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 document asks how to interpret bond carry for a financed position, including what yield means and how to identify the starting and ending accrued interest and bond price in a carry formula. It does not provide a formal answer or resolve those…
The document explains the present value of an overnight index swap’s floating coupons, including the value of the remaining coupon strip at a fixing date. It assumes the collateral rate equals the overnight rate and writes each coupon as the product of daily…
The document points readers studying foreign-exchange inefficiency toward three low-frequency patterns: carry, momentum, and value. It names a survey on currency carry returns, an overview of FX momentum, and purchasing power parity as a way to frame…
The document shows how to estimate the roll yield implied by two CAC 40 futures contracts with different expiries. It compares the November and December contract prices, calculates their point difference, and expresses that difference as a percentage of the…
The document examines why an FX forward rate should not be treated as a forecast of the future spot rate. It illustrates the distinction with a EUR/USD forward position that lost money when the spot rate moved against it, despite the forward premium…
The document discusses which interest rate series to compare across currencies when researching rate differentials and foreign exchange. The question notes that interbank benchmarks differ by currency, that some IBOR series have changed availability, and…
The document clarifies how carry on a Treasury curve steepener can compare with carry on an outright long-duration position. It distinguishes the financing cost of holding the two legs from the carry described in a market report. For a payer position over a…
The document explains why a persistent positive basis, defined as spot price minus futures price, can make a long futures hedge profitable on average under a particular assumption. If spot behaves like a martingale and futures begin below spot, convergence…
The document explains how stock borrow scarcity can affect put-call parity and the prices of options. Buying a put and selling a call at the same strike and expiry creates a synthetic short forward, which can provide short exposure without borrowing shares…
The document explains how bank balance-sheet costs can affect Treasury futures net basis trades. In a long basis position, the investor buys a Treasury bond, finances it through repo, and sells conversion factor weighted futures. The trade depends on actual…
The document explains how financing costs enter an equity forward price through the cost of carrying the stock until delivery. A forward can be understood by comparing its payoff with a position that holds the underlying equity and finances that purchase.…
The note asks whether Bitcoin and Ether should be modeled as currencies with zero interest when they pay no dividends, and whether crypto carry costs instead reflect commodity-like features. Its answer compares two modeling frameworks for a stochastic…
The document explains how to think about carry and roll-down when modeling a bond index. It distinguishes carry, the bond’s return effect under an unchanged yield curve, from roll-down, the part of carry associated with moving along the curve as time passes.…
The document distinguishes an unhedged foreign exchange carry trade from a forward trade that locks in an exchange rate. Carry involves borrowing the lower-interest-rate currency and holding the higher-interest-rate currency, leaving the investor exposed to…
The document asks how to estimate six-month carry on a spot-starting interest rate swap and why the DV01 of the remaining forward-starting swap is used. It frames carry as arising from the difference between the swap’s fixed rate and the floating leg fixing,…
The document explains an approach to valuing Australian dollar floating-rate notes whose coupons combine a fixed margin with three-month BBSW. To estimate future coupon cash flows, it proposes using forward rates inferred from the Australian government bond…
The document explains why holding futures with notional exposure equal to an index mandate may still fail to track the index. A futures position reflects financing and expected dividends through its cost of carry, while the investor also holds cash. Tracking…
The explanation distinguishes the cost of carry from convenience yield in commodity futures pricing. Carry costs, such as the expense of holding inventory, make physical ownership less attractive. Convenience yield works in the other direction: it represents…
The question examines why futures-based exchange-traded products can decline over time in contango, using crude-oil and volatility products as examples. It distinguishes losses attributed to selling an expiring nearby contract and buying a more expensive…
The document asks how to estimate the carry from holding a long-duration bond denominated in a foreign currency. The proposed calculation combines the cost of borrowing cash, the forward points on exchanging dollars for local currency, and an adjustment for…
The document explains the carry on a long cash bond and short futures position through the relationship between implied repo and the bond’s actual repo financing cost. If the bond is cheapest to deliver and the net basis is zero, delivery leaves the investor…
The document explains implied cross-currency basis as the adjustment that reconciles FX spot and forward prices with interest rates in two currencies. Substituting OIS rates into a covered-interest-parity relationship lets a trader infer an FX-OIS basis from…
The document examines why a portfolio of VIX futures targeting a constant 30-day weighted average maturity can lose value despite the usual contango explanation for gains in inverse VIX products. The question is whether buying more of the higher-priced…
The document asks why a forward or futures price is expressed as spot multiplied by an exponential of net carry over time, and what convenience yield represents. The response points to standard pricing references and gives a brief no-arbitrage intuition:…