How to Determine Implied Dividend Yield-Derivative Valuation in Excel

Posted on February 27, 2021 By Harbourfront Technologies

Dividend yield is an input into the option valuation model that often receives little attention from practitioners. This is probably because the majority of companies do not pay dividends. And for those that pay, an inaccuracy in the estimation of the dividend yield often has a small impact on the …

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Exponentially Weighted Historical Volatility in Excel-Volatility Analysis in Excel

Posted on February 19, 2021 By Harbourfront Technologies

Historical volatility (HV) is a useful measure to gauge market uncertainty. Recall that, In finance, volatility (usually denoted by σ) is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market …

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Modern Portfolio Theory-Effect of Diversification on the Optimal Portfolio-Portfolio Management in Python

Posted on January 31, 2021 By Harbourfront Technologies

In the previous installments, we presented the concept of Modern Portfolio Theory. We also provided an optimization algorithm, written in Python, for searching for the optimal portfolio. To continue, we are going to perform some numerical experiments. Specifically, we are going to use the portfolio optimization program developed in the …

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Modern Portfolio Theory-Searching For the Optimal Portfolio-Portfolio Management in Python

Posted on January 25, 2021 By Harbourfront Technologies

In the previous installment, we presented a description of the Model Portfolio Theory and provided a concrete example in Python. We also explained the concept of an Efficient Frontier and provided a visual presentation of it. Recall that, … the efficient frontier (or portfolio frontier) is an investment portfolio which …

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The Willow Tree Method, an Advanced Option Pricing Model

Posted on January 19, 2021 By Harbourfront Technologies

The Binomial tree is a standard method for pricing American style options. Recall that, The Binomial options pricing model approach has been widely used since it is able to handle a variety of conditions for which other models cannot easily be applied. This is largely because the BOPM is based …

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Hedging Market Risks Using Volatility Estimators-Are Sophisticated Methods Better?

Posted on December 28, 2020 By Harbourfront Technologies

Previously, we elaborated on why hedging is an important tool for risk management. We illustrated the importance of hedging with examples from the commodity, mortgage back securities, and foreign exchange markets. A recent paper evaluated the hedging effectiveness of various range-based volatility estimators. Among them, we can find the …

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Is Quant’s Life Hard or Easy?

Posted on December 20, 2020 By Harbourfront Technologies

Last month, efinancialcarreeers published a post, stating that quant’s life is getting harder these days. Back in the day, a quant in finance could devise a strategy, sit back and let the money roll in while lounging about in a silk robe with a fat cigar. Such are the halcyon …

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Convertible Bond Arbitrage Using the Volatility Surface

Posted on December 14, 2020 By Harbourfront Technologies

Convertible bonds are complex, hybrid securities. In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock …

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Modern Portfolio Theory-The Efficient Frontier

Posted on December 11, 2020 By Harbourfront Technologies

Modern Portfolio Theory (MPT) is a theory developed by Harry Markowitz in 1952, which later earned him a Nobel Prize in Economics. The theory states that investors can create an ideal portfolio of investments that can provide them with maximum returns while also taking an optimal amount of risk. The …

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Trading Performance of an ETF Pair Strategy-Quantitative Trading In Python

Posted on December 6, 2020 By Harbourfront Technologies

In a previous post, we presented statistical tests for the Australia/Canada country ETF pair. Specifically, we calculated the return correlation and performed cointegration tests using a training set consisted of 8 years of data. The high correlation and the fact that the pair spread passed 2 cointegration tests made this …

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