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
This note explains why overnight FX swap points can be larger than tom-next or spot-next points even when the quoted forward points rise with tenor. The key is to compare like periods: in the example, the overnight quote covers three days, while the other…
The document answers whether alternatives to the DXY can track the dollar against emerging market currencies. It describes Federal Reserve H.10 trade-weighted emerging-market currency indices, available in nominal daily and monthly forms, with a CPI-adjusted…
The document addresses what a positive CFTC total net contracts figure means for Brazilian real futures. Its key point is that each futures contract has both a buyer and a seller, so the market as a whole cannot be net long or net short by simply counting…
The document explains a proposed ordering of bid–offer spreads for three common foreign exchange volatility structures: at-the-money (ATM), risk reversal (RR), and butterfly (BF). It links the spread width to the exposure market makers must manage, rather…
The document explains how to interpret currency pairs and why the written order matters. Under the standard pair convention, the first currency is the base and the quote gives units of the second currency needed to buy one unit of the first. Thus, EUR/USD at…
The document points readers studying foreign-exchange inefficiency toward three low-frequency patterns: carry, momentum, and value. It names a survey on currency carry returns, an overview of FX momentum, and purchasing power parity as a way to frame…
The document explains why a Garman–Kohlhagen valuation for a USDJPY option may not match Bloomberg’s displayed premium. FX option formulas depend on which currency is domestic and foreign, the currency pair quotation, and whether the option is a call or put…
The document examines why an FX forward rate should not be treated as a forecast of the future spot rate. It illustrates the distinction with a EUR/USD forward position that lost money when the spot rate moved against it, despite the forward premium…
The document discusses which interest rate series to compare across currencies when researching rate differentials and foreign exchange. The question notes that interbank benchmarks differ by currency, that some IBOR series have changed availability, and…
The document considers whether banks might replace overnight funding with continuously or intraday indexed funding as trading activity grows. It cites a historical triparty repo example in which daily unwind mechanics created a temporary funding gap that…
The document gives context for Heston model calibration in foreign exchange options. It describes a market-data provider’s approach of fitting to at-the-money and 25-delta options across expiries from several months to a year, while fixing mean reversion at…
The document examines whether the currency used to express an FX position changes measured volatility. It distinguishes simple returns from log returns when a rate is inverted. For reciprocal exchange rates, simple returns are not exact negatives and…
The document questions why the USD/CNY exchange rate does not appear to move in step with US inflation in a historical comparison. It also notes potential confusion about quote direction: an increase in USD/CNY means more yuan per dollar under the usual…
The document distinguishes a European FX option’s forward premium from its spot premium by expressing the Garman–Kohlhagen option value using the forward exchange rate. In this formulation, the option payoff terms are discounted at the domestic-currency…
The document explains how to include foreign exchange risk when estimating historical value at risk for a foreign-currency stock position. The position’s home-currency value depends on both the stock price and the exchange rate. Under log returns, the…
The document explains that an FX option can be described from either currency’s perspective. An option to exchange a fixed amount of one currency for another can be framed as a call on the currency being acquired or a put on the currency being sold. The…
The document explains why spot foreign exchange is commonly described as quote driven even though retail platforms may display limit orders. The accepted response characterizes spot FX as an over-the-counter market where customers request or receive prices…
The document explains the FX volatility smile through two related ideas: currency returns can have heavier tails than the lognormal distribution assumed by Black–Scholes, and an exchange rate is a ratio whose direction can be reversed. Fat tails make extreme…
The document considers implementing Markov chain Monte Carlo methods in the context of foreign exchange option pricing. The author is seeking implementation guidance and foundational mathematics, building on a paper about MCMC analysis of option pricing…
The document discusses the difficulty of finding backtesting libraries that support foreign exchange tick data. The questioner notes that two candidate tools they considered lacked FX support, while a suggested alternative was described as accepting only…
The document prices a foreign exchange call whose payoff is converted into the same currency used to value the option. It starts from the payoff expressed in the foreign currency, then uses a change of numeraire between the domestic and foreign risk-neutral…
The document explains the distinction between a curve-building helper and a tradable cross-currency basis swap instrument in QuantLib. A user asks whether the newly available rate helper can also be used to price the swap itself. The answer says QuantLib…
The document asks about using American Monte Carlo (AMC) to simulate exposure for credit valuation adjustment across a portfolio containing different trade types. Its central question is how the method can estimate the distribution of positive portfolio…
The document discusses choosing market data for a Euro risk-free yield curve used in an interest-rate risk model. It describes a question about reproducing short-dated swap-rate observations and finding equivalent data on Bloomberg. The answer identifies…