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 continuous foreign exchange hedging changes the volatility of an overseas asset, distinguishing a domestic-currency investment from a quanto option. For an unhedged asset translated into domestic currency, it explains that the return…
The document explains how to compare offshore U.S. dollar corporate bonds with Brazilian real-denominated benchmarks. Its proposed framework is to model an asset swap: pay the bond’s cash flows and receive floating-rate payments in the target currency, then…
The document explains an apparent inconsistency in calculating foreign-exchange sensitivity. A cash flow expressed using one currency pair may appear to depend on another pair after rewriting exchange rates through a triangular currency relationship.…
The document explains how to compare pip moves in two currency pairs that share the same base currency. It frames the calculation in terms of profit and loss: for a fixed base-currency trade size, the same pip move produces the same amount in the quote…
The note considers how foreign exchange exposure affects the risk of a portfolio holding foreign assets. For an unhedged position, the return can be represented as the hedged portfolio return plus a scaled currency return. Its variance includes the portfolio…
The discussion explains how to interpret USD/JPY forward points and the direction of an FX swap. It illustrates the quote convention with a spot rate and a three-month forward below spot, then describes how dealing at the bid or offer determines which…
The document outlines a practical way to consolidate risk measures for a multi-market options portfolio. Its central recommendation is to separate security-level risk calculations from products and reports: calculate exposures in a shared system, store…
The document compares proposed risk-free rates for discounting options, including government bond yields, overnight index swap rates, and fixed assumed rates. For collateralized trades, the practitioner answer recommends discounting with the rate on the…
The document addresses pricing American-style foreign exchange options in QuantLib when both domestic and foreign interest rates matter. The accepted answer explains that a Garman–Kohlhagen process, which incorporates both currency yield curves, can be…
The document poses a question about deriving hedging dynamics for a multi-currency derivative whose inputs are domestic and foreign forward rates and a forward foreign-exchange rate. It sets up a portfolio holding the derivative and short positions in the…
The document asks how to form a return series for strategies whose cumulative profit and loss can become negative, in the context of statistical strategy comparisons such as White's Bootstrap Reality Check. The issue is that conventional log returns cannot…
The document addresses how to interpret the dividend-yield input when adapting a vanilla option delta or pricing framework to foreign exchange. Its answer explains that an FX option’s underlying is an exchange rate and that holding the foreign currency has…
The document raises design questions for a web chart showing the equity performance of foreign-exchange trading strategies. It asks whether equity should be recorded on every market tick or at a coarser interval, noting that frequent snapshots can create…
The document describes a multinational consolidation path from a USD functional currency in El Salvador through GBP books in the UK and back to USD books in the US. It reports that USD transactions can return at a different amount after translation, giving…
The document asks how an FX spot market maker should manage and hedge currency inventory accumulated while providing quotes. It raises practical questions about measuring exposure, choosing hedge instruments, and deciding how frequently to rebalance while…
The document discusses a user’s attempt to obtain a 21-observation-ahead volatility forecast with the R package function ugarchroll. The user sets a forecast length and expects results dated after the final observation, but the returned data still end on the…
The document sketches how a foreign investor might translate a bond investment into domestic-currency cash flows using a cross-currency swap, then interest rate swaps. Its example has a US investor acquiring euros through a swap, purchasing a…
The document presents a QuantLib Python question about building an FX swap curve from overnight and tomorrow-next quotes and reproducing the input forward points. It supplies a setup with a trade date, spot settlement lag, spot rate, collateral curve,…
The document asks how to move from FX vanilla and barrier option quotes to a local volatility model. The author describes fitting smiles at quoted maturities with Vanna–Volga, then interpolating total variance across maturities using a flat-forward approach.…
The discussion considers whether average hourly foreign-exchange log returns differ from zero, based on separate one-sample t-tests for 24 hour-of-day buckets. A central statistical issue is multiplicity: running many tests at a nominal significance level…
This explanation describes how foreign-exchange reserve requirements can affect the onshore yuan market when capital movement is restricted and onshore and offshore rates differ. A central bank seeking yuan appreciation can sell foreign-currency reserves to…
This note gives a simple way to estimate the mark-to-market value of an existing FX forward between its trade date and maturity. It linearly interpolates the agreed forward rate from the initial spot rate toward the contracted maturity rate, then compares…
The document addresses risk management for an over-the-counter vanilla FX option book as Morocco transitions toward a floating exchange rate. It identifies two exposures to consider: a period of elevated currency volatility and a large one-time repricing of…
The document describes an attempt to derive a GBP yield curve from a bootstrapped USD overnight indexed swap curve and FX forward quotes using QuantLib. The USD discount factors match a separate library, but the GBP discount factors differ slightly. The code…