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 discusses a quoted 50-year euro swap rate of -0.58% and asks how to interpret the unusually shaped long end of the swap curve. The question notes positive carry for paying fixed and suggests limited liquidity may be influencing long-tenor…
The document questions the cost-of-carry model for commodity futures when storing a commodity today may cost more than obtaining new supply at a later date. It uses oil as an example and asks whether the usual carry-based price should be treated as an upper…
The discussion explains how New Zealand’s trade-date rollover can change the effective trade date of an NZD currency transaction. A Friday trade executed after the rollover may be treated as a Monday trade, making Tuesday a tomorrow-value date and Wednesday…
The document explains that dealers use repurchase agreements to finance Treasury inventories and to support reverse-repo lending to clients. In a repo, a dealer receives cash against securities, while a reverse repo provides cash to a client against…
The document illustrates how to estimate a future USD/CHF exchange rate from the current spot rate and the two currencies’ one-year interest rates. It grows one unit of each currency at its respective rate, then compares the resulting amounts to infer the…
The document asks why institutional portfolios might hold a sizable allocation to short-term fixed-income instruments, such as repo, while also maintaining a similarly sized unfunded position in another asset class. It distinguishes this allocation from cash…
The document discusses how to distinguish high, medium, and low frequency trading, considering both data resolution and how long positions are held. It presents no single accepted threshold: definitions vary among practitioners, and a strategy’s execution…
The document asks how to infer a fair level for a 3s1s single-currency basis swap from one-month and three-month LIBOR and OIS levels, including how to hedge stub exposure when LIBOR is not directly tradable. The answer cautions that the 3s1s basis does not…
The document describes a peso carry trade built by buying MXN in the spot market and entering an FX swap that sells MXN spot and buys it forward. The paired spot transactions offset, while the forward leg creates exposure to supplying dollars through the…
The discussion addresses whether shorting a futures contract earns a return simply because its price converges toward spot as expiration approaches. It explains that the futures price difference reflects carrying costs and financing, rather than a separate…
The note considers how to estimate a bond’s price change from the passage of time, in a context where PV01 is used to approximate P&L from yield-curve movements. The central point is that time passage alone does not define a unique scenario: the calculation…
The document asks whether yield to maturity minus borrowing cost is a reasonable estimate of return for a leveraged bond position that will be sold before maturity. The proposed quote uses the bond’s starting YTM and a fixed annualized funding rate, with the…
The document questions whether a bond’s carry, estimated from changes in dirty price and yield, can be used to infer its implied repo rate. The response instead defines implied repo through the cash-and-carry trade: buy the cheapest-to-deliver bond and sell…
The document explains why carry can be described as zero when interest rates evolve along projected forward rates. It distinguishes two conventions for a deterministic passage of time. In derivatives practice, market variables are assumed to age according to…
The note outlines an approximate way to estimate bond forward prices and carry when the available inputs are government yields by maturity. It proposes treating the observed yields as par yields, so each yield also serves as the coupon rate for a…
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 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 clarifies the cash-flow direction of an FX swap that sells euros for dollars at the near date and buys euros back at a higher forward exchange rate. Because EUR/USD is quoted as dollars per euro, the higher far-leg rate means paying more dollars…
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 note explains why repo is treated as the financing cost of a bond, even though a cash lender in a repo receives both interest and bond collateral. It clarifies the usual trading terminology: bidding repo means seeking the bonds, while offering repo means…
The document outlines a practical estimate for the yield on a US Treasury bond hedged into euros. For a quarterly hedge, the notional is set slightly above the bond’s current value to reflect the expected increase in bond value over the hedge period. The…
The document introduces a framework for understanding calendar spreads between bond futures maturities. It decomposes a bond futures price into the underlying spot bond price, carry, delivery option value, and relative richness or cheapness. A calendar…
The document explains why expected currency values need not be reciprocal when a currency pair is quoted in the opposite direction. In general, the expectation of an inverse is not the inverse of an expectation, a consequence of Jensen’s inequality. This…
The document discusses how to assess fair value estimates for non-US equity index futures before expiry, where the estimate depends on financing costs and expected dividends. It notes that closed foreign-exchange markets can complicate the interest-rate…