Quantitative Finance Weekly Newsletter - Thursday, August 28, 2014

Quantitative Finance newsletter

Top new questions this week: Explicit solution SDE I have the following SDE: $$dY_{t}=A\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{1}+B\left(\frac{W_{t}^{1}}{\sqrt{t}},\frac{Y_{t}}{\sqrt{t}}\right)dW_{t}^{2}$$ where … stochastic-processes stochastic-calculus sde   asked by Math Girl 4 votes Nested volatility The introduction VIX options makes the concept of "volatility of volatility" a real life concept. The idea of "nested volatility" seems interesting, and I am wondering if there are any academic … volatility implied-volatility vix   asked by Sam Li 4 votes answered by Richard 1 vote How does this follow from the separating hyperplane theorem? This is from Pliskas book in mathematical finance. I do not know what was best to write the question so I included the pages from the book. He has not written what form of the separating hyperplane … arbitrage risk-neutral-measure no-arbitrage-theory convexity   asked by user119615 4 votes answered by emcor 1 vote Algorithm to detect the aggressor side of a trade Most of the exchanges provide aggressor side property of trades (e.g. Tag=5797 AggressorSide on CME) in their raw data. But many data providers do not provide this information via their datafeed … data market-data automated-trading market-microstructure   asked by Serg 3 votes answered by madilyn 1 vote Intuition behind American Option pricing The price of an American option is given by $V_n$ = Max{$G_n$, $\frac{1}{1 + r}$($pV_{n +1}$(H) + $qV_{n + 1}$(T)}. Where p, q are the risk neutral probabilities. I have two questions. How can … american-options   asked by user7348 3 votes Risk Neutral Pricing Necessary Condition Suppose that I have an option on a single stock expiring at time $T$ and I replicate the payoff of this derivative by investing in the stock market and the money market. So this condition reads $$X(T) … risk-neutral-measure   asked by L'universo 3 votes answered by emcor 1 vote How to classify stocks by their volatility? I would like to hear other possible ways of classifying Stocks by the Volatility of their returns. Assuming that I want to characterize each stock as Low, Medium or High Volatility Stock and assuming … volatility equities returns   asked by g_puffo 2 votes answered by Bram 1 vote Greatest hits from previous weeks: Is "eoddata" a good data source? Not sure if this is a relevant question for site, but I am looking to move to www.eoddata.com as my data source. If anyone has used it, can you tell me how the data quality is ? I am currently … data market-data   asked by silencer 12 votes answered by monksy 5 votes What is the difference between Option Adjusted Spread (OAS) and Z-spread? I am preparing for the CFA level 2 exam, I got confused by the concept Z-spread and OAS. When a call option is added to a bond, since it is not favorable to the bond buyer, they would require more … fixed-income   asked by Dave 9 votes answered by SRKX 18 votes Can you answer this? State Space models with Short Time Series My problem is that I have a state space model that I estimate using the Berndt–Hall–Hall–Hausman (BHHH) algorithm. The state space model is relatively simple in that the hidden part follows a pure … time-series statistics optimization bootstrap   asked by Bazman 2 votes

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