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 presents a money market approach to managing exchange-rate exposure from a future foreign currency receivable. Its example concerns a Japanese exporter expecting a euro payment in one year and supplies borrowing and lending rates for dollars,…
The document surveys categories of systems used by hedge funds for automated trading and explains why platform choice depends on the instrument and workflow. It names examples spanning Bloomberg order and execution tools, futures-focused systems,…
The discussion explains how FX futures can represent currency carry even though a futures position does not directly exchange interest payments. A futures price reflects interest rate differentials between the currencies, and as the contract approaches…
The document explains why the euro profit from an XAUUSD trade cannot be calculated from the gold price movement alone. A trade denominated in dollars creates exposure to the EUR/USD exchange rate when the account balance is in euros. The response describes…
The document describes OANDA box options, which pay out when an exchange rate enters a chosen price interval during a specified time window. It distinguishes a successful bet on touching the interval from the opposite bet that the rate stays outside it, and…
The answer distinguishes the spot-market effects of outright forwards and FX swaps used to hedge foreign investments. It says forwards can have a substantial effect on spot, while swaps generally carry much less direct spot delta. As an illustration, it…
The document discusses why bid and ask quotes in foreign exchange market data may appear crossed or locked. Unlike a centralized exchange, forex liquidity is distributed across venues, broker feeds, and market makers, so quote relationships observed across…
The document raises a market-convention question about quoting delta and term pairs on FX volatility surfaces for EUR/PLN and EUR/USD. It suggests that EUR/PLN may use forward delta throughout, while EUR/USD may use spot delta through one year and forward…
The document compares pegged orders with a cancel-and-replace approach for trading through a private forex dealer. Its answer frames the choice around how often the strategy updates orders: frequent repricing and cancellation may favor sending market orders,…
The document asks whether adding the individual option P&Ls in a foreign exchange options book gives the portfolio value. Its brief answer says yes and notes that foreign exchange markets can move around the clock, making ongoing exposure monitoring…
The note concerns reproducing an implied volatility surface for foreign exchange options, with the intention of using it to calculate local volatility. The questioner suspects that strike discrepancies may stem from the forward exchange rate calculation or…
Quanto option pricing depends on the underlying asset’s volatility, the exchange rate’s volatility, and their correlation. When liquid quanto instruments are available, their prices can imply the combined correlation and volatility adjustment directly;…
The document explains Taleb’s “soft” American option idea through foreign exchange options. Unlike a simple stock call or put, an FX option combines exposure to two currencies, so early exercise depends on the relative domestic and foreign interest rates as…
The document asks which participant groups influence foreign exchange prices and how much each contributes to market movements. Its answer points to the Bank for International Settlements (BIS) Triennial FX Survey, including tables that break down…
This post describes a challenge in constructing an FX local volatility surface for use with a stochastic local volatility model in QuantLib. FX option quotes are commonly specified by delta, so their strikes vary with maturity and market conventions. That…
The document raises a practical valuation question: how to estimate an FX forward for an exotic currency pair when a pricing system supplies spot rates but no forward quotes. It asks whether spot can be adjusted by the ratio of the two currencies’ discount…
The document addresses whether market makers can take speculative positions without paying the bid-ask spread. The accepted answer distinguishes immediate execution from passive order placement: a market maker who wants an immediate fill generally crosses…
The document discusses whether foreign currency value at risk should be calculated on gross asset and liability positions or on their net exposure. It does not present a specific Basel formula or numerical worked example. Instead, it highlights the trade-off…
The document explains how quoted foreign exchange forward points adjust a spot bid and ask to produce outright forward prices. Its USD/RUB example adds the quoted points, scaled to the currency pair’s decimal convention, to the corresponding spot sides. This…
This note asks how to estimate intraday co-movement between an FX pair such as EUR/USD and an equity index under the real-world measure. It treats interest-rate differentials as a source of forward-price drift and proposes adjusting FX changes around the…
The document explains that hidden Markov model states for foreign-exchange returns are modeling choices rather than fixed categories such as “hot” or “cold.” One possible setup assigns discrete states according to whether returns are positive or negative,…
The document explains how the price of the same product in different countries can be used to form a purchasing-power-parity comparison. The suggested procedure is to infer an exchange rate from the product prices, then compare that implied rate with the…
The document explains how covariance between two currency pairs contributes to the variance of their synthetic cross rate. For EUR/USD divided by GBP/USD, the resulting cross is EUR/GBP. Taking logarithms turns the ratio into a difference, so the variance of…
The document explains why comparing the standard deviations of asset price levels can mislead. Multiplying every price by a constant changes the standard deviation even when the relative price movement is unchanged, so the raw measure does not provide a fair…