)dt+\eta\beta(S_t,\nu_t,t)\sqrt{v_t}dZ_2\\\left[Z_1,Z_2\right]&=\rho dt\end{align}$$ where $S_t$ is a stock price, and $\nu_t$ stochastic volatility. There is an option on $S$ with price $V(S_t,\nu,t)$, and another asset $V_1$ depen…

While trying to price an option on a future using a binomial tree, I found out in a manual (Actuarial Finance by Boudreault and Renaud) that we need to calculate $F_0$ , and then apply the up and down factor on this value. I am wondering why we don't model the stock value instead and use the formula $F_t^T = S_t\exp(r(T-t))$ ? For me this seems more intuitive; it would give us the same value for …

In the past I've only ever traded OTC options, and never really thought about the following: If you trade a European OTC option you post/receive cash collateral and on this collateral you receive/pay interest. This is in line with no-arbitrage since one needs to borrow money to post collateral and the interest received on the collateral goes to paying the interest on the loan. Now suppose you tra…

Before I start: Ok, this is something I investigated for a fair amount of time and my question is semi-academic. To simplify, I will introduce the short bit (TLDR) of my question and then lay out specifics. Short Question : What happens when option pricing model estimate and market price disagree? What is the course of action? What happens to the difference when I take positions on option and del…

I am building an event-driven portfolio allocator for three short-horizon trading strategies. Some positions close intraday, while others remain open overnight and temporarily lock capital that could otherwise be used for later opportunities. This is a frictionless research experiment, not a live-performance claim. My question concerns the correct stochastic-control formulation and benchmark. Cur…

How should i quote a product with required bid-ask spread. How to handle adverse fills instead of cutting losses. What are the models i have to study to start understanding the market making of volatile products.

Recently, I have heard that the pricing of callable bonds produces a strange relationship between coupons and the tenor of the call option. I have always thought that for a callable bond, when rates fall, the issuer of the bond seizes the chance to exercise the call and payback the principal (buyback the bond), and reissues at a lower rate/yield. It is for this reason that a callable bond, as com…

I am reading Harry Markowitz’s “ Portfolio Selection ” ( Journal of Finance , 1952), and I cannot determine whether Figure 4 contains a labeling error or whether I am misunderstanding the paper. On PDF page 11 (journal page 86), Figure 4 shows a three-dimensional coordinate system with axes $X_1$ , $X_2$ , and $X_3$ , together with three lines labeled $l_{1234}$ , $l_{234}$ , and $l_{124}$ . On t…

Suppose a backtest pipeline is evaluated at a historical cutoff T. Let F_T be the information legitimately available by T. I am testing temporal causality by applying a mutation M_T that leaves F_T unchanged but perturbs only information that should still be unavailable, then rerunning the pipeline and checking whether the historical artifact A_T changes. Formally, the test is: M_T(D)|F_T = D|F_T…