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.
16,761 documents
The document compares two ways to price a callable zero-coupon bond in the Ho-Lee short-rate model. One method values the bond as a straight zero-coupon bond minus a European call on that bond. The other represents the callable bond as a claim whose value…
The document raises a core backtesting question: if a fitted price model represents the underlying process, why test a trading algorithm on historical prices rather than simulated paths? It suggests that simulation could expose a strategy to scenarios absent…
The document explains how to convert a series of simple, or arithmetic, returns into continuously compounded log returns when the underlying price series is unavailable. The conversion uses each return itself, so past prices are not required. It also gives…
The document describes a portfolio risk simulation that combines GARCH-filtered standardized residuals, semiparametric marginal distributions with Gaussian-kernel interiors and generalized Pareto tails, and a time-varying Gaussian copula. The author…
The document describes a proposed volatility forecasting exercise using ARCH, GARCH, and EGARCH models on daily returns for two stocks. The author divides the observations into a training portion and a later testing portion, estimates model parameters on the…
The document describes an attempt to reproduce a vendor price for a discrete arithmetic average price Asian call using the Haug, Haug and Margrabe approximation and Curran’s approximation. It lays out the inputs, reports the author’s calculated values and…
The discussion asks whether statistical arbitrage can work in foreign exchange and describes a study of relative-value trading among G10 currencies. The cited approach forms currency pairs from USD crosses, measures their misalignment, and trades when…
The document examines a Monte Carlo valuation in which a simulated American call on a non-dividend-paying stock is priced slightly below a European call with the same strike and maturity. The example fits a Student t location-scale distribution to historical…
The discussion considers quasi-random sampling for Monte Carlo valuation of path-dependent interest-rate options, where each simulated path may require many time steps. Its main recommendation is a dimension-ordering approach: use low-discrepancy…
The discussion addresses how to decide whether a predictive model has too many explanatory variables, especially when adding variables keeps improving in-sample fit. The answers emphasize that there is no universal cutoff. One warning sign is…
The document clarifies the difference between instantaneous variance in the Heston model and the variance of cumulative log returns over a fixed horizon. In the model, the variance process describes local log-return variance; it should not be read as the…
The question concerns fitting a geometric Brownian motion model to historical stock prices, simulating future paths, and averaging those paths to create a forecast. The responses explain that the ensemble mean follows the model’s expected price path, while…
The document compares approaches to annualizing a Sharpe ratio for an equity index using daily data and a risk-free benchmark. It outlines a log-return calculation that annualizes mean log return and volatility, with the risk-free rate adjusted to an annual…
The document compares continuous-time models, which offer mathematical tools for deriving pricing results, with discrete-time models that align more directly with recorded market observations and computer simulations. One response emphasizes that market…
The document considers whether a Vasicek process estimated from monthly data can be simulated with a daily time step. Its response emphasizes matching parameter units to the simulation frequency: estimates based on monthly observations should first be…
The document asks whether commonly accepted ranges exist for risk-aversion parameters in power and exponential utility functions. Its author describes simulating stock returns over multiple weeks and comparing optimal portfolios across different values of…
The document discusses a long-short macro momentum portfolio whose positions are adjusted so that the portfolio has a specified forecast volatility. The cited research describes estimating risk from a rolling window of monthly returns and scaling the…
The document explains how a portfolio return function can combine asset returns with a dated series of portfolio weights. It describes aligning the return and weight data, selecting the matching asset columns, and starting the calculation only once initial…
The document surveys ways to make a published record of recommended trades more credible. Suggestions include timestamping articles with an independent service, posting recommendations on platforms that retain publication dates, sending regular updates to…
The document considers whether bootstrap Sharpe ratios can establish that a trading strategy’s true Sharpe ratio is positive, and whether 100 resamples are enough. Its central caution is that the fraction of bootstrap estimates above zero is not…
The discussion compares Bloomberg’s BGN and CMPN sources for EUR/USD FX option volatility quotes, especially butterfly quotes used in strategies that trade convexity. The answer describes BGN as a generic daily close and CMPN as a composite of contributor…
The document addresses how to represent a stock portfolio that is rebalanced periodically while daily positions need to be recovered over time. It presents a trade-journal approach: record each instrument, transaction amount, date, and price, then derive…
The note outlines a model-based route to backtesting variance and volatility swaps when direct swap data is unavailable. It uses a one-factor Bergomi setup in which instantaneous variance follows a lognormal process correlated with the asset return. In this…
The document presents a proposed explicit finite-difference method for a nonlinear Hamilton–Jacobi–Bellman equation with a terminal condition. The value function depends on time, a variance-like state, and a Vega state. The proposed grid uses a backward time…