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.
4,613 documents
The document explains how to estimate P&L for a position long a government bond and paying fixed on an interest rate swap. It starts with each leg’s DV01 and its yield change: multiplying them gives the bond and swap P&Ls, which sum to the trade’s total. A…
The document considers a euro-based investor holding a US dollar S&P 500 ETF and asks how to calculate a minimum-variance hedge ratio against dollar depreciation. Although the question starts from the usual correlation-and-volatility formula, the answer…
The document examines how to hedge a government bond portfolio against interest-rate changes with Treasury futures. It sets out a portfolio’s market value and modified duration, the deliverable bond’s duration, contract value, and a six-month rate, then…
The document asks how to update the weight of a long or short swap after its value changes. It distinguishes a holding’s value relative to the portfolio’s original value from its weight in a portfolio whose total value has also changed. A long position with…
The document addresses how an event-driven allocator can value free capital when future signals arrive unpredictably and positions tie up capacity. It frames the problem as approximate dynamic programming, with a compact state covering available capital,…
The document examines how a sequence of bet sizes maps to share holdings, cash, and final profit. Using two strategies with identical price forecasts but different position adjustments, it shows that the path of exposure matters: the first strategy earns a…
The document asks how to apply Kelly sizing to angel portfolios when investments are made in parallel, pay out at unknown times, and may have different outcomes. It proposes scaling each investment’s Kelly fraction by a decreasing schedule so that the total…
The document describes a paper-trading problem in which a cash-neutral long–short equity portfolio repeatedly runs out of excess liquidity when target positions are converted into share orders. The trader scales portfolio weights by a high fraction of…
The document asks whether reducing exposure in a leveraged long/short equity portfolio at predefined drawdown thresholds can manage risk, and what risks such active deleveraging may introduce. The proposed approach cuts portfolio exposure in stages as losses…
The question asks how to keep hierarchical risk parity allocations within per-asset bounds while preserving the method’s recursive allocation across correlation clusters. One proposed approach examines each pair of branches at every split. It calculates each…
The document considers how to represent margin and capital use when backtesting a long-short futures strategy. Its central guidance is that exchange margin is a minimum collateral requirement for protecting the exchange, not a sensible target for sizing…
The document clarifies how to interpret the tick specification for the Mini Nikkei futures contract traded on the Osaka exchange. The quoted increment is five index points, and the stated value of one tick is 500 yen. Thus, the monetary value applies to the…
The document considers how to study what happens after a stop, target, or other risk rule closes a position. For a formal strategy, it proposes running two simulations in parallel with identical entry logic: one uses bracket exits and the other does not.…
The document derives allocation weights for two ETFs tracking the same index with different daily leverage: one returns negative one times the index move, and the other returns 1.5 times the move. It assumes the full portfolio is invested across the two…
The discussion considers how to assess whether a candidate holding improves diversification in an existing portfolio. One proposed method combines pairwise correlations with position weights to form a weighted average correlation, then compares that measure…
This exchange examines why borrowing below a property’s capitalization rate may still reduce first-year cash-on-cash return. The key distinction is between the debt interest rate and the loan constant, which measures annual debt service relative to the loan…
The document poses implementation and interpretation questions about marginal risk contributions in a long-short portfolio. It describes legacy code that applies a marginal volatility formula using each instrument’s sided U.S. dollar notional as its weight.…
The document asks how to chart a long-short position when its two stocks have different capital weights or market sensitivities. One response says to combine each stock’s price or profit-and-loss contribution using the same weights as the position, so the…
The document addresses how to keep a portfolio optimizer from assigning zero weight to securities an investment team wants represented. It describes a mean-variance objective using expected returns and a covariance matrix, then proposes minimum weight bounds…
This document explains how to use the PMwR backtesting framework when trade sizing depends on portfolio state at each decision point. The example defines a signal function that reads current wealth, cash, and holdings, then uses that information while…
Portfolio weights far above 1 or below 0 can represent leveraged long and short positions. In mean-variance optimization, extreme paired positions may arise when the model estimates that two similarly risky assets have sharply different expected returns. It…
The document examines why a repeated horse-race model that requires bettors to wager all their wealth assigns each horse a share equal to its win probability, even when the payout odds differ. Under the expected log-wealth objective, the log of each horse’s…
The document explains how to size out-of-the-money index puts in a tail-hedged equity portfolio. The proposed procedure evaluates the portfolio under a specified downside scenario over a one-month horizon. For a long index position, estimate the put’s…
The document concerns an implementation of the Betting Against Beta strategy that ranks stocks by estimated market beta, shorts higher-beta names, and takes long positions in lower-beta names. The author describes adjusting exposures toward a beta target and…