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 explains how a prepaid expense moves through the balance sheet and income statement. At purchase, cash decreases while the prepaid asset rises by the same amount, leaving total assets unchanged. If the purchase is initially made on credit,…
The document describes the Basel market-risk expected shortfall calculation that adjusts a base-horizon ES for risk factors with longer liquidity horizons. It defines ES on the full portfolio and on subsets where shorter-horizon factors are frozen, then…
The document asks how to measure monthly returns for two S&P 500 equity portfolios formed from the highest- and lowest-scoring ESG companies. The proposed portfolios are reconstituted annually using the prior year’s ESG scores, and the author wants to…
The document compares hedging a future foreign-currency receipt with a forward contract against creating a similar exposure through dollar borrowing, spot conversion, and euro investment. Under covered interest parity, it gives the forward-rate relationship…
The document asks where to find aggregate information on investor margin borrowing, including historical data, and whether margin activity could inform or be backtested as a trading signal. It is prompted by a claim that peaks in margin trading preceded past…
The document asks for the probability that a Brownian bridge, conditioned on its terminal value, reaches an upper barrier before a lower barrier within a fixed horizon. It starts from the familiar upper-before-lower hitting probability for arithmetic…
The document asks how to adapt the two-scale realized variance estimator (TSRV) associated with high-frequency data. It proposes calculating realized variance at two subsampling intervals, then subtracting the shorter-scale estimate from the longer-scale…
The document considers a market with one risky asset and a zero-rate risk-free asset, where the stock’s volatility depends on a second Brownian motion independent of the one driving its returns. It constructs a change of measure that removes the stock’s…
The document explains how to calculate the U.S. share of global equity market capitalization using the World Federation of Exchanges’ monthly report. For a selected month, add the market capitalization reported for NASDAQ and NYSE, divide by the WFE global…
The document describes estimating incremental value at risk by calculating portfolio VaR from simulated scenario returns, removing one position’s scenario returns, and recalculating VaR. Incremental VaR is the difference between the original and reduced…
The note clarifies how to interpret the euro short-term rate (€STR) when estimating interest on a single overnight loan. The quoted rate is expressed as an annual rate using an Actual/360 day-count convention. Under that convention, the overnight interest…
The document discusses PCA for equity risk modeling when the number of stocks exceeds the available return observations. With fewer observations than assets, the estimated covariance or correlation matrix has limited rank; components beyond that rank have…
The note describes several ways a central bank can acquire foreign currency and how reserve holdings can be used. In a market-based system, the bank may sell domestic currency to buy dollars or other reserve assets when demand for the local currency is…
Price discreteness means stock prices can move only in specified increments, or ticks, rather than taking any value on a continuous scale. The note illustrates this with historical NYSE quotes that used fractional increments before decimal pricing, then…
The document describes the basic market-making model in an ETF context. A market maker quotes prices at which it will buy and sell, generally buying at the bid and selling at the ask; the difference between those prices is a primary source of revenue.…
The document explains why a derivative’s quoted market price may differ from a model estimate of fair value. It challenges a simple pricing workflow in which a desk recalibrates a model, obtains a valuation, and adds a fixed fee. The response instead…
The document asks whether pairs trading can be applied to related options or to an option and its underlying asset. The proposed idea is to trade a stationary linear combination over short horizons, where changes in delta and time decay may have less…
The document asks how to estimate an execution or settlement price from a spot price when order size affects the realized price. It proposes using the bid–ask spread as a starting point because both spread and execution impact depend on liquidity, and asks…
The document clarifies the relationship between a bond's beta, its volatility, and its correlation with the market portfolio. The question derives debt beta from expected debt and market returns, then uses the regression-beta identity to infer debt…
The document examines a multi-asset delta-hedging P&L decomposition and asks why a pricing function should satisfy a condition involving a positive break-even covariance matrix. Taylor expansion and delta hedging remove the first-order asset-price terms; the…
The document asks whether a Black-Scholes equation with an issuer credit spread is suitable for pricing an autocallable structured product, and how to examine its Delta, Vega, and hedge. The response advises against using Black-Scholes as the pricing model…
The document surveys alternatives to the sample covariance matrix used in Markowitz mean-variance portfolio construction. It names RiskMetrics exponentially weighted moving average estimators from 1996 and 2006, multivariate DCC-GARCH, and Ledoit-Wolf…
The document frames an annual right to transfer oil from France to the UK, with daily capacity and the choice to leave capacity unused. Its proposed payoff arises when the UK price exceeds the French price: buy in France and sell in the UK. The underlying…
The document explains why index volume cannot be interpreted like the volume of a single traded security. The reported turnover for an equity index aggregates each constituent’s trade prices multiplied by the shares traded, then sums those amounts. The…