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 a bond investment denominated in one currency when the investor hedges the currency exposure using a forward rate whose implied yield differs from the bond’s yield. It frames the question as whether a 10% bond yield…
The document illustrates how a company with dollars can use an FX swap when it needs francs to settle a bond purchase and later expects to receive foreign-currency proceeds. In the example, the company exchanges dollars for francs for near-term settlement,…
The document explains why a total return swap’s financing spread can reflect security borrow costs and how the contract relates to an index future. A TRS buyer receives the reference asset’s total return, including dividends, while paying a financing amount…
The document considers how to define carry for a USD payer swaption with a six-month expiry and a ten-year underlying swap. It questions a simple calculation based on subtracting a short-term LIBOR fixing from a ten-year yield, and whether that spread alone…
The document weighs whether investors should include commodities in diversified portfolios. It presents arguments on both sides, noting that asset-allocation products and some institutional portfolios use commodity exposure, while the cited research is not…
This note explains an approximate way to translate the spread on a USD-denominated bond into an equivalent spread over a euro reference rate. It considers a euro issuer that borrows in dollars and uses the SOFR–ESTR cross-currency basis to express the USD…
The document compares shorting borrowed shares with constructing a synthetic short using a long put and short call at the same strike and expiry. Its example uses a hard-to-borrow stock and reports that the option combination produces a credit and an…
The document interprets carry on a short long-dated Treasury position by connecting the current yield with the yield implied for a shorter-maturity bond at a future date. It explains negative carry as a drag that must be offset by a favorable market move for…
The document asks whether a long position in a quarterly bitcoin future and a short position in a perpetual swap can remain market neutral. It explains that perpetual swaps have no expiry and use funding payments to help keep their prices near spot. The…
The note explains why a floating-rate bond is generally valued near its face value when issued and immediately after a coupon resets. For the first accrual period, the forward coupon rate is already known and matches the discount rate used for that period,…
The note explains why an inflation-linked bond can show positive carry as its reference index rises. Linker cash flows are tied to index ratios, so an increase in the index raises the value of the indexed component; the realized holding return also reflects…
The document explains why an outright FX forward can have theta even though it has no option-style time value. It frames theta more broadly as the change in a position’s value when time advances while market inputs are held fixed. In an FX forward, this…
The document explains how to estimate EUR/USD forward rates from spot and interest rates using covered interest rate parity (CIP). Rates must match the forward’s maturity: an overnight rate is not a substitute for a one-year rate, and the calculation needs…
The document asks why a one-year Bitcoin futures contract can trade at a premium whose annualized rate exceeds a comparable government bond yield, despite standard cost-of-carry relationships. It considers whether demand for leveraged exposure may help…
The document examines a covered interest parity example involving Australian and US interest rates and a spot exchange rate quoted in US dollars per Australian dollar. The example applies the rate differential over the contract term to derive a forward…
A total return swap (TRS) exchanges an asset’s returns, including price changes and income, for financing payments. The asset leg is valued from the asset’s current price and accrued returns through the valuation date; expected future gains are not…
The note explains repo as a funding source for a long bond and reverse repo as a way to borrow a security for a short. It addresses why financing is tied to the bond being held: repo lenders apply security-specific haircuts, so the cash raised against a bond…
The discussion asks whether a floating-rate note’s discount margin (DM) change can approximate its credit-related return, in the way spread changes and duration are used for fixed-rate bonds. One proposed method estimates the bond’s price sensitivity to a…
The document explains why the calendar spread between nearby German government bond futures can differ from zero and why rolling a position has a cost. Ignoring delivery options and margining, a bond future can be approximated as a forward whose fair value…
The document explains why treasury futures carry cannot be obtained simply by subtracting an implied repo rate from a deliverable bond’s yield. Under a strict definition, pure carry consists of known cash inflows and outflows from holding and financing an…
The post explains two treasury uses of FX swaps: obtaining needed local-currency cash and putting idle balances to work through carry. In an emerging-market banking example, depositors and businesses shifted toward US dollars amid fears of devaluation, while…
The document distinguishes running basis points from upfront basis points in bond risk and carry calculations. Upfront basis points translate a running spread into a price-risk amount using DV01, the dollar value of a one-basis-point yield move; the…
The discussion points readers seeking variance and volatility swap strategies toward sell-side research and foundational papers. It frames relative-value trading as comparing implied variance across markets using historical relationships: buy the market that…
The document presents cost-of-carry relationships for pricing a forward on an asset that pays dividends or another yield. It gives equivalent expressions using a continuous yield or the present value of future cash flows, then states the value formula for a…