Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
20,364 documents
The document describes a question about calibrating a local volatility surface through an inverse problem. It outlines a representation that uses B-splines across one dimension and linear interpolation across time, then penalizes variation in time and…
The procedure estimates an at-the-money implied volatility for a target maturity by using two listed option expirations that bracket it. It first selects nearby call and put strikes, estimates a forward price for each expiration from put–call parity, and…
The discussion addresses why combining a commodity channel index, momentum, and price distance from a moving average with a row-wise standardization formula does not yield values confined to minus one and one. It explains that standardization centers…
The explanation clarifies that the Black–Scholes stock process is written for the ordinary price level, with drift and volatility proportional to the current price. The logarithm enters when Itô’s lemma is applied to that process: the log price then has a…
This discussion compares Bloomberg’s FWCM and FWCV functions for projecting US Treasury forward rates. Both use the same underlying calculation formula, but can show different values because of curve settings, interpolation, conventions, and update timing.…
The document asks whether quants build one prediction model per stock or train a model that can generalize across many securities. It highlights two concerns with training on a single stock and applying that model elsewhere: survivorship bias and the narrow…
The document compares two ways to estimate a factor risk premium in a linear asset pricing model. The time-series method estimates asset exposures from returns over time and treats the factor’s sample mean as its premium; the factor is priced exactly in that…
The document distinguishes two choices in mean-variance portfolio theory. The tangency point between the capital allocation line (CAL) and the efficient frontier identifies the optimal portfolio of risky assets, given the model’s assumptions. It is the…
The document questions whether historical means and covariance matrices are useful for portfolio allocation when an asset’s risk can change after new information. It frames the issue using a multivariate Gaussian model, where allocations are chosen to shape…
The document describes a random matrix theory approach to separating noise from structure in a correlation or covariance matrix. It explains that the matrix is decomposed into eigenvectors and eigenvalues, noisy eigenvalues are adjusted, and the matrix is…
The document explains the different roles of loan loss provisions and capital adequacy rules. Provisions recognize expected or likely losses on a bank’s existing loans, with changes flowing through earnings and equity. Capital adequacy requirements instead…
The document asks how to infer an incremental discount rate for a company with no observable traded debt when market yield or credit spread data for its sector stop at stronger credit ratings. Its example is a company rated CCC when available sector data…
The document raises a pricing question about a down-and-out call when the underlying follows a jump process, with the Kou double-exponential and normal inverse Gaussian models suggested to represent asymmetric jumps. It considers raw Monte Carlo simulation…
The document poses a question about constructing a risk-neutral density from out-of-the-money options. Since the density is related to the second derivative of option price with respect to strike, it asks whether convexity of option prices is needed to…
The document explains how to request historical data outside regular trading hours through Interactive Brokers’ API using the R IBrokers package. The key setting is the historical-data request’s regular-hours flag: disabling it allows the request to include…
The document explains why an FX option’s delta convention must match the convention used to build a volatility smile or surface. It lists spot and forward delta, each with premium-adjusted and unadjusted forms, and notes that converting between conventions…
The document asks how to assess the income taxes a company actually pays using its annual financial disclosures. It focuses on two reported figures: cash paid for income taxes after refunds and the income tax provision. Using a large technology company as an…
The document compares risk parity with smart beta and shows why their relationship depends partly on how each term is defined. Risk parity is described as a portfolio construction and risk management approach that seeks diversification across risk…
The document presents a portfolio geometry question: given a fully invested portfolio on the efficient frontier other than the global minimum variance portfolio (GMVP), can another fully invested frontier portfolio have zero covariance with it? The accepted…
The document collects practical ways for a small trading operation to reduce exposure of proprietary data, code, indicators, and strategy parameters when hiring a quant. Suggested controls include limiting access to only the resources needed, separating…
The document explains that CUSIPs are assigned identifiers for specific securities and are generally immutable once assigned, rather than values that simply change in place. It describes the identifier as having a base associated with the issuer and a tail…
The document discusses how to identify US stocks and ETFs that may be delisted soon after an announcement, rather than waiting for the effective date. Its suggested starting point is SEC EDGAR: search relevant filing types, including merger proxy filings,…
The note addresses whether Black–Scholes prices a call and a put equally when their strikes are equally far from the current underlying price in opposite directions. It distinguishes terminal payoffs from option values before expiry. At expiry, if the…
The note explains why callable bonds should not automatically be analyzed as if they run to maturity. When an issuer is likely to call, calculating spread and interest-rate risk to maturity can give misleading results. A common practical approach is to find…