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 why the absolute call and put deltas of an at-the-money-forward foreign-exchange straddle may differ, and whether the difference follows from the lognormal assumption in Black–Scholes. The response points to premium-adjusted delta as a…
The document asks whether a standard-deviation measure of exchange-rate volatility can be included as a regressor in the mean or variance equation of a GARCH or EGARCH model for stock returns. The response says it can, on the grounds that GARCH models…
The document explains how to interpret t-statistics for parameters estimated in a GARCH volatility model. It frames the usual test as a comparison of an estimated parameter with zero, with the estimate divided by its standard error. For maximum likelihood…
The document models a lease whose payments are denominated in a foreign currency, making the lessee’s domestic-currency payments sensitive to the exchange rate. It considers a payment floor and cap and asks how to value the resulting embedded derivative. The…
The explanation derives the interest-rate sides used to form FX forward points by considering the market maker’s hedge for a forward bid. In an FX quote, the base currency is bought or sold against the value currency. For a forward bid, the market maker…
The document discusses boundary artifacts when denoising a forex price series with a discrete wavelet transform. Keeping a small fixed set of large coefficients can distort the series near its endpoints, especially when the trend makes the first and last…
The document explains how to calibrate a Heston stochastic-volatility model for an FX spot process when currency options are commonly quoted over the counter by delta, tenor, and implied volatility rather than by strike and price. The proposed workflow…
The note derives the futures–forward price difference from the change between the risk-neutral measure and the maturity-forward measure. This difference appears as a covariance between the accumulated funding factor and the terminal index level. For an FX…
The document discusses modeling conditional mean and volatility spillovers between exchange-rate series using an MA(1)-GARCH(1,1) framework. It identifies how external regressors can be included in a univariate GARCH specification: a lagged return from…
The document asks how to value a quarterly swap whose fixed and floating interest amounts are calculated on a notional in one currency, while net payments are settled in another. It presents a proposed fixed-leg present value that multiplies the…
The document explains why the volatility of pounds per euro matches the volatility of euros per pound when volatility is measured using log returns. Reversing the exchange-rate quote negates each log return, and negation changes its sign but leaves its…
The document distinguishes a Forward Volatility Agreement (FVA) from a forward-starting volatility swap. An FVA provides exposure to future implied volatility through a forward-starting vanilla option, with its Black–Scholes parameters set at trade inception…
The question asks how calibrated SABR parameters can be turned into points on a strike-versus-volatility graph. The concise answer gives a practical sequence: use the calibrated model parameters to calculate option prices at a selection of strikes, then…
The document asks when volatility smiles began appearing in capital markets, especially around the 1987 equity crash. Responses offer several different perspectives rather than a settled account. One says smiles became visible in equities after the crash and…
The note explains why an overnight FX swap quote can appear when the United States is observing a holiday but the other currency’s market is open. It says Bloomberg generic prices are indicative composites rather than executable quotes, and interprets…
The document explains how target redemption forwards (TARFs) commonly accumulate gains toward a profit target and terminate future settlements once the target is reached. In the typical structure described, only positive, in-the-money payoff amounts count…
The document asks whether bank client transaction flows in a currency can serve as an estimate of market positioning. Its specific problem is that a rolling one-month sum can shift sharply when a large older observation leaves the window, even if current…
The document addresses how to value an existing FX forward by imagining an offsetting forward that leaves a net future cash flow in one currency. Its central point is that the appropriate discount rate depends on the collateral arrangement. For dollar cash…
The document surveys possible sources for estimating foreign exchange trading activity when comprehensive official figures by currency are unavailable. It points to a North American Foreign Exchange Volume Survey, which reports activity across spot,…
The document asks how to calculate the return of a currency basket when its components have stated dollar allocations. It gives a two-currency example and first computes each position’s gain or loss separately, then adds the dollar results. It compares that…
The discussion outlines two ways a cross-currency inflation-linked swap can be structured. One approach exchanges inflation exposure tied to different national baskets, such as euro-area harmonized prices against UK consumer prices. This introduces relative…
The document considers how to align daily Bitcoin returns, which include weekends, with fiat currency data that may be missing on those days when fitting a GARCH model. The software package mentioned rejects null observations, leaving the analyst to consider…
This note explains why overnight sterling LIBOR can sit below the Bank of England base rate, despite the intuition that unsecured borrowing should command a higher rate. It distinguishes LIBOR, which is based on trimmed submissions from panel banks, from an…
The document explains why FX spot settlement dates can depend on several holiday calendars and why a simple union of calendars may not capture every market convention. It contrasts advancing two business days on a combined calendar with calculating dates…