Free C++, Matlab, and VBA code for derivative pricing
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2010/01/29 12:02 | by abiao ]
2010/01/29 12:02 | by abiao ]
Volopta is a site I came across yesterday, it contains free C++, Matlab, and VBA code for derivatives pricing. Derivatives categories include equity options, options on bonds, swaps, swaptions, options on futures, variance swaps, collateralized debt obligations, credit default swaps, volatility models, etc.
At the moment the files uploaded are only a few, which is understandable considering it is a newly launched website, take a look if interested, http://www.volopta.com/index.html.
Have a nice weekend.
At the moment the files uploaded are only a few, which is understandable considering it is a newly launched website, take a look if interested, http://www.volopta.com/index.html.
Have a nice weekend.
Friday reading list 29/01/2010
[ 2010/01/29 11:54 | by abiao ]
2010/01/29 11:54 | by abiao ]
1, On the Heston Model with Stochastic Interest Rates, "We discuss the Heston [Heston-1993] model with stochastic interest rates driven by Hull-White [Hull,White-1996] (HW) or Cox-Ingersoll-Ross [Cox, et al.-1985] (CIR) processes. A so-called volatility compensator is defined which guarantees that the Heston hybrid model with a non-zero correlation between the equity and interest rate processes is properly defined. Two different approximations of the hybrid models are presented in order to obtain the characteristic functions. These approximations admit pricing basic derivative products with Fourier techniques [Carr,Madan-1999; Fang,Oosterlee-2008], and can therefore be used for fast calibration of the hybrid model. The effect of the approximations on the instantaneous correlations and the influence of the correlation between stock and interest rate on the implied volatilities are also discussed." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1382902
2, Dynamic Copula Modelling for Value at Risk, "By using copulas, we can separate the marginal distributions from the dependence structure and estimate portfolio Value-at-Risk, assuming for the risk factors a multivariate distribution that can be different from the conditional normal one. Moreover, we consider marginal functions able to model higher moments than the second, as in the normal. This enables us to better understand why VaR estimates are too aggressive or too conservative. We apply this methodology to estimate the 95%, 99% VaR by using Monte-Carlo simulation, for portfolios made of the SP500 stock index, the Dax Index and the Nikkei225 Index. We use the initial part of the sample to estimate the models, and the the remaining part to compare the out-of-sample performances of the different approaches, using various back-testing techniques." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1542608
2, Dynamic Copula Modelling for Value at Risk, "By using copulas, we can separate the marginal distributions from the dependence structure and estimate portfolio Value-at-Risk, assuming for the risk factors a multivariate distribution that can be different from the conditional normal one. Moreover, we consider marginal functions able to model higher moments than the second, as in the normal. This enables us to better understand why VaR estimates are too aggressive or too conservative. We apply this methodology to estimate the 95%, 99% VaR by using Monte-Carlo simulation, for portfolios made of the SP500 stock index, the Dax Index and the Nikkei225 Index. We use the initial part of the sample to estimate the models, and the the remaining part to compare the out-of-sample performances of the different approaches, using various back-testing techniques." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1542608
The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It
[ 2010/01/24 17:24 | by abiao ]
2010/01/24 17:24 | by abiao ]
Bought a book just now recommended by a friend of mine, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, what a looong name. The book is written by a Wall Street Journal reporter Scott Patterson and has got brilliant editorial reviews, for instance:
Quotation
“Scott Patterson has the ability to see things you and I don’t notice. In The Quants he does an admirable job of debunking the myths of black box traders and provides a very entertaining narrative in the process.”
--Nassim Nicholas Taleb
--Nassim Nicholas Taleb
Quotation
"The Quants will keep hedge fund managers on the edge of their Aeron chairs, while the rest of us read in horror about their greed and their impact on the wider economy. A gripping tale right until the last page...but I fear this is perhaps not yet the end of the story."
--Paul Wilmott
--Paul Wilmott
Elliott Wave Analysis
[ 2010/01/22 23:27 | by abiao ]
2010/01/22 23:27 | by abiao ]
Last weekend I reviewed a service called elliott wave analysis at Popular Culture and the Stock Market, some of my blog readers joined the free EWI club and downloaded the free report. As a result, elliott wave international sent me a book elliott wave principle, key to market behavior and a pen with club logo on, thank you.
So this weekend I'm gonna talk few more words about Elliott Wave Analysis, what is elliott wave principle then? as described on wikipedia, "it is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific wave patterns in price movements." Therefore it is a type of investment discipline combining technical analysis with behavioral finance that attempts to explain and predict the market trend (of stock, forex, etc.). Unlike those quantitative techniques we often hear or apply, Elliott Wave Analysis assumes it is unnecessary to be based on past price charts to decide where a market is in its wave patten, which is instead decided by investors' psychology, therefore Elliott Wave Analysis has got criticism, for example, quantitative researchers tend to blame it is just an art where the subjective judgement is more crucial than the objective, replicable verdict of the numbers.
Anyway, it is not bad at all to know the non-quantitative trading world, if you are interested, I recommend you to watch the following video "How to Use Elliott Wave Analysis to Boost Your Forex Trading" and attend the free courses then.
Watch this full $79 course, FREE. Click Here!
Or watch this classic video from Elliott Wave International's Chief Currency Strategist, Jim Martens, to see how useful the basics of Elliott wave analysis can be. Jim explains how the same basic pattern that R.N. Elliott discovered back in the 1930s is often all you need to make informed market forecasts. Then access Jim Marten's intraday and end-of-day Forex forecasts, completely free from Elliott Wave International. Get your free Forex forecasts.
So this weekend I'm gonna talk few more words about Elliott Wave Analysis, what is elliott wave principle then? as described on wikipedia, "it is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific wave patterns in price movements." Therefore it is a type of investment discipline combining technical analysis with behavioral finance that attempts to explain and predict the market trend (of stock, forex, etc.). Unlike those quantitative techniques we often hear or apply, Elliott Wave Analysis assumes it is unnecessary to be based on past price charts to decide where a market is in its wave patten, which is instead decided by investors' psychology, therefore Elliott Wave Analysis has got criticism, for example, quantitative researchers tend to blame it is just an art where the subjective judgement is more crucial than the objective, replicable verdict of the numbers.
Anyway, it is not bad at all to know the non-quantitative trading world, if you are interested, I recommend you to watch the following video "How to Use Elliott Wave Analysis to Boost Your Forex Trading" and attend the free courses then.
Or watch this classic video from Elliott Wave International's Chief Currency Strategist, Jim Martens, to see how useful the basics of Elliott wave analysis can be. Jim explains how the same basic pattern that R.N. Elliott discovered back in the 1930s is often all you need to make informed market forecasts. Then access Jim Marten's intraday and end-of-day Forex forecasts, completely free from Elliott Wave International. Get your free Forex forecasts.
Friday reading list 22/01/2010
[ 2010/01/22 09:56 | by abiao ]
2010/01/22 09:56 | by abiao ]
1, Time-Varying Momentum Profitability, "In this paper, we present a comprehensive examination of the time-series predictability of momentum profits. We uncover a list of intriguing features of the time-variation in momentum profits: (1) market volatility has significant power to forecast momentum payoffs, which is even more robust than that of market state or business cycle variables; (2) the time-series predictability is centered on loser stocks; and (3) the time-series patterns appear to be at odds with the cross-sectional results." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1534325
2, Econometric Modeling for Transaction Cost-Adjusted Put-Call Parity: Evidence from the Currency Options Market, "this study developed a transaction cost-adjusted put-call parity (TC-Adj-PCP) econometric model to examine the efficiency of options markets. The fundamental analysis of the proposed model concludes that transaction costs represent an omitted variable for the PCP model, where the uniqueness of this variable is demonstrated under PCP in the context of options market efficiency. The novelty of the TC-Adj-PCP model resolves controversial transaction costs issues for traders and researchers." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1537834
3, Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis, "find that bans (i) were detrimental for liquidity, especially for stocks with small market capitalization and high volatility; (ii) slowed down price discovery, especially in bear market phases, and (iii) failed to support stock prices. " http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1533163
4, On the Volatility and Comovement of U.S. Financial Markets around Macroeconomic News Announcements
2, Econometric Modeling for Transaction Cost-Adjusted Put-Call Parity: Evidence from the Currency Options Market, "this study developed a transaction cost-adjusted put-call parity (TC-Adj-PCP) econometric model to examine the efficiency of options markets. The fundamental analysis of the proposed model concludes that transaction costs represent an omitted variable for the PCP model, where the uniqueness of this variable is demonstrated under PCP in the context of options market efficiency. The novelty of the TC-Adj-PCP model resolves controversial transaction costs issues for traders and researchers." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1537834
3, Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis, "find that bans (i) were detrimental for liquidity, especially for stocks with small market capitalization and high volatility; (ii) slowed down price discovery, especially in bear market phases, and (iii) failed to support stock prices. " http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1533163
4, On the Volatility and Comovement of U.S. Financial Markets around Macroeconomic News Announcements
