Quantitative Finance Collector

Fourth Set: Basel III counterparty credit risk - Frequently asked questions

Fri, 28 Dec 2012 16:07:10 +0000

The Basel Committee on Banking Supervision has received a number of interpretation questions related to the December 2010 publication of the Basel III regulatory frameworks for capital and liquidity and the 13 January 2011 press release on the loss absorbency of capital at the point of non-viability.

Below are three sets of frequently asked questions (FAQs) that relate to counterparty credit risk, including the default counterparty credit risk charge, the credit valuation adjustment (CVA) capital charge and asset value correlations. More sets may be forthcoming, stay tuned.

First set
Second set
Third set
Fourth set
Tags - basel , faq , counterparty , credit
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Selected Papers of First Day Conference 12142011

Mon, 19 Dec 2011 03:17:33 +0000

On each day there are approximately 80 papers to be presented in 20 sessions, which is really a lot and hard to have a detailed and useful discussion, I would say too many presentations are the weak side of this 24th Australasian Finance & Banking Conference. I selected several papers of the first day based on my interests:

Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis: investment-cash flow sensitivity must be measured taking into account the value of a firm’s assets that can be used as collateral.

Explaining Momentum Strategies Using Intrinsic Price Fluctuations: This paper focuses on cross-sectional equity momentum patterns by modeling a stock’s price path as the interaction between a long-term growth component and a number of fluctuating price components that oscillate around the long-term trend at various distinct frequencies.

Adverse Information and Mutual Fund Runs: anticipation of adverse events can also trigger runs in mutual funds.

Liquidity and Price Discovery of Algorithmic Trading: An Intraday Analysis on the SPI Futures Contract: the intra-day impact of algorithmic trading on the futures market to increase our understanding of algorithmic trading and its role in the price formation process.

A full list of the presented papers can be downloaded at Conference papers.
Tags - conference , crisis , momentum , liquidity
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Efficient Forex Trading Strategies

Sun, 01 Aug 2010 09:50:18 +0000

A guest post by Mirsad Hasic.

Trading by the raw price change in the volatile market is indeed the best of the Forex strategies.  Those Forex systems and strategies used by major financial institutions might not work for day traders and vice versa.

A single mechanical trading strategy will probably not work for a long time.  The differences in volumes traded and the volatility of the price of the currency pairs make it impossible to have a standardized Forex trading strategy.  The strategy should be flexible and differed by demand of trends.

There is always a right time to buy or sell a currency pair; however, the exact time to buy or sell is relative to personal trading needs.  When one feels it is the best time to sell a currency, you might feel it is the appropriate time for you to buy it. There is no best time to buy a currency. It is relative and differs between investor attitudes. The decisions on whether to go long or short on a position relates to the risk appetite of the buyer and his forecast of the near future.

In the highly volatile Forex market, profits and loss could be accomplished within a few minutes only. Making correct decisions in short periods of time require a keen perception of the Forex signals.  Analyzing those signals based on technical and fundamental indicators can be time consuming, thus many times a Forex broker who looks after several accounts might have just enough time to decide by signals rather than doing all the analysis.  Subscribing to efficient Forex signal services for the preferred currency pairs is a quick way to act by raw price situations in the market.

Several online Forex trading platforms provide Forex signal services by e-mail, SMS, and leader boards in websites. The idea of subscribing to automated signals is to get existing signals at the right time before the volatility moves the PIPs. Acting in timely manner using the correct Forex signals should yield profitable PIPs.

The price that is paid for the Forex signal packages using a credit card or any other payment method is pretty high, so this service should be used only if it proves to be accurate and applicable in the long run.  There are many spams Forex signal packages sold. Traders should always prefer the subscription to reputed signal providers. Using Forex reviews should help in identifying and selecting the best signal provider for you.

Forex strategies are all about when to buy and when to sell.  The signals that work best for smaller volumes might not be applicable for larger volumes. Always consider the efficiency of the currency pair, and the specific Forex signal before you strategize your trading decision.

If you have not tried Forex signals by subscription before, try free packages and upgrade to paid services once results prove efficient.  Trading by pure price patterns is probably the best way to make profit – however, pure price trading takes experience and efficiency in reading indicators. If you do not have enough time to follow trading price in depth, stick on to signal alerts from expert analysts.

Market sentiments dictate Forex strategies.  Investors move the market trends. The signals are an indication of how the trading crowd decides on buying and selling. Market makers are those who create demand level for buying and selling. Following and analyzing market makers actions may provide a clue to the upcoming trend. This is the reason that makes deciding by signals is so important.

Efficient Forex strategy is more than just “entering” and “exiting” at the right time. It is about deciding on the volumes of currency pairs, expected return, risk appetite and efficiency of instant decisions. If you cannot supervise the whole process, it is probably best to trust a professional market watcher.

There are many Forex strategy systems and software sold in the market.  When you are new to Forex, it is advisable to create a practice account and see the results. This is a real, objective test, as even with trading with “practice account” you will be trading within real conditions and the profit/loss figures you get are realistic. Experience is an important key to successful trading as well. The more you trade, the more you learn. Review trading errors of the past and fix them – this is the best Forex trading strategy.

My Bio:

About the Author: Mirsad Hasic is the webmaster and editor of best credit card deals, a site where you will learn how to pick a credit card that suits your current needs.

Tags - forex , trading
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VarCalc Online Financial Calculator

Sun, 16 May 2010 08:05:49 +0000

A guest post of Kang Wang.

The VarCalc Pty Ltd Australia is a specialist in financial modelling & their numerical methods, actuarial mathematics, web tool development and Adobe Flash media design. On the web site http://www.varcalc.com.au, it provides a series of innovative and comprehensive financial calculators for both Australian and international investors. These online tools cover many aspects of finance and investment like home loan & mortgage, savings, personal finance, bond and financial derivatives. The VarCalc will launch new calculators regularly.

Tags - calculator
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Binary Options Trading

Mon, 22 Feb 2010 11:57:08 +0000

Binary option is a one of the simple & common type of derivative, where the payoff is either a certain amount of prescribed cash, called cash-or-nothing option, or shares, called asset-or-nothing option. Intuitively, cash-or-nothing option holders receive cash if the option finishes in the money, asset-or-nothing option holders receive shares of asset if in the money, thereafter binary options are often named as digital options.

The pricing of binary options is straightforward under GBM framework, the widely used Black Scholes formula can be easily adopted for binary option valuation. Once we understand the principle and know how to price it, the next step probably is to trade binary options. There are several online option trading platform for an individual investor to choose, the one I'd like to review is EZTrader, who has revolutionized the way binary options are traded on the internet today, by supplying its customers with a simple, exciting, dynamic and highly profitable trading platform, very different from traditional option trading. Due to the simplicity and speed of our binary options trading system and the low minimum investment amount, it is able to reach investors with different profiles all over the world. Ranging from sophisticated investors that are looking for ways to hedge their positions in the traditional market, to amateur day traders looking for some "action" without risking large amounts of money, EZTrader developed a system suitable to most of everyone's goals.

EZtrader have taken the fear and uncertainty out of Forex trading to focus on an existing new kind of trade. At EZtrader you can trade Binary Options. With binary options you simply choose whether the stock price will go up or down by the expiration time and place you call or put accordingly. With EZtrader your winning return is fixed, you don’t have to leverage millions of dollars with every trade or setup complicated stop loss strategy. With EZtrader binary options everything you need is right in front of you.

Why do I select this online trading service? well, there are at least the following advantages of EZtrader I am aware of:
- A member is able to trade Nasdaq, Dow Jones and Commodities based options;
- Hourly trades;
- Open an account is free, absolutely No Fees;
- Members can choose to withdraw fund as they want;
...

Besides simplified trading process, EZTrader members are provided with a complete set of tools to help them optimize their trading. Tools include live financial news, references to financial sites and a wide variety of tradable options, and more. Check EZtrader home page regularly for new promotions that will help you to get the most out of your trades, for example, one promotion is: If you deposit a total of $550.00 today, Monday, February 22nd, 2010, you will receive a bonus of $250.00 (%45)Registration is totally free and there are no commissions to pay ever.

To start trading, first go to trading area after sign in, you will find a pool of options to choose

Choose an option to trade from the list of available options, then select the type of trade, either CALL or PUT, enter the amount you would like to trade. you can change the trade type from CALL to PUT or vice-versa even after entering an amount, finally click 'Trade' to execute your trade. Simple & new binary options trading platform, start applying your derivative quantitative skills directly at EZTrader.
Tags - binary , option , trading
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Friday reading list 19/02/2010

Fri, 19 Feb 2010 08:47:29 +0000

1, Market Timing & Trading Strategies Using Asset Rotation, "In this paper we present empirical results on the statistical and economic viability of a market timing trading strategy that is based on rotation between two risky assets. We use data on Exchange Traded Funds (ETFs) and models for both the returns and the volatility of the underlying assets." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1537914
2, Hedging the Black Swan: Conditional Heteroskedasticity and Tail Dependence in S&P500 and Vix, "In this paper, we show how the conditional approach of Heffernan and Tawn (2004) can be implemented to model extremal dependence between financial time series. A hedging example based on VIX futures is used to demonstrate its flexibility and superiority against the conventional OLS regression approach." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1549164
3, Stability of Mean-Variance Portfolio Weights, "The mean-variance portfolio weights are known to be strongly affected by the estimation errors of the parameters of asset distribution. Our paper studies this phenomenon from a new angle. We distil the stability measurements of separate coordinates of portfolio weights estimator into a single number. We derive analytical formulas that relate this measure with the mean and the covariance matrix of asset returns." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1553073
4, Unusual News Events and the Cross-Section of Stock Returns, "We show that stocks that experience a sudden increase in idiosyncratic volatility earn abnormally high contemporaneous returns but significantly underperform otherwise similar stocks in the future." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1362121
5, Exact Simulation of Point Processes with Stochastic Intensities, "This paper develops a method for the exact simulation of point processes with stochastic intensities. The method is based on a change of the filtration that describes the information flow in the point process model." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1551647
Tags - friday
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