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 considers why a currency may become widely used internationally and argues that population, economic scale, military power, and trade share do not explain the outcome by themselves. The answer highlights open markets, transparent and efficient…
The document considers whether bid-ask spreads vary with volatility and argues that there is no single relationship that applies across markets and trading conditions. The answer recommends tailoring a model to the asset, broker or market maker, and the…
The document considers how to optimize a portfolio of foreign-currency equities when returns and risk are measured in an investor’s home currency. Its central suggestion is to model the investment as carrying both equity risk and currency risk, rather than…
The document explains how exchange-rate changes affect the realized return of a euro-based investor trading US Treasury futures without delivery. Its answer treats futures P&L as the daily gains or losses credited to a USD account. When the trade is closed,…
The document explains implied cross-currency basis as the adjustment that reconciles FX spot and forward prices with interest rates in two currencies. Substituting OIS rates into a covered-interest-parity relationship lets a trader infer an FX-OIS basis from…
The document explains how exchange rates across three currencies are related in a triangular arbitrage calculation. Given any two rates, the third cross rate is implied by their relationship, so traders can compare a quoted rate with the rate implied by the…
The document proposes FX-credit hybrids as a possible undergraduate research topic. These contracts combine an FX option, forward, or cross-currency swap with a trigger tied to a credit event. The example is a right to exchange dollars for euros that…
The document discusses why a cross-currency swap paying euros and receiving dollars may have different credit valuation adjustment (CVA) from the reverse position. One explanation focuses on the final notional exchange: forward currency values, influenced by…
The document raises a risk-neutral valuation question for a euro-denominated fund holding US stocks without currency hedging. The fund’s euro value depends both on the dollar equity holdings and on converting those holdings at the prevailing EUR/USD exchange…
The document asks how to interpret changes in the IMF’s COFER measure of unallocated foreign exchange reserves. It describes a notable decline in the unallocated share between two quarters in 2015, while reported allocations to major currencies increased,…
The document explains that a bond denominated in a foreign currency creates foreign-exchange delta for an investor reporting in USD. To estimate the exposure, it considers the amount that would be received by unwinding the position at settlement: notional…
The document considers whether a swap can have zero notional on one leg and what such a contract would represent. Its answer says that a leg with no effective payment stream generally removes the defining exchange of a swap. It distinguishes a zero swap rate…
The discussion explains why cross-currency swaps can be valued at zero when traded, even though their floating legs include a quoted cross-currency basis. The key is that market valuation uses discount curves calibrated from liquid FX forwards, FX swaps, and…
The discussion explains how New Zealand’s trade-date rollover can change the effective trade date of an NZD currency transaction. A Friday trade executed after the rollover may be treated as a Monday trade, making Tuesday a tomorrow-value date and Wednesday…
The document derives the currency forward price from the spot exchange rate and the interest rates in the two currencies. It defines the local currency as the numéraire and treats the foreign currency’s spot price as its value in local currency. With…
The discussion considers whether reversing one currency quote can make two negatively correlated exchange rates suitable for a cointegration or distance based strategy. It uses EUR/USD and USD/JPY as examples, noting that quote direction changes the way…
The document asks whether FX option structures quoted through risk reversals, butterflies, and at-the-money volatility are delta neutral, and whether a trade that begins with nonzero delta should be considered speculative. The response says that the quoted…
The document asks why an exchange-rate process governed under a domestic risk-neutral measure by a proportional stochastic differential equation with constant volatility and no drift is a martingale. One response invokes the stochastic exponential solution…
The document asks how to attribute FX option profit and loss to observable volatility surface quotes rather than to implied volatility at each individual strike. It describes surfaces represented by at-the-money volatility, risk reversals, and butterflies,…
The document presents a Black–Scholes calculation for a cash-or-nothing binary option on a currency price. The contract pays one unit of the same currency when the terminal price exceeds the strike, and nothing otherwise. The code calculates the discounted…
The document asks whether a five-minute currency binary-options strategy that showed a 65% average win rate over three years of minute-level tick data should be expected to maintain that rate. It describes a reversal approach using multiple indicators,…
The discussion considers how EUR/CZK might move when the Czech National Bank ends its exchange-rate floor. It contrasts expectations of koruna appreciation with the possibility that prior price changes already reflect the peg, and asks whether options or…
The document considers how to define delta for an FX option when its premium is denominated in a foreign currency but the holder evaluates value in a domestic currency. It contrasts differentiating the option’s foreign-currency present value directly with…
The document discusses how reported probabilities of Yuan depreciation might be inferred from currency options. One proposed route is to use an option model’s delta at a relevant strike as an approximation, or to price a digital put using the full volatility…