Quantitative Finance Weekly Newsletter - Thursday, April 28, 2016

Quantitative Finance newsletter

Top new questions this week: Thoughts on how quantitative hedge funds use machine learning to invest in the stock market (algorithms, examples of data, etc.) I believe there are several post on this general topic but I thought I would start my own thread. I'm a former fundamental hedge fund investor (i.e. modeling a company's financials, forecasting the ... equities time-series algorithm investment hedge-fund   asked by Alex 6 votes answered by QuantScientist 1 vote How to express the volatility of two correlated Ito processes $Wt_1, Wt_2$ expressed in terms of $W_t$? Having two correlated Ito processes ($W_t^1$ and $W_t^2$ are correlated Brownian motions with correlation $\rho$) $dX_{t} =\mu_{1} dt + \sigma_1 dWt_1 $ $dY_{t} = \mu_{2} dt + \sigma_2 dWt_2 $ ... stochastic-processes stochastic-calculus brownian-motion itos-lemma   asked by Michal 4 votes answered by Richard 5 votes Interest Rate Convexity - Fundamental Question I have a very basic question around convexity adjustments in swap valuations. I am comfortable with the mathematical derivation of the convexity adjustment. My question relates to when and why a ... interest-rate-swap convexity   asked by Kotov 4 votes answered by dm63 1 vote What are the answers to these questions on card deck and option pricing? here are 3 questions I have some trouble dealing with. Your help will be greatly appreciated! 1 - We have a deck card: 26 red, 26 black. we play a game: you draw a card from the deck without putting ... options option-pricing probability arbitrage   asked by phacoo 3 votes answered by Quantuple 0 votes Why can a swap option be regarded as a type of Bond option? Why can a swap option be regarded as a type of bond option? My idea: Suppose the swap rate of the swaption is $s$. Now consider a bond option expiring at $T$ with strike, $(P_K)_t = ... options bond interest-rate-swap forward-rate swaption   asked by Pii 3 votes answered by Gordon 3 votes What is the effect of mean-reversion on an upper barrier knock-out call option? Consider a mean-reverting normal model for an underlying $dX^{(1)}_t=-\kappa X^{(1)}_tdt+\sigma^{(1)} dW^{(1)}_t$, for fixed time-independent constants, $\kappa$ (mean-reversion) and $\sigma^{(1)}$ ... modeling mean-reversion barrier   asked by Jase Uknow 3 votes answered by MJ73550 0 votes Integration to calculate expected value of swap rate In Hagan's paper on valuing CMS swaps (Convexity Conundrums: Pricing CMS Swaps, Caps, and Floors), there is: So the swap rate must also be a Martingale, and $$E \big[ R_s(\tau) \big| ... interest-rates fixed-income martingale expected   asked by MarinD 3 votes answered by Gordon 1 vote Greatest hits from previous weeks: How to calculate unsystematic risk? We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ... risk risk-management risk-models risk-premium   asked by Norlyda 8 votes answered by Ram Ahluwalia 10 votes What open source trading platform are available I would like to compile a list of open source trading platforms. Something that would give an overview and comparison of different architectures and approaches. trading high-frequency   asked by Datageek 14 votes answered by Andrew Campbell 10 votes Can you answer these? Optimize a trading strategy created in excel with R I have created quite a complex back test in excel spanning 15 years with 17 parameters. I would like to optimize the parameters which would give me maximum return given a maximum draw-down percentage. ... r optimization portfolio-optimization excel   asked by Vinay Bharath 1 vote calculating long short portfolios currency exposure I have calculated the currency exposures of a long short portfolio simply by summing the weights of each stock. However I was told that I need to incorporate the dollar borrowing (short dollars), I ... risk portfolio-management currency   asked by user8170 1 vote Interplay of statistical factors (PCA) and market factors (value, momentum, low vol, ...) Is there any research done on the interplay between statistical factors (as a result of principle component analysis PCA) and the market factors (especially value, size, low vol, momentum, quality)? ... pca factor-loading factor-investing   asked by Richard 1 vote

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