Quantitative Finance Stack Exchange Weekly Newsletter - Thursday, December 29, 2016

Quantitative Finance Stack Exchange newsletter

Top new questions this week: In portfolio theory, has volatility a logical place as an asset class? Some years ago, a colleague made the argument that volatility should be thought of as an asset class. That means that taking exposure to implied volatility, in the form of volatility bonds, or long ... modern-portfolio-theory   asked by dm63 4 votes answered by Kiwiakos 4 votes Moment Ito's Process Proof I have a following stochastic integral - related problem that I have difficulty to solve: Given \begin{equation} dX_t = -\alpha X_tdt+\sigma\sqrt{X_t}dW_t \end{equation} and the second moment of ... stochastic-processes stochastic-calculus brownian-motion itos-lemma sde   asked by Donkey_JOHN 4 votes answered by Behrouz Maleki 2 votes Finding the True Option Value Many research papers use differing solution methods to attempt to find the 'true' value of an option whether it be Euro, American, etc. They never mention how they do find the true option value to ... options option-pricing american-options valuation european-options   asked by Murphy's Law 3 votes answered by vonjd 3 votes For any efficient portfolio, does there exist another efficient portfolio which has zero correlation with it? For any portfolio on mean-variance efficient frontier, does there exist a portfolio on the frontier which has zero correlation with it? I tried to play around with the covariance, by setting ... finance portfolio mean-variance   asked by user25910 2 votes answered by Mark Joshi 0 votes Black Scholes in Practice: Delta Hedging From the Wikipedia page, we know call option as an example is price through delta hedging. $$\Pi=-V+V_SS$$ and over $[t,t+\triangle t]$ $$\triangle\Pi=-\triangle V+V_S\triangle S$$ My questions ... options black-scholes optimization brownian-motion continuous-time   asked by ZHU 2 votes answered by quallenjäger 3 votes How to show that $E\left[ \int_0^t \sigma(s) e^{iuX(s)} dW(s)\right] = 0$? Let $\sigma(t)$ be a given deterministic function of time and define the process $X_t$ by $$X(t) = \int_0^t \sigma(s)dW(s)$$ I want to show $$E\left[ \int_0^t \sigma(s) e^{iuX(s)} dW(s)\right] = ... stochastic-processes stochastic-calculus brownian-motion itos-lemma   asked by Maaniya 1 vote answered by Behrouz Maleki 6 votes Portfolio Theory: Currency Risk It seems to me that Currency Risk can be diversified away and hence one should not get paid for taking it. Do you agree? modern-portfolio-theory   asked by dm63 1 vote answered by Helin Gai 2 votes Greatest hits from previous weeks: Difference between S&P 500 index and S&P 500 Total Return index? There's the standard S&P 500 index (SPX) and the rarer used S&P 500 Total Return index (SPTR). If you compare graphs, you'll find that the latter grows faster. Supposedly, SPTR assumes ... index etf dividends mutual-fund   asked by Axel Boldt 8 votes answered by Rime 3 votes Should I use an arithmetic or a geometric calculation for the Sharpe Ratio? What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances? statistics returns sharpe-ratio calculation   asked by Kelly 20 votes answered by SRKX 10 votes Can you answer this? How to calculate the volatility of a equity option spread I would like to calculate the volatility of an equity option spread with all legs having the same expiration. Reading Option Volatility and Pricing 2nd Edition by Natenberg, Chapter 20, section ... options volatility spread spread-options   asked by Nel 1 vote

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