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 document explains the settlement legs underlying overnight (ON) and tomorrow-next (TN) FX swaps and lists the bid and ask outright calculations. ON spans today’s settlement to tomorrow’s, while TN spans tomorrow’s settlement to the following business…
The note explains how Bloomberg Excel functions can retrieve a price for a specified time rather than the current quote. It contrasts BDP, which returns current data, with BDH, which can request intraday data over a short interval. Bar settings select trade,…
The document answers a question about matching a CFTC Commitments of Traders report code to the futures contract it represents. It identifies code 097741 with Japanese yen futures and points to the standard CME 6J contract as the corresponding market…
The document asks how to express payoffs for a GBPUSD European option with a knock-in feature and leverage when the contract notional is specified in USD. It describes an upside payoff when the terminal exchange rate exceeds the strike and a leveraged…
The document explores ways to divide price histories into regimes with different trend and volatility characteristics, motivated by subjective segments in a short-interval EURUSD chart. It notes that a single large price bar may be an outlier rather than…
The document proposes adjusting constant range bar size dynamically on intraday foreign exchange charts. Unlike time-based candles, range bars form after price moves a preset amount, so their duration varies with market activity. A fixed range may sometimes…
The document distinguishes three contracts that can be described as an option on a foreign-currency stock but have different payoffs. If a USD payoff is converted at a predetermined exchange rate, the contract is a quanto. If the strike is in EUR while the…
The document explains which interest rates belong in a currency-pair forward value formula. Its AUD/USD example shows that the quoted price is the value of one Australian dollar expressed in US dollars, so the rate for the quote currency, USD, is applied…
The document outlines possible models for quanto credit default swaps, whose contingent payments use a different currency from the pricing leg. It says there is no single market standard and describes the main modeling components: a dynamic credit or…
The answer explains how to value a dual-currency bond whose payments are converted into the investor's accounting currency. A cross-currency swap can be viewed as a portfolio of FX forwards in a credit-risk-free setting, but a bond issuer may default before…
The document explains how faster access to prices or faster order transmission can create a temporary advantage across markets. A trader who learns that an asset has changed price in one venue may try to trade in another venue before its prices adjust. The…
The document examines the relationship between GBP/USD and USD/GBP, which are reciprocal exchange rates. Their log returns have equal magnitudes and opposite signs when measured over matching intervals, so their historical volatility, calculated from those…
The document introduces cross-border risks relevant to Brazilian derivatives, distinguishing transferability from convertibility. Transferability risk is the possibility that local rules prevent repatriating assets held onshore, regardless of the currency in…
The question describes simulating an FX rate with a Black-Scholes-style process that includes the domestic and foreign short rates, volatility, and correlated random shocks. The simulation’s terminal-rate percentiles appear positively skewed, prompting a…
The document presents the no-arbitrage relationship between foreign exchange spot and forward rates. With the spot quote defined as domestic currency per unit of foreign currency, the forward rate reflects the difference between domestic and foreign interest…
The document asks whether SABR can be used for foreign-exchange and equity underlyings when beta, estimated from a regression of at-the-money implied volatility against the forward, falls below zero or above one. The responses distinguish parameter fitting…
The document considers how to estimate risk-neutral currency depreciation conditional on a sovereign default within a fixed horizon. Proposed approaches include quanto CDS spreads and market-implied quanto factors, broker indications, historical default…
The document explains how to calculate first-order FX sensitivities when a pricing function’s inputs use one set of exchange rates but the desired risk measures use another. It represents portfolio value as amounts in their local currencies, then converts…
The document distinguishes between an ETF’s actual exposure and a proposed hedge based on oil prices. If an ETF tracks shares of a US oil company, its direct exposure is to those shares; an issuer would generally hold the underlying stock, with a possible…
The document explains why a cross-currency swap may appear to have no foreign-exchange exposure in a risk report. The reported EURUSD sensitivity is expressed per pip, so a small value shown with limited decimal precision can round to zero even when the…
The document examines a proposed GARCH analysis of USD/JPY daily changes in the high-minus-open range. It transforms that range by taking the logarithm of its ratio to the previous day's range, then fits several GARCH specifications. The original analysis…
The discussion outlines a framework for valuing a cross-currency swap using currency discount curves, FX rates and forwards, calibrated market instruments, and the swap’s cash flows. The example sets up sterling and dollar curves plus a cross-currency curve,…
The document asks how to express a target set of net currency positions using the fewest foreign-exchange pairs while also limiting the absolute size of positions. It illustrates that different combinations of currency trades can produce the same net…
The document explains a method for pricing a quanto option when direct quanto quotes may be unavailable. It proposes calibrating an effective volatility from non-quanto options in the domestic currency, focusing on the volatility smile relevant to the…