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 answer distinguishes the spot-market effects of outright forwards and FX swaps used to hedge foreign investments. It says forwards can have a substantial effect on spot, while swaps generally carry much less direct spot delta. As an illustration, it…
The question proposes a cash-based arbitrage when a risk-free interest rate is negative: borrow or short a bond, keep the proceeds as currency, and repay a smaller amount later. The answers explain why this apparent zero lower bound does not hold…
The document describes a fixed-income carry trade in which a trader borrows cash through repo and uses it to buy government bonds. The basic condition for positive carry is that bond income exceed the financing cost. The example discusses cheap short-term…
The document explains Taleb’s “soft” American option idea through foreign exchange options. Unlike a simple stock call or put, an FX option combines exposure to two currencies, so early exercise depends on the relative domestic and foreign interest rates as…
The document explains how interest rates and dividends affect the carry associated with equity options, and how a long call combined with a short put replicates a forward. It emphasizes that carry belongs to the underlying financing and dividend economics:…
This note asks how to estimate intraday co-movement between an FX pair such as EUR/USD and an equity index under the real-world measure. It treats interest-rate differentials as a source of forward-price drift and proposes adjusting FX changes around the…
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 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 explains that EONIA capitalisé jour is a daily compounded total return measure for overnight euro money market lending. An investor earns the overnight rate for one day and reinvests that interest at the same rate, so the index reflects…
The document raises a practical financing question about equity forwards inferred from European call-put parity. It asks whether a forward on an easy-to-borrow European stock should be expected to accrue at Euribor or Eonia, and whether a trader can assume…
The document asks how much near riskless yield an investor can earn from holding a stock, beyond ordinary equity price gains, when the shares must eventually be returned. It questions whether stock lending captures the full available yield or whether…
The document compares buying a one-year Treasury and holding it to maturity with buying a three-year Treasury and selling it after one year, assuming the yield curve stays unchanged and funding costs are zero. It explains that the longer bond earns its…
The note explains why a standard risk-neutral FX diffusion uses the domestic minus foreign short-rate differential for the expected change in an exchange rate quoted as domestic currency per unit of foreign currency. Covered interest parity constrains spot,…
A classic repurchase agreement is described as a collateralized borrowing: one party receives cash against a bond and later repays that cash plus repo interest to recover the bond. The example illustrates how the repurchase amount accrues using a…
The document explains the yield-curve riding strategy: an investor with a fixed holding period buys a bond maturing later, then sells it before maturity. When the curve is upward sloping and remains unchanged, the bond’s yield can fall as its remaining…
The document discusses a reported jump in the USD/INR forward premium during a period of dollar inflows into India. The cited news account attributes the inflows to repatriated dollars and says state banks were instructed to protect dollar deposits amid…
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 considers how a futures market can be in contango while also exhibiting normal backwardation. The key clarification is that the terms refer to different comparisons: contango describes the relationship between futures and spot prices observed…
The document addresses how daily mark-to-market settlement fits into the implied repo rate calculation for a cash-and-carry trade in Treasury futures. The key point in the accepted answer is that the hedge assumes a position of shorting a number of futures…
The document explains how to estimate the two-year forward exchange rate and the annualized carry return for a GBP position using spot and forward quotes. It assumes a position that buys GBP at spot and sells it forward, then compares the forward price with…
This answer distinguishes pricing carry from roll-down for an interest rate swap. A swap has no intrinsic purchase funding cost in the same way as a security because entering a par swap requires no initial cash outlay. For a cleared, collateralized swap,…
This note explains why overnight FX swap points can be larger than tom-next or spot-next points even when the quoted forward points rise with tenor. The key is to compare like periods: in the example, the overnight quote covers three days, while the other…
This note explains one interpretation of a futures contract’s matched-maturity asset swap spread. The proposed trade pairs the futures position with a forward-starting interest rate swap beginning on the contract’s first delivery date and ending when the…
The discussion explains how a carry expression based on the spot and forward prices of a fully funded position relates to a bond’s one-period return. Under the simplifying assumption that yield to maturity stays unchanged, the bond’s value at the next date…