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by Gmike2000
February 6th, 2011, 4:50 pm
Forum: Trading Forum
Topic: Trading the Chinese stock markets, 29 Sharpe ratio 107% annualised returns over 5 years
Replies: 23
Views: 26354

Trading the Chinese stock markets, 29 Sharpe ratio 107% annualised returns over 5 years

<t>i am sorry, but if you roll your position every 3 days this means you do just over 80 "roundtrips" in one year and hence trading costs in terms of slippage, commissions, and bid-offer spread are going to have a material impact on the performance of what you euphemistically call a "system". i dont...
by Gmike2000
February 6th, 2011, 4:46 pm
Forum: Trading Forum
Topic: origins of interest rate skew
Replies: 19
Views: 27671

origins of interest rate skew

<t>hi unk, what i meant was just looking at a very simple measure of realized vol and plotting that versus the level of the forward, you see that currently vol rises when fwds go up and vol falls when fwds come down. i am talking bp vol (normal vol). so all i meant was that the skew has to reflect t...
by Gmike2000
February 5th, 2011, 11:55 pm
Forum: Trading Forum
Topic: origins of interest rate skew
Replies: 19
Views: 27671

origins of interest rate skew

<t>the skew is influenced by supply and demand on the micro level (the level of the mkt maker)from a macro perspective, however, the skew tends to follow the (probability weighted) local vol that the fwd realizes during the life of the option. for example in the current low rate environment, (normal...
by Gmike2000
February 4th, 2011, 11:23 pm
Forum: Student Forum
Topic: SABR/LMM for dissertation?
Replies: 8
Views: 23242

SABR/LMM for dissertation?

<t>The problem with the classic SABR is that you can hardly control the far out strikes...their vol becomes too high. Also it may allow arbitrage for very low strikes. You will end up mispricing CMS products for example. In my opinion, a 2 factor short rate model with stoch vol can do the same job a...
by Gmike2000
February 4th, 2011, 11:17 pm
Forum: Trading Forum
Topic: Trading the Chinese stock markets, 29 Sharpe ratio 107% annualised returns over 5 years
Replies: 23
Views: 26354

Trading the Chinese stock markets, 29 Sharpe ratio 107% annualised returns over 5 years

you sell at the close, but where do you buy? the open? once you have the signal, do you assume you get into the position the next day? if yes, how? i mean, you have to make an assumption on where you would get filled.
by Gmike2000
January 31st, 2011, 7:59 pm
Forum: Trading Forum
Topic: Question from trader to trader regarding punting
Replies: 9
Views: 23766

Question from trader to trader regarding punting

<t>all hedging is prop trading at the same time. if a client trades some exotic option that requires dynamic hedging, there is no way you can statically replicate it, and let's not even talk about trading costs.even simple things like callable libor range accruals require you to carry digital risk o...
by Gmike2000
January 31st, 2011, 7:48 pm
Forum: Economics Forum
Topic: QE2 and Long term Interest Rates
Replies: 6
Views: 26075

QE2 and Long term Interest Rates

<r>QuoteOriginally posted by: farmerQuoteOriginally posted by: gauravs I have recently started reading about QE2. The intent of the program was to boost the economy by reducing long term interest rates. But many articles say that the interest rates on 10 year treasury have risen after QE2.I have a t...
by Gmike2000
January 24th, 2011, 9:42 pm
Forum: Economics Forum
Topic: QE2 question
Replies: 3
Views: 24991

QE2 question

<t>5yr is the liquid point on the curve, the other being 2yr and 10yr. swaps/libor spreads price off treasury yields. a typical mortgage bond has, due to prepayment optionality, the highest sensitivity around the 5yr point on the curve, even though the stated maturity is much longer. so to impact mo...
by Gmike2000
January 24th, 2011, 9:37 pm
Forum: Economics Forum
Topic: QE2 and Long term Interest Rates
Replies: 6
Views: 26075

QE2 and Long term Interest Rates

<t>QE2 has backfired and the FED has lost some of its credibility. The market essentially learned that no one, not even the FED, can control the yield curve. They can set the funds rate, ok, but they cannot set the 10yr rate.This has been one of the most horrible bond sell-offs since 2003. The FED b...
by Gmike2000
January 23rd, 2011, 8:58 pm
Forum: Technical Forum
Topic: FX Volatility smile in delta space vs. excercise price space
Replies: 18
Views: 27296

FX Volatility smile in delta space vs. excercise price space

<t>I have a stupid question about this actually, since I am a rates guy and not fx-versed at all.So the fx guys tell me they look at RR numbers to "tell" whether the mkt expects to go up or down. Besides the fact that they could not cite empirical evidence for this being a true relationship, the pro...
by Gmike2000
January 22nd, 2011, 9:25 pm
Forum: General Forum
Topic: swap carry and roll down once more..
Replies: 6
Views: 27170

swap carry and roll down once more..

<t>The convexity is priced into the rate already and is related to volatility. This is why the yield curve may even start going down again at some point in the long end...meaning the payer starts paying less for what you call "disadvantage"..... so it is not really a disadvantage at all, as the mkt ...
by Gmike2000
January 22nd, 2011, 9:17 pm
Forum: General Forum
Topic: swaptions..
Replies: 7
Views: 24141

swaptions..

<t>Hello, first of all, normal vol is F*black vol only for ATM strikes. For everything else you need to use a more exact approximation (e.g. the one by Hagan), but for close to ATM strikes, sqrt(F*K)*black vol is acceptable as well.Secondly, if you want to keep normal vol constant, as you state in y...
by Gmike2000
January 21st, 2011, 9:50 pm
Forum: Student Forum
Topic: risk-free rates and effects on quant finance
Replies: 15
Views: 22120

risk-free rates and effects on quant finance

<t>QuoteOriginally posted by: TinManQuoteOriginally posted by: Traden4Alpha That seems a bit extreme. Is the probability of collapse conditional on U.S default really exactly 100.00000%? Or is it 99% or maybe 95%? And what about in 5 years time if the BRIC++ countries are 50% larger and more of the ...
by Gmike2000
January 18th, 2011, 9:41 pm
Forum: Technical Forum
Topic: Hedging with Factor Models
Replies: 5
Views: 21684

Hedging with Factor Models

3m, 5y, and 30yr are not optimal. choose 2y,10y,30y for a portfolio that spans the whole mkt and/or add 5yr if you like.3m only moves when the FED changes interest rates. 2y however, moves with market expectations regarding FED changes.
by Gmike2000
January 14th, 2011, 7:24 pm
Forum: Careers Forum
Topic: Help me decide: entry level BB IB v/s HF tech
Replies: 6
Views: 21938

Help me decide: entry level BB IB v/s HF tech

<t>In the bank you will face a lot of red tape regarding new releases. They will be very careful with any code additions to the existing library, which is understandable. This can be frustrating and also slow down development.In smaller shops, the attitude is much more hands on. If there is a bug, y...
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