Quantitative Finance Weekly Newsletter - Thursday, September 29, 2016

Quantitative Finance newsletter

Top new questions this week: Formula to price a CDS Index Option? Say I wanted to buy an option on the CDX US HY Index (specifics here are irrelevant, but the point is that I'm looking for an option on a CDS Index). What would be the pricing formula given inputs of ... option-pricing cds   asked by Curious Student 5 votes answered by Gordon 2 votes Pricing under short rate models in emerging markets I've been thinking how to price the early payment of mortgages in banks from emerging markets, where swaptions aren't available, and how to hedge this kind of options. At first i thought about ... option-pricing interest-rates short-rate development   asked by Jose Pedro Melo 3 votes Volar Higher Order Parametrizations I came across this presentation from volar.io. The authors show fitting examples for a flexible volatility smile parametrization in 5 to 8 parameters which is also able to fit the locally concave ... implied-volatility volatility-smile   asked by LocalVolatility 3 votes How can the market price of a stock be significantly lower than its Bid and Ask? I was trading various stocks on the market, and I often see that stocks have their price, much higher or lower, than the Bid and Ask. Also, as the Bid and Ask move in real time, the price moves too, ... equities bid ask   asked by Victor2748 3 votes answered by Kiwiakos 6 votes How to interpret the 'price' of a CDS? I'm looking for an intuitive explanation of how to understand the 'price'/trade spread of a CDS. Looking say at a current CDS on Santander, the index states that it is currently at 132. As I ... credit-derivatives   asked by Curious Student 3 votes answered by MJ73550 4 votes Justification for Binary Option's Infinite Delta? First time poster here. Glad to be here. I just graduated with an MSc in computational finance. I recently read a question by another user about the delta of an at-the-money binary option as it ... option-pricing delta-hedging binary-options   asked by Alex Ockenden 2 votes answered by LocalVolatility 2 votes J-test and Empirical Model Performance of Conditional and Unconditional Estimations (as for example in Cochrane (1996)) Take for example the Consumption-based model with a power utility function estimated by Cochrane in his paper "A Cross-Sectional Test of an Investment-Based Asset Pricing Model" (1996). The following ... statistics asset-pricing   asked by user24592 2 votes Greatest hits from previous weeks: What is the difference between asset management and wealth management? What is the difference between this two concepts? risk-management asset   asked by Michael 5 votes answered by EHC 3 votes Is the Interactive Brokers API suitable for hft? By HFT here I mean anything with holding period less than 5 to 10 minutes. Any empirical/anecdotal evidence of using it successfully on even higher frequencies? programming high-frequency interactive-brokers   asked by user40 16 votes answered by Pete 14 votes Can you answer these? What are some of the most important/interesting Risk measures to watch? I am wondering what are some of the more important/interesting risk measures to watch, particularly in FX markets. So far I'm watching the following: Greeks Tail moves AKA VaR (left and right tail ~ ... risk fx risk-management var   asked by Vladimir 1 vote How can I perform an analysis of risk exposures for an index? I'm writing my bachelor thesis and the main goal of the paper is to answer the question: "are smart beta indexes efficient?" In order to answer this question would like to determine if those smart ... regression factor-models risk-models   asked by Raphael Galvagno 1 vote Should cash-flows discounted at WACC be pre- or post-tax? WACC in my mind is effectively a post-tax measure: $$\text{WACC} = \frac{E}{V} k_e+\frac{D}{V}k_d(1-t)$$ In this case should cash-flows, in particular loan cash-flows be adjusted for tax as well? ... discounting dcf wacc   asked by PBD10017 1 vote

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