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.
1,414 documents
The document compares CME expiration language for serial options on several grain contracts. Most examples specify the last Friday that falls at least two business days before month-end, with a fallback to the preceding business day if that Friday is not a…
The document describes a forecasting workflow for Brent crude oil: transform prices into log returns, check stationarity, fit an ARMA-GARCH model, and obtain forecasts of conditional means and variances. The author reports that the forecasted conditional…
The document outlines a way to estimate seasonal patterns in natural gas prices before analyzing or modeling the futures term structure. For each year, calculate the average daily spot price, then calculate the average for each month. Divide each monthly…
This document is a curated reading list spanning factor investing, trading and execution, volatility estimation, derivatives pricing, and commodity futures. It names influential papers and briefly describes their contributions, including multifactor asset…
The note explains how to select strikes for a costless collar using gold options. A collar pairs a long put with a short call whose premium offsets the put’s cost. There is an unlimited set of such strike pairs: for each positive put strike, a call strike…
The document explains how to estimate an implied volatility for an option maturity that is not directly quoted, using options with nearby expiries as market anchors. It frames the task as building a volatility surface with strike and maturity dimensions,…
The document explains how to express historical spread volatility when using the Bachelier single-factor spread option formula. Since the option’s underlying is the price difference between two futures contracts, the volatility input is measured in…
The document describes factors behind the price difference between West Texas Intermediate and Brent crude. It first contrasts crude grades by API gravity and sulphur content, explaining how lighter, sweeter oils can be more valuable because of product…
The document outlines ways to set long-term capital market assumptions for fixed-income assets, including government bonds and high-yield credit. One approach builds expected returns from a cash-return estimate plus relevant premia, such as government bond…
The answer explains a practical reason to use a commodity swap when individual forwards are available: a swap can package a series of forward exposures into one agreement. For a farmer seeking to hedge production across multiple periods, this can reduce the…
The note asks how commodities relate to real assets and physical assets, drawing on a CFA reading that classifies commodities and tangible property as physical assets. It distinguishes commodities such as metals, energy, and agricultural products from real…
The document examines a proposed differential for the second risk factor in the two-factor Gibson–Schwartz commodity model. The factor is first defined as the time integral of an Ornstein–Uhlenbeck process, then rewritten as a stochastic integral using…
The document explains LME prompt dates as the dates on which contracts trade and relates them to the sequence of available contract maturities. It contrasts the usual monthly contract pattern with LME's more frequent dates nearby, followed by weekly and…
The document investigates why correlations derived from a Kalman filter’s posterior covariance estimate for a commodity forward curve appear nearly constant across contracts. The described setup uses a latent state containing forward values and drift…
The document asks whether calendar spreads become pure arbitrage when implied volatility is flat across strikes and maturities, as in the Black–Scholes framework. Its answer cautions that equal implied volatility across maturities does not guarantee that…
The document discusses computing and comparing Sharpe ratios for gold, Treasury returns, and a stock index when observations have different frequencies. The reply recommends calculating each asset’s excess return at a common monthly frequency by subtracting…
The document derives the dynamics of a log forward price in a Schwartz model where the logarithm of the spot price follows a mean-reverting diffusion. The forward price is given as an explicit function of time and the current log spot. Applying Itô’s lemma…
The document addresses forecasting daily asset prices with explanatory data published weekly or monthly. It recommends beginning with a market hypothesis and testing whether the slower series contains information at the forecast horizon. The discussion…
The document considers how to optimize a gas storage schedule using a forward curve, subject to facility volume and injection and withdrawal limits. The initial intuition is to buy gas for cheaper months and sell for more expensive months, with storage…
The document discusses how to assemble futures data for regressions that forecast monthly Brent spot prices at several future horizons. Its model uses the futures quote available at time t for a maturity matching the forecast horizon, alongside other…
The discussion clarifies how to simulate an oil spot price trajectory when starting from observed market data. For each simulated path, the first simulated value uses the actual starting spot price; subsequent values should be generated recursively from the…
The discussion addresses whether a deferred oil futures contract should fall toward spot when it becomes the front-month contract after a roll. Futures prices reflect more than the current spot price: financing and storage-related costs can raise futures…
The document discusses market factors for mapping the risk of Brazilian commodity swaps exposed to commodity forwards, BRL interest rates, and the IPCA inflation index. It outlines common Brazilian curve proxies: DI futures for the nominal swap curve and…
The document considers a USD-based firm that has agreed to pay a fixed EUR amount at a future date for an asset also priced in EUR. It asks how to hedge both the asset-price movement and the currency exposure. The answer first pairs the agreement with a sale…