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.
4,574 documents
The discussion addresses whether buying a Eurodollar futures contract produces a gain when its quoted price is unchanged from entry through expiration. Its central point is that a buyer who enters at 99.80 and settles at 99.80 has no price-based profit or…
The document explains why currencies and futures can be treated as assets with known yields. The key idea is that an investor can combine a spot position with an offsetting forward or futures position, setting the future sale price in advance. For a currency…
The document discusses extending an FX curve beyond the maturity range covered by FX swaps, using cross-currency swaps (CCS) or non-deliverable swaps (NDS). It asks whether QuantLib can support these instruments as curve-building inputs. The answer…
The document raises a benchmark currency problem for a European investor whose portfolio is measured in euros but holds mostly unhedged US securities. It asks whether converting a US equity benchmark using spot EUR/USD rates produces a fair comparison, and…
The document asks how practitioners build a smooth foreign-exchange volatility smile from a small set of quoted points: at-the-money volatility, risk reversals, and strangles at two delta levels. It also asks which interpolation and extrapolation methods are…
The document raises a question about gamma for a short INR/JPY put option and lists the trade’s notionals, strike, spot, maturity, volatility, and interest rates. It reports a delta of 0.56 and gamma of -2.26, then asks why gamma could exceed one or the deal…
The discussion explains why a zero correlation between the S&P 500 and USD/JPY does not imply that they must move in opposite directions. Uncorrelated returns can decline together, while a negative correlation would describe a tendency to move oppositely.…
The document asks whether domestic–foreign symmetry can price a foreign-paying fixed-strike Asian option when its arithmetic average is approximated by a lognormal distribution. The proposed change of measure uses the average itself as a numeraire, but the…
The document asks how to apply the Vanna–Volga method when market inputs are quoted for discrete maturities. The desired outputs are an option premium and delta for a specified spot, strike, and expiry, using domestic and foreign rate curves and implied…
The document surveys possible sources for aggregated foreign exchange order-flow and volume data, including broker statistics, commercial providers, industry surveys, and settlement-system data. It explains a central limitation: spot FX is decentralized, and…
The note considers why a company’s reported earnings or equity sensitivity to a foreign exchange rate movement may differ between an upward and downward scenario. It explains that the net effect depends on the company’s revenues and expenses in each…
The discussion surveys several ways graph concepts can be applied in finance. Correlation networks can represent relationships among assets and help visualize clusters or tightly connected groups. For foreign exchange, exchange rates can be represented as…
This short explanation clarifies how to convert a pip distance into a price level for USD/JPY. Although a pip is commonly 0.0001 for many currency pairs, the convention for yen pairs is 0.01. The different pip size reflects the pair’s quote precision and the…
The document describes a simulated real-time currency trading competition in which teams could request current prices and submit buy or sell orders through a server. Participants began with equal holdings across six currencies, and trades incurred no…
The document describes calibrating a parametric implied volatility smile from foreign exchange option quotes. The market supplies at-the-money volatility, a delta-based market strangle quote, and a risk reversal. The calibration seeks parameters that pass…
The document considers a call option on a foreign equity with its strike denominated in the foreign currency, while the payoff is valued in domestic currency. At expiration, the domestic payoff is the exchange rate multiplied by the positive difference…
The document distinguishes the ordinary valuation of a repo from the risks associated with its collateral. In the explanation provided, a repo’s loan cash flows are valued using the repo rate in the currency of the cash advanced. If those cash flows are…
The document asks how a foreign exchange swap with near and far legs, or several value dates, can be represented by a single price. The response explains that FX swap points reflect the interest-rate differential embedded in exchanging currencies across…
The document considers whether a trader can profit simply by taking the opposite side of a stream generated by traders who lose money. Its answer emphasizes that observed losses are typically measured after transaction costs. A candidate group must lose more…
The document outlines an ARMA(1,0)-GARCH(1,1) model for forecasting exchange-rate movements and volatility. The conditional mean equation uses the previous observation to forecast the next exchange rate, while the variance equation combines a constant with…
The document explains why volume and time-and-sales information displayed by a broker such as Interactive Brokers may not represent comprehensive foreign-exchange order flow. In decentralized FX, a broker’s display can reflect only the quotes or activity…
The discussion explains how to mark a USDJPY forward before maturity. For a position that receives dollars and pays yen at a contracted strike, the offsetting transaction uses the current forward rate for the remaining term, rather than spot. That…
The discussion explains why FX forwards may depart from the relationship implied by two quoted money-market rates. In practice, banks cannot necessarily borrow and lend independently at those rates; they often transact through the currency basis swap market.…
The document raises a pricing question about a reverse convertible denominated in euros and linked to a US dollar stock. It frames the product as a zero-coupon bond combined with a put, and asks how quanto adjustment affects both components. For the…