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 a futures hedge can leave meaningful risk even when the contract was intended to lock in a price. A hedger may retain an asset, such as a bond or stock basket, and take an offsetting position in a correlated futures contract rather…
The document clears up a common binomial-pricing confusion: a forward’s market price and the value of an existing forward contract are different quantities. A binomial calculation that discounts expected future payoffs is valuing a contract with specified…
The document raises a fixed-income pricing question about the relationship between SR3 SOFR futures and SOFR swaps when financing and variation-margin effects are assumed negligible. It observes that a swap coupon payoff tied to the future rate and a futures…
The document explains how markout PnL measured before a trade can provide diagnostic information, even though the trader could not necessarily have executed at the earlier price. A negative pre-trade markout followed by a positive post-trade result may…
The document explains why market-cap-weighted indices are common benchmarks even though principal component analysis can identify an orthogonal portfolio that captures the most variation among constituents. It emphasizes that an index’s purpose is often to…
The question compares convexity adjustments for three-month FRA or LIBOR futures, overnight indexed swap futures, and federal funds futures. It asks whether lower volatility in the overnight rate implies a smaller adjustment, and why federal funds futures…
The document asks whether cash-settled bond futures have a carry effect comparable to that of physically settled contracts. Physical delivery can connect futures pricing to a deliverable bond, making coupon income and financing costs relevant. By contrast,…
The document outlines how commodity trading firms manage flat price exposure arising from physical contracts. A back-to-back physical contract with matching commodity, timing, and delivery location can offset commodity price risk, leaving mainly counterparty…
The document considers why a trader might buy a cash-settled quarterly bitcoin future instead of holding bitcoin in the spot market. Its main explanation is leverage: a spot purchase requires paying the full asset value, while opening a futures position…
The document asks how to value an option on fresh corn that will not be harvested until after the option is arranged. In a market with a matching futures contract, that future is the natural instrument for hedging the option; physical corn available now is…
The document examines a proposed mean-reversion trade based on the price difference between Brent and West Texas Intermediate crude. It cautions that a wide spread need not close quickly, and that futures contract expiration and rolling can prevent a trader…
The document addresses whether constant-maturity swap (CMS) and overnight indexed swap (OIS) curves can be treated as the same when their reported values match. It explains CMS as a way to represent yields at fixed tenors over time, often using interpolation…
The document asks why a forward contract price is expressed both as the spot price multiplied by the deterministic financing factor and as an exponential stochastic process containing a volatility adjustment and Brownian motion. It focuses on reconciling the…
The document distinguishes several effects relevant to the daily economics of a bond futures position. Underlying carry and yield roll-down can be estimated from the cheapest-to-deliver bond, including its coupon accrual. Financing is another component and…
The document considers whether futures and other commodity derivatives distort spot prices by letting speculators gain exposure without buying or taking delivery of the physical asset. It explains the basic risk-transfer role of a forward contract: a…
The document examines how futures convexity affects interest-rate curve construction, including multicurve bootstrapping. Futures quotes can be related to synthetic forward rates derived from discount curves, with a convexity adjustment. Modeling that…
The document proposes investigating whether changes in contract-for-difference spreads can provide information about equity market conditions. The author hypothesizes that a widening spread on an index CFD, without a concurrent rise in volatility, might…
The document explains the apparent conflict between two descriptions of futures: one says the delivery price is agreed when the contract is entered, while another refers to the futures quote on the delivery date. It resolves this by distinguishing the…
The document surveys index futures outside the United States that can serve as alternatives to E-minis, focusing on contract notional, liquidity, and access through an international broker. It lists European contracts such as the CAC 40, AEX, DAX, FTSE, and…
The document presents a Python method for converting a two-character IMM futures code into a calendar date. It maps the first character to a delivery month, derives a candidate year from the current year and the code’s final digit, then calculates the third…
The document explains why a long call combined with a short put on the same underlying, strike, and maturity has the same payoff as a forward contract with that delivery price. The payoff is the underlying’s terminal value minus the strike, so the option…
This document raises a question about why the cheapest-to-deliver Treasury bond shown for a futures contract can change when selecting the first versus last delivery date. The author is comparing implied repo rate with the market repo rate and asks whether…
The document considers how a strategy that performs best in volatile markets might respond to quieter conditions. Suggested approaches include selling medium-dated VIX futures for equity exposure, selling straddles or using volatility futures for other…
The discussion examines a crude oil futures calendar spread strategy that estimates a roll return from several contract maturities, standardizes it with a rolling z-score, and takes opposite positions in near and far contracts according to the signal’s sign.…