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.
610 documents
The question asks how to separate the approximate return of a coupon-bearing bond into yield income, roll-down, duration-driven price change, and pull-to-par effects. The response gives a compact decomposition: return is associated with yield minus repo over…
The discussion distinguishes futures-curve roll from the price effect associated with a bond futures contract’s cheapest-to-deliver bond. In common futures terminology, roll is measured by comparing prices of successive contracts. For bond futures, however,…
The document addresses a sign mismatch in a calculation of the cross-currency dollar basis. The questioner derives an implied dollar interest rate from spot and three-month forward exchange rates, then compares the implied rate with three-month USD LIBOR.…
This explanation distinguishes the timing option from the switch option in bond futures and clarifies that the end-of-month option is another form of switch option. The timing option concerns when to deliver; the switch option concerns which eligible bond to…
The document examines how to distinguish coupon and funding carry from a premium bond’s price change as it approaches maturity, and from yield-curve roll down. Its example considers a five-year, 5% coupon bond priced at 110 with funding at 2.5%. The accepted…
The note asks why GBP/USD forward quotes rise above spot despite the apparent expectation that the higher-yielding US currency should strengthen. The explanation is covered interest rate parity: forward points reflect the interest-rate differential so that…
The document explains negative roll yield for a commodity ETF that uses futures to approximate spot exposure. As a held near-expiry contract approaches maturity, its price converges toward spot. In a contango curve, the next contract costs more than the…
The note explains why two expressions for a European call’s delta agree when the cost of carry is defined as the risk-free rate minus the dividend yield. The risk-free rate is a cost of holding the asset because that capital could earn interest elsewhere,…
The discussion explains that FX forward points reflect the interest rate differential between two currencies, while the all-in forward price combines spot with those points. Changes in short-term money-market rates and funding conditions affect the points,…
The document concerns modeling a floating-rate bond tied to SOFR in QuantLib. The question describes difficulties adapting a workflow used for Ibor indices, since SOFR coupons involve overnight fixings compounded over a period and fixing conventions that…
The document explains why the yield to maturity of a floating-rate note (FRN) can rise when market rates increase, even if its price stays roughly unchanged. Yield reflects the broader risk-free interest-rate regime as well as compensation specific to the…
The document explains how currency forward carry relates to the return on a hedged foreign bond. A long position in foreign currency has carry when the spot rate is unchanged at maturity; a hedge against that exposure takes the opposite, short…
The document derives a bond forward price by replicating the position with a spot bond purchase financed through repo. When a coupon arrives before settlement, the investor uses it to reduce the repo borrowing, then finances the remaining balance through the…
This discussion clarifies how carry and roll-down are defined for a receive-fixed interest rate swap. It questions a description of upfront carry as the difference between present values of current and forward-starting swaps, since those values depend on the…
This note clarifies what it means for a bond to earn its yield to maturity over its life. The explanation uses a semiannual coupon bond and algebraically compounds the bond's initial price at its yield to maturity through maturity. The resulting future value…
The document surveys research directions and references for building systematic strategies in rates markets. It groups the ideas into alternative risk premia, relative value, and directional approaches. Factor strategies can apply trend, value, or carry…
The document poses a fixed-income spread-trade question: whether a long Treasury bill position hedged with short fed funds futures earns mark-to-market profit equal to the bond’s DV01 times a five-basis-point tightening in the quoted spread. The trade is…
The discussion separates the funding costs of holding an interest rate swap from roll-down, the mark-to-market change associated with the curve moving through time while its shape is held fixed. It explains why the difference between a forward swap rate and…
The document explains why a one-month overnight index swap rate may move less visibly than short-term Treasury bill yields, including during periods of financial stress. OIS rates are closely linked to central bank deposit or policy rates. Because policy…
The document presents a money market approach to managing exchange-rate exposure from a future foreign currency receivable. Its example concerns a Japanese exporter expecting a euro payment in one year and supplies borrowing and lending rates for dollars,…
The discussion explains how FX futures can represent currency carry even though a futures position does not directly exchange interest payments. A futures price reflects interest rate differentials between the currencies, and as the contract approaches…
The document defines carry as the difference between the income earned on an asset and the cost of funding its purchase. This framing helps explain why a bond described as carrying well may appeal to a trader: its income relative to financing costs is…
The document introduces the commodity cost-of-carry relationship, which links a futures price to spot price, financing, storage costs, convenience yield, and time to delivery. It asks whether the model implies an upper bound on futures prices and how to…
The document asks whether standard Black–Scholes–Merton (BSM) theta includes the cost of financing an option premium. It quotes a discussion from Taleb’s Dynamic Hedging that distinguishes theta from the trader’s financing carry: the option’s present value…