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by bearish
March 25th, 2024, 12:20 pm
Forum: Student Forum
Topic: CMS Spread
Replies: 8
Views: 9728

Re: CMS Spread

Vanilla CMS spread range accruals are not primarily difficult to value from a numerical perspective (although you have to deal with a lot of discontinuities), but rather from the perspective of getting the spread process roughly right. For example, just about any 1-factor term structure model would ...
by bearish
March 22nd, 2024, 7:56 pm
Forum: Trading Forum
Topic: Treasury swap spreads payoff
Replies: 2
Views: 127

Re: Treasury swap spreads payoff

Hmm - I usually see them (say on Bloomberg) as swap minus Treasury, but I guess I never thought of these quotes as anything other than a slightly more dynamic way to quote swap rates. So if the 5Y OTR treasury moves by a bp, the swap quote is automatically adjusted by the same. But maybe I’m too far...
by bearish
March 21st, 2024, 9:39 pm
Forum: Student Forum
Topic: Drift of futures prices, Risk Neutral word
Replies: 5
Views: 622

Re: Drift of futures prices, Risk Neutral word

I don’t think your statement is literally right, in the sense that the covariance term will still be there in models that do not rely on Ito calculus per se, e.g. some kind of discrete lattice model. But in a continuous time/state setting, yes it will have the flavor of an Ito co-quadratic variation...
by bearish
March 20th, 2024, 11:57 am
Forum: Student Forum
Topic: Mean-Variance Optimization
Replies: 4
Views: 293

Re: Mean-Variance Optimization

Yes. I hadn’t even got started on your covariance matrix estimation. My main point was that your expected return estimates are going to be extremely noisy. Say your estimated mean is 5% with a standard deviation of 15%. A 95% confidence interval would be -25% to +35%, under the most benign assumptio...
by bearish
March 19th, 2024, 9:51 pm
Forum: Student Forum
Topic: Mean-Variance Optimization
Replies: 4
Views: 293

Re: Mean-Variance Optimization

I don’t think you are missing anything, aside from perhaps a bit of intuition. Your optimized portfolio weights are basically random, probably resulting in a poorly diversified portfolio most of the time compared to the equal weighted one. The historical mean return over such a short window will hav...
by bearish
March 19th, 2024, 9:41 pm
Forum: Student Forum
Topic: CMS Spread
Replies: 8
Views: 9728

Re: CMS Spread

A range accrual is essentially a bundle of digital options, usually presented in terms of a (relatively high) interest rate that will accrue (on a bond or a swap) as long as some reference quantity remains within a given range. When said reference quantity is a CMS spread you have on your hands a CM...
by bearish
March 18th, 2024, 3:05 am
Forum: Politics Forum
Topic: Trump -- the last 100 days
Replies: 4584
Views: 479720

Re: Trump -- the last 100 days

Having read some of the things he has said and written over the weekend, it is pretty bizarre that he is allowed to be left out there to spew his venom and hatred against whatever may still be OK in this country. I assume that more precise language would be frowned upon. The only good news I can see...
by bearish
March 13th, 2024, 11:22 pm
Forum: Politics Forum
Topic: Trump -- the last 100 days
Replies: 4584
Views: 479720

Re: Trump -- the last 100 days

Yes, he is obviously on board with the national total ban on abortion, to be followed by a total ban on contraception (well, with exceptions for the king). Since that’s religion for you.
by bearish
March 12th, 2024, 11:39 pm
Forum: Student Forum
Topic: why we can't use linear regression to predict share prices?
Replies: 16
Views: 1099

Re: why we can't use linear regression to predict share prices?

At this point I may as well also apologize to the students seeking the wisdom of their elders in this thread, which has gone off the rails.
by bearish
March 12th, 2024, 11:35 pm
Forum: Student Forum
Topic: why we can't use linear regression to predict share prices?
Replies: 16
Views: 1099

Re: why we can't use linear regression to predict share prices?

All right, on behalf of us charming and romantic Norwegian men, I apologize! Probably the closest I ever came to chatting with a supermodel was some idle banter while playing poker with Tila Tequila in a charity tournament, back in her hey day.
by bearish
March 12th, 2024, 8:38 pm
Forum: Politics Forum
Topic: Trump -- the last 100 days
Replies: 4584
Views: 479720

Re: Trump -- the last 100 days

One wonders what his rabidly evangelical base makes of this. A bit too ecumenical for them, I’d think.
by bearish
March 12th, 2024, 12:42 am
Forum: Student Forum
Topic: why we can't use linear regression to predict share prices?
Replies: 16
Views: 1099

Re: why we can't use linear regression to predict share prices?

To be clear, I never said it couldn’t be done, only suggesting that it’s harder than it looks. Which, by the way, may be a good line to use when chatting with a supermodel.
by bearish
March 10th, 2024, 9:42 pm
Forum: Student Forum
Topic: ATM Call Option Delta N(d1)
Replies: 4
Views: 275

Re: ATM Call Option Delta N(d1)

No, sadly, people’s language is pretty sloppy on this topic. It is generally helpful to specify outright whether you are talking about ATM spot or forward. Of course, if the volatility is 20% rather than 0.8%, the difference will be a lot less significant
by bearish
March 10th, 2024, 9:08 pm
Forum: Off Topic
Topic: Vatican News
Replies: 255
Views: 33641

Re: Vatican News

If the papacy were to disappear in a puff of smoke, would it be black or white?
by bearish
March 10th, 2024, 8:55 pm
Forum: Student Forum
Topic: why we can't use linear regression to predict share prices?
Replies: 16
Views: 1099

Re: why we can't use linear regression to predict share prices?

If with “for a short while” you mean some small fraction of a second, you may very well be right. For longer periods, you can always hope, but don’t underestimate the efficiency of markets. There are many many cases where historical times series will suggest the presence of some statistically signif...