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 asks how to estimate credit valuation adjustment and debit valuation adjustment for a portfolio containing long and short FX options. The example assumes both options share an underlying and expiry. The author understands that current…
The note asks whether an implied volatility surface for INR/USD can be reused for the inverse USD/INR rate. It distinguishes the standard deviations of an exchange rate and its reciprocal, which are generally not equal, from the relationship between…
The document explains a QuantLib FX swap curve setup using forward-point quotes, a spot exchange rate, and a collateral discount curve. It describes a mismatch between input forward points and values reconstructed from the resulting curve when the curve and…
The document addresses a sign mismatch in a calculation of the cross-currency dollar basis. The questioner derives an implied dollar interest rate from spot and three-month forward exchange rates, then compares the implied rate with three-month USD LIBOR.…
The document asks how to approximate two path-dependent products with vanilla options: a range accrual note and a foreign-exchange target accrual redemption forward (TARF). It mentions a generic description of range accruals as a sequence of daily options,…
The question examines a polynomial interpolation formula for an FX implied-volatility smile and focuses on its at-the-money value. Using the coefficients and equation from a cited textbook example, the author reports that the reproduced value matches only…
The document examines a currency triangular arbitrage example and asks why traversing the exchange-rate loop in opposite directions produces a stated gain of 2.5% one way and a loss of 2.44% the other. The accepted explanation is that percentage gains and…
The document raises a question about whether cross-gamma effects belong in curvature calculations under the Fundamental Review of the Trading Book standardised approach. It describes an FX option whose risk is represented in the two currency legs relative to…
The answer explains how to identify inputs for a European at-the-money currency option using spot FX, implied volatility, and deposit rates. For an option on a currency forward, it first derives the forward level from spot and the interest-rate differential…
The document sets up a quanto put with a fixed exchange-rate conversion in its payoff and describes candidate hedge instruments involving the foreign stock, exchange-rate conversion, foreign cash, and domestic cash. It applies Itô’s lemma to the proposed…
The response explains the relationship between an outright foreign exchange forward and a spot transaction combined with an FX swap. In the described construction, the spot purchase is offset by the swap’s initial exchange, leaving the same future currency…
The note asks why GBP/USD forward quotes rise above spot despite the apparent expectation that the higher-yielding US currency should strengthen. The explanation is covered interest rate parity: forward points reflect the interest-rate differential so that…
The note addresses why a cross-currency basis calculation may appear far from zero before the financial crisis. The key correction is to match the interest-rate convention to the contract horizon: for a three-month period, convert quoted annualized rates to…
The document explains how a corporate issuer can compare bond financing costs in two currencies when each bond is quoted against a different reference rate. The basic comparison is to calculate each bond’s all-in yield, then translate one set of cash flows…
The document gives a brief overview of empirical patterns reported in financial returns, particularly in response to a question about intraday equity and exchange-rate data. It notes that return distributions and volatility change over time, returns are…
This discussion examines the risk exposures of an Australian investor holding a USD-denominated zero-coupon bond. It explains that the bond's AUD value can change with both the AUD/USD exchange rate and US interest rates, because the investor knows the…
The document asks how currency index formulas select their component pairs and weights, and how to build a dollar index from a chosen set of exchange rates. It supplies example formulas for dollar and euro indexes, then asks how to estimate a constant and…
The document explains a global macro trade based on the expected narrowing of government bond yield spreads before the euro’s launch. Investors went long higher-yielding Italian or Spanish bonds and short German bunds. As yields converge, bond prices rise;…
The note explains why a EURUSD cross-currency swap can carry sensitivity to the EUR 6-month versus 3-month basis, in addition to USD LIBOR, EURIBOR, and the currency exchange rate. The explanation links the basis exposure to how the EUR leg is built:…
The document explains why an FX swap should have zero value at inception under idealized interest rate parity. It distinguishes the spot exchange, which is agreed at the prevailing spot rate, from the forward exchange, whose fair rate reflects the interest…
The answer offers a funding-based explanation for why cross-currency swap basis was close to zero before the 2008 financial crisis. It argues that European banks were structurally short US dollars and used FX swaps to obtain dollar funding. Before the…
The document surveys sources that may provide free or sample high-frequency market data for research and training. Suggestions include foreign exchange tick histories, exchange sample files, equity order book data, and reconstructed limit order books. Some…
The question asks which market variables drive the value of a currency non-deliverable forward (NDF) and therefore belong in a historical simulation VaR model. It expresses the NDF value using the forward exchange rate, strike, domestic discount factor, and…
The document considers whether changing performance across symbols and weeks might reflect shifts between stationary and nonstationary behavior. Its response recommends testing returns rather than price levels under a weak-stationarity framework, since price…