Quantitative Finance Weekly Newsletter – Friday, November 15, 2013

#AceNewsDigest – Question and Answers – Subject: Quantitative Finance

These are question people ask every week about finance and the markets, how many can you answer?

Quantitative Finance newsletter

Top new questions this week: How is pricing and valuation done in practice with incomplete markets? In mathematical finance complete markets are very nice. You essential have an unique ELMM (equivalent local martingale measure) $Q$ and you know how that the value $V_t$ at time $t$ of a contingent … mathematics pricing asked by hulik 3 votes Dividend Index Futures My question is dealing with the proportionality between Dividend Index Futures prices and Index prices. Indeed, we in the past we used to do a simple regression between these variables and use the … futures regression index dividends dynamic asked by user1646105 3 votes Risk and Reward in practice My question is a bit philosophical. As a risk manager I often have to tell portfolio managers to reduce risk (e.g. due to VaR limits or exposure limits). Then usually the discussion arises that if … risk risk-management asked by Richard 3 votes answered by Matt Wolf 5 votes Mitigating gateway delay A trading system has $n$ colocated uplinks to TCP order entry gateways $g_1, \dots, g_n$ on a given exchange. Each gateway $g_i$ has a different order entry delay function $d_i(t)$ as a function of … high-frequency order-handling latency asked by Randomblue 3 votes answered by user2964219 3 votes Bond Convexity Treasuries Futures I know long duration bonds, on a a single bond basis, exhibit convexity however do treasury futures prices and the 10 yr yield exhibit the same property? Below is a plot of continious ten year … fixed-income convexity asked by jessica 3 votes Pricing of Forward Contracts in "Term-Structure Models: A Graduate Course" by Filipovic I have a question about the Pricing of a Forward Contract in "Term-Structure Models: A Graduate Course" by D. Filipovic. In chapter $8$ he introduce the following (I quote): A forward contract $Y$, … interest-rates mathematics pricing bond forward asked by hulik 2 votes Synthesize a futures spread option Is it possible to synthesize a futures spread option using only the options on the spread’s underlyings? If so, how? If not, is there another way? As an example, please show me how to synthesize … options futures spread synthetic asked by quantycuenta 2 votes answered by Chris Taylor 2 votes Greatest hits from previous weeks: How fast is QuickFix ? In my firm we are beginning a new OMS (Order Management System) project and there is a debate whether we use Quickfix or we go for a professional fix engine? Because there is a common doubt that … fix asked by ali_bahoo 13 votes answered by murrekatt 11 votes Using variance ratios to test for mean reversion Can you use the variance ratio test to determine whether or not a time series is mean reverting? I’m using the Lo.Mac function in the vrtest library in R. I’ve used the test to reject geometric … time-series r asked by wcampbell 4 votes answered by Ryogi 5 votes Can you answer this? Cross validation of a garch model Suppose I divide a time series into 10 sequential time windows, where each window contains 1000 data points. I want to do test 5 different garch models using cross validation. So for each model, I … garch cross-validation asked by user847663 1 vote