Estimation of volatility is important for many financial applications. The most common methods are based on a time series analysis, either sampling prices at regular intervals or using extreme values from within the time intervals. We examine an alternative, where we use the exit times from a...

In this short paper we outline the Newton-Raphson methods used for solving and minimizing complex equations that often have no analytical solution. We outline the formulae, their origins and give a simple example of their application

The concept of enterprise risk management will be examined in the context of multi-strategy hedge funds and fund of hedge funds. This paper seeks to demonstrate that risk at these organizations has to be considered holistically and not in “silos”. A number of qualitative and quantitative...

An observed correlation between two variables, unless there are some special conditions, includes the possibility of multiple relations among the two and a third variable. The correlation coefficient is therefore not sufficient to measure the pure relation between two variables. I propose a...

In this short note we summarise one of the results achieved in a project conducted by SoftSolutions! with the goal of aligning some of the bond analytics result in their system nexRates with those that are produced in Bloomberg. By adding a global bootstrapper to the QuantLib library we are able...

Many sophisticated investors rely on scenario analysis to select a portfolio. These investors define prospective economic scenarios, assign probabilities to them, translate the scenarios into expected asset class returns, and select the portfolio with the highest expected return or expected...

Financial analysts assume that the reliability of predictions derived from regression analysis improves with sample size. This is generally true because larger samples tend to produce less noisy results than smaller samples. But this is not always the case. Some observations are more relevant...

For a large financial market (which is a sequence of usual, “small” financial markets), we introduce and study a concept of no asymptotic arbitrage (of the first kind) which is invariant under discounting. We give two dual characterisations of this property in terms of (1) martingale-like...

We study general undiscounted asset price processes, which are only assumed to be non- negative, adapted and RCLL (but not a priori semimartingales). Traders are allowed to use simple (piecewise constant) strategies. We prove that under a discounting-invariant condition of absence of arbitrage,...

In general multi-asset models of financial markets, the classic no-arbitrage concepts NFLVR and NUPBR have the serious shortcoming that they depend crucially on the way prices are discounted. To avoid this economically unnatural behaviour, we introduce a new way of defining “absence of...