Quantitative Finance Weekly Newsletter - Thursday, February 26, 2015

Quantitative Finance newsletter

Top new questions this week: Why does the volatility smile flatten as maturities increase? First, I can't find a purely "financial" explanation for this. Also the only mathematical explanation I've found so far was using the large deviations theory, which is quite complex. Is there a ... implied-volatility volatility-smile   asked by Dark 5 votes answered by user9403 2 votes How to approximate the time to mean reversion for implied volatility Given an option and its implied volatility, and also the mean value of the implied volatility over the last 30 days, if we find that the current IV is significantly (> 1 std dev.) away from the mean, ... options implied-volatility mean-reversion   asked by Victor123 4 votes answered by vonjd 3 votes Why is Brownian motion merely 'almost surely' continuous? Why is Brownian motion required to be merely almost surely continuous instead of continuous? For example, this is stated as condition 2 in this article in section 1, Characterizations of the Wiener ... stochastic-processes brownian-motion   asked by user50229 4 votes answered by vonjd 0 votes What does the "-E" mean at the end of a CBOE options symbol? Below is are some option quotes taken directly from the CBOE website. I am wondering what the -E, -4, -8, -A, -B, -I, -J etc..that are at the end of the options symbol mean? Example: AAPL1513C109-E ... options   asked by Jakobovski 4 votes answered by vonjd 3 votes What is the yield on an infinitely lived ZCB? I guess the price of a Zero-Coupon Bond with infinite maturity should go to zero, what about its yield? I am asking this because I was dealing with the yield curve and its asymptotic properties when ... fixed-income yield-curve bond-yields yield   asked by franic 3 votes answered by crunch 2 votes Why an option has sometimes and implied volatility greater than 100%? Sometimes, in an option chain, the implied volatility of an option is greater than 100% . How is this possible? I mean, it is possible for 100$ stock to increase more than 100%, but not decrease more ... options implied-volatility   asked by Victor123 3 votes answered by AFK 8 votes correlation for portfolio of stocks I have a portfolio of stocks and all I want to do is to make sure that I'm not trading one big position, so I would like to monitor some type of metric that gives me a rough idea of what the overall ... portfolio-management correlation   asked by jason_cant_code 2 votes answered by vonjd 2 votes Greatest hits from previous weeks: How to fit ARMA+GARCH Model In R? I am currently working on ARMA+GARCH model using R. I am looking out for example which explain step by step explanation for fitting this model in R. I have time series which is stationary and I am ... time-series statistics r   asked by Add 5 votes answered by Jase 7 votes How to calculate equally weighted market portfolio There's two studies that test the same thing in different markets (i.e. they apply the identical methodology). They state: 1) "$R_{mt}$ is the equally weighted average stock return in the dual-listed ... equities returns return asset-returns log-returns   asked by user2921 2 votes answered by jeffery_the_wind 1 vote Can you answer these? Please recommend a book regarding Monte Carlo simulation in OAS I couldn't find a book that explains in details how to use Monte Carlo Simulation to generate a number of interest rate scenarios. And then based on the interest rate scenarios, how to calculate the ... bond reference-request valuation   asked by dullboy 1 vote Correctly applying GARCH in Python Problem: Correct usage of GARCH(1,1) Aim of research: Forecasting volatility/variance. Tools used: Python Instrument: SPX (specifically adjusted close prices) Reference material: On Estimation of ... volatility garch python   asked by The Laughing Man 2 votes Use of Black-Scholes Model on Guaranteed Fund Investment I am stuck with a revision question at home on Black-Scholes pricing model. The question is on a fund manager selling one unit of the fund to a customer for S(0) at time 0 and then guaranteeing at ... option-pricing black-scholes   asked by Mulita 1 vote

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