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<TITLE>Rmetrics::FAQ</TITLE>
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<FONT FACE="Arial,Helvetica,Monaco"><B><FONT SIZE="7"><FONT COLOR="#7F0000">FAQ</FONT></FONT></B></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="7"><FONT COLOR="#7F0000"> </FONT></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><B><FONT SIZE="3"><FONT COLOR="#7F0000">www.rmetrics.org</FONT></FONT></B></FONT></P>
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<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B>200</B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">4-10-11
Rmetrics 200.10058</FONT></FONT></B></P>
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<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
is Rmetrics?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">Rmetrics is a
collection of several hundreds of functions which may be useful for
teaching "Financial Engineering" and "Computational
Finance". These functions are available for R, “GNU’s
S”. This is a freely available language and environment for
statistical computing and graphics which provides a wide variety of
statistical and graphical techniques.</FONT></FONT></P>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The functions have
their source in algorithms and functions written by myself, my
students, and many other authors. A major aim is to bring financial
algorithms and concepts together under a common software platform and
to make it public available mainly for teaching financial engineering
and computational finance. Rmetrics is not part of <A HREF="http://cran.r-project.org">CRAN</A>,
Rmetrics is an initiative by its own. Rmetrics has some aims similar
like <A HREF="http://www.bioconductor.org">Bioconductor</A>. Rmetrics
is an open source and open development software project.</FONT></FONT></P>
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<B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><FONT COLOR="#7F0000">What
are the roots of</FONT></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000"> Rmetrics?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The basic R port
from which Rmetrics originated was already initiated in 1999 as an
outcome of lectures held by Diethelm Würtz on topics in
econophysics at ETH Zürich. Meanwhile, the family of the
Rmetrics packages includes four members dealing with the following
subjects: <I><B>fBasics</B></I> - Markets, Basic Statistics, Date and
Time, <I><B>fSeries</B></I> - The Dynamical Process Behind Financial
Markets, <I><B>fExtremes</B></I> - Beyond the Sample, Dealing with
Extreme Values, and <I><B>fOptions</B></I> - The Valuation of
Options. Two other packages are under current development, <I><B>fBonds</B></I>
and <I><B>fPortfolio</B></I>.</FONT></FONT></P>
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<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
is included in the </FONT><I><FONT COLOR="#7F0000">fBasics</FONT></I><FONT COLOR="#7F0000"> Package?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The package <I><B>fBasics</B></I>
covers the management of economic and financial market data. Included
are functions to download economic indicators and financial market
data from the Internet. Distribution functions relevant in finance
are added like the asymmetric stable, the hyperbolic and the inverse
normal gaussian distribution function to compute densities,
probabilities, quantiles and random deviates. Estimators to fit the
distributional parameters are also available. Some additional
hypothesis tests for the investigation of correlations, dependencies
and other stylized facts of financial time series can also be found
in this package. Furthermore, for date and time management a holiday
database for all ecclestial and public holidays in the G7 countries
and Switzerland is provided together with a database of daylight
saving times for financial centers around the world. Special calendar
management functions were implemented to create easily business
calendars for exchanges. A collection of functions for filtering and
outlier detection of high frequency foreign exchange data records
collected from Reuters' data feed can also be found together with
functions for de-volatilization and de-seasonalization of the data.</FONT></FONT></P>
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<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
is included in the </FONT><I><FONT COLOR="#7F0000">f</FONT></I></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><I><FONT COLOR="#7F0000">Series</FONT></I></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000"> Package?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The package <I><B>fSeries</B></I>
covers topics from the field of financial time series analysis
including ARIMA, GARCH, Regression, and Feedforward Neural Network
modelling. This library tries to bring together the content of
existing R-packages with additional new functionality on a common
platform. The collection comes with functions for testing various
aspects of financial time series, including unit roots, independence,
normality of the distribution, trend stationary, co-integration and
neglected non-linearities. Furthermore functions for testing for
higher serial correlations, for heteroskedasticity, for
autocorrelations of disturbances, for linearity, and functional
relations are also provided. Technical analysis and benchmarking is
another major issue of this package. The collection offers a set of
the most common technical trading indicators together with functions
for charting and benchmark measurements. For building trading models
functions for a rolling market analysis are available. A new
additional chapter on modeling long memory behavior including moment
methods, periodgram analysis, whittle estimator, and wavelet analysis
is planned to be added in the near future.</FONT></FONT></P>
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<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
is included in the </FONT><I><FONT COLOR="#7F0000">f</FONT></I></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><I><FONT COLOR="#7F0000">Extremes</FONT></I></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000"> Package?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The package <I><B>fExtremes</B></I>
covers topics from the field what is known as extreme value theory.
The package has functions for the exploratory data analysis of
extreme values in insurance, economics, and finance applications.
Included are plot functions for empirical distributions, quantile
plots, graphs exploring the properties of exceedences over a
threshold, plots for mean/sum ratio and for the development of
records. Furthermore functions for preprocessing data for extreme
value analysis are available offering tools to separate data beyond a
threshold value, to compute blockwise data like block maxima, and to
de-cluster point process data. One major aspect of this package is to
bring together the content of already existing R-packages with
additional new functionality for financial engineers on a common
platform investigating fluctuations of maxima, extremes via point
processes, and the extremal index. A new additional chapter on risk
measures, stress testing and copulae is planned to be added in the
near future.</FONT></FONT></P>
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<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
is included in the </FONT><I><FONT COLOR="#7F0000">f</FONT></I></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><I><FONT COLOR="#7F0000">Options</FONT></I></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000"> Package?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The package <I><B>fOptions</B></I>
covers the valuation of options including topics like the basics of
option pricing in the framework of Black and Scholes, including
almost 100 functions for exotic options pricing, including the
Heston-Nandi option pricing approach mastering stochastic volatility,
and Monte Carlo simulations together with generators for low
discrepancy sequences. Beside the Black and Scholes option pricing
formulas, functions to valuate other plain vanilla options on
commodities and futures, and function to approximate American options
are also available. Some binomial tree models are implemented. The
exotic options part comes with a large number of functions to valuate
multiple exercise options, multiple asset options, lookback options,
barrier options, binary options, Asian options, and currency
translated options. Some functions for the investigation of
exponential Brownian motion in the context of Asian option valuation
have been recently added.</FONT></FONT></P>
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<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">I</FONT></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><FONT COLOR="#7F0000">s
Rmetrics Open Source Software?</FONT></FONT></FONT></B></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">Rmetrics has a
commitment to full open source code development and distribution. All
contributions included in the Rmetrics packages are expected to exist
under an open source license such as GPL2. The reasons for this
commitment are the ability to test, to extend and to improve the
software in a convenient way, to encourage excellent scientific
computing and statistical practice in financial engineering and
computational finance, and to provide a workbench of tools that allow
to explore and expand the methods used to analyze financial market
data and to valuate financial instruments.</FONT></FONT></P>
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<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">What
Platforms are supported by Rmetrics?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">Rmetrics is
primarily build and maintained under <B>MS Windows XP</B>.</FONT></FONT></P>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">The <U>latest
source packages</U> are located in the source directory on the <I><B>Rmetrics
Server</B></I>, and the latest binary files for the Windows OS are
located in the download directory themselves. The DESCRIPTION files
hold the most recent version number, please check. The source code of
the <U>productive packages</U> can be downloaded from the <I><B>CRAN Server</B></I>,
also the binary packages for Windows, Mac OSX and Linux operated
computers. Rmetrics is also availalble in form of <I><B>Debian </B></I></FONT></FONT><I><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">P</FONT></FONT></B></I><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><I><B>ackages</B></I>
and part of the latest <I><B>Knoppix Quantian CD</B></I>. </FONT></FONT></P>
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<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">Why
d</FONT></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><FONT COLOR="#7F0000">id
you start the </FONT></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">Rmetrics
Port </FONT></B></FONT></FONT><B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><FONT COLOR="#7F0000">for</FONT></FONT></FONT></B><FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2"><B><FONT COLOR="#7F0000">
Microsoft Software?</FONT></B></FONT></FONT></P>
<BLOCKQUOTE>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">In the financial
community and also in my lectures Windows is the mostly used
operating system. To teach financial engineers it became quite
natural for me to work under Windows. For a broad distribution and
acceptance of Rmetrics I decided to devellop the software under
Windows 2000/XP. That is business reality, and it was a good decision.</FONT></FONT></P>
<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">There are no many
people behind Rmetrics, currently it's only me. I have my job as a
lecturer at the Institute of Theoretical Physics at <A HREF="http://www.itp.phys.ethz.ch">ETH
Zurich</A>, and I'm the senior partner of an ETH spin-off software
company, <A HREF="http://www.finance.ch">Finance Online</A>. So I
have several responsibilities to take, and as a consequence things
might go slow ... The growing Rmetrics collection is based on many
statistical and financial functions which were contributed by myself,
my students, or were ported from many other sources during the last
seven years since I started my lectures in "Econophysics"
at ETH. I'm aware that the work is by far not complete. Parts of the
software are still untested, and may contain some bugs. Contributors
are welcome!</FONT></FONT></P>
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<P>
<FONT FACE="Arial,Helvetica,Monaco"><FONT SIZE="2">Diethelm Würtz</FONT></FONT>
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