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.
9,797 documents
The document explains why the implied repo rate for a bond in a futures contract is below that bond’s term repo rate. The key comparison is between the futures price and the bond’s forward price for delivery, adjusted by the conversion factor. To rule out…
The document discusses practical inputs for a rough cost-to-carry estimate of a distant-expiry Nikkei 225 index future. Its proposed dividend input is a market-implied dividend strip, with the annual dividend amount translated into a continuous yield by…
The document derives the relationship between futures and forward prices when the underlying asset and short rate are stochastic and correlated. It assumes a geometric process for the asset price and a mean-reverting short-rate process, then integrates the…
The document discusses whether options can reproduce an index that tracks one asset’s performance relative to another, such as a stock against a broad market benchmark. It distinguishes the index exposure from an option on that index: a long position in the…
The note explains why traders compare a current yield-curve trade with its forward curve level. Its example contrasts a steeper spot slope with a flatter slope implied for a future date. A trader could enter a steepener at the forward slope; if the spot…
The document discusses a time series of implied repo for the cheapest-to-deliver bond in a Treasury futures contract. The author finds that implied repo tracks SOFR reasonably well but has sharp spikes, especially near the end of the delivery month, and asks…
The document distinguishes cash-equity ownership from exchange-traded futures and over-the-counter derivatives. It explains that a cash-equity buyer can hold the security through a custodian or in certificate form, while futures are exchange-listed contracts…
The document constructs an arbitrage involving a short stock position, interest-bearing short-sale collateral, a money-market investment, and a forward contract. The setup assumes a continuously compounded financing rate, a collateral fraction of the spot…
The discussion asks whether forward prices should be bootstrapped into estimated spot prices before calculating correlation between two commodities. One response recommends using returns from liquid futures contracts as a practical proxy: calculate daily…
The document explains the conversion-factor adjustment in a duration hedge using bond futures. With a single cheapest-to-deliver bond and no delivery optionality, the futures price is the CTD bond delivery price divided by its conversion factor.…
The document explains the rationale behind bond futures conversion factors: they translate the futures invoice price into a comparable amount for eligible delivery bonds with differing coupons and maturities. The cited explanation says maturity and coupon…
The document explains how corporate actions affect single-stock futures and options. It distinguishes stock splits, which are handled through contract adjustments, from dividends, which can change the market value of the underlying shares and therefore the…
A futures option gives its holder the choice to enter a specified futures contract at the option’s strike price. Exercising creates a futures position with that contract price; it does not mean paying the strike amount upfront as though buying the underlying…
The document compares two proposed denominators for measuring returns on a bond futures contract: the contract’s stated face value and the futures price at the start of the period. It favors the starting price as the more appropriate basis, consistent with a…
The note discusses whether volatility helps explain or forecast the equity premium, focusing on the gap between implied volatility and estimated realized volatility. It suggests estimating variance from OHLC data, smoothing it with an ARCH-family model, and…
The document surveys sources and methods for choosing position sizes in futures trading. It points to the Kelly criterion, which sizes exposure based on expected returns and risk, and notes that fractional Kelly uses a reduced fraction of the full Kelly…
The document explains why an ETF that maintains exposure by rolling futures can have a forward value close to its current net asset value, despite differences between spot and futures prices. Because the fund sells expiring contracts and reinvests the…
This note clarifies when the risk-neutral drift equals the risk-free rate and why market forwards or futures may be used to set drifts in pricing and risk simulations. For an asset with no dividends, carry expenses, or repo costs, the risk-neutral drift is…
The note explains why put-call parity can appear to differ between formulas for options on spot and options on futures. For spot options, the call-minus-put relationship uses a discount factor applied to the forward-minus-strike amount. For options on…
The document addresses how to view historical or intraday prices for options on E-mini S&P futures, when readily available futures charts do not provide the desired options data. It notes that some sites show current option prices but may not offer price…
The document discusses choosing a Python backtesting framework for a team familiar with Quantstrat, especially one interested in granular data, parameter sweeps, and futures. The response recommends BackTrader as a complementary research tool, emphasizing…
The answer distinguishes Eurodollar futures from the short-term deposit market. A futures contract references a notional amount and interest rate exposure, but entering the contract does not transfer the principal from one bank to another. Instead, buyers…
The document explains how a bond becoming special in repo can affect its cash price and its forward price. The response first fits a discount curve to several bonds, then represents the temporary repo specialness with a separate curve and combines the curves…
The document clarifies the distinction between a quoted cash or spot reference for the S&P 500 and a listed E-mini futures contract. The cash reference reflects the index level; it is not itself an exchange-traded instrument that can be bought or sold. The…