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 explains how to infer an implied USD borrowing rate from EUR/USD spot and overnight forward-point quotes when borrowing dollars through an FX swap. The key correction is to compare the forward exchange rate with the same spot rate used in the…
The document explores how carry and delivery optionality can affect the basis between a Treasury futures contract and its cheapest-to-deliver bond near contract expiry. It considers a long basis position under both upward-sloping and downward-sloping yield…
The document explains why buying volatility exposure after a quiet period is not a cost-free way to profit from a future volatility spike. VIX is a spot index rather than a security that investors can hold directly, so traded exposure is typically obtained…
The discussion compares ways to define bond carry, especially the proposed measure of yield minus repo financing. One answer distinguishes cash income after financing—coupon less repo—from a broader return measure that can include pull to par and yield curve…
The document explains the two components of a bond’s carry and roll-down over a holding period. Carry is the net income earned, such as coupon income after financing costs, and can be related to the difference between forward and spot yield. Roll-down is the…
The document poses a comparison between two ways of hedging the financing and rate exposure of an investment-grade bond in an inverted curve environment. The investor buys a bond yielding less than three-month Euribor and wants to lock in a spread over…
The response cautions that an expected end to quantitative easing does not automatically imply falling Treasury futures prices or a profitable long put position. If a policy change is widely anticipated, markets may already reflect it. The author also points…
The document asks how a USD investor should compare keeping cash in dollars with using a USDJPY FX swap to fund a Japanese bond. It distinguishes the implied yield from the swap from the bond’s yield and asks whether a swap alone could be preferable when its…
The discussion considers whether a widening gap between a bond futures price and its spot price causes the bond yield to rise. The answers describe the price gap as related to financing carry and argue that changes in yields or financing conditions generally…
The document asks whether the carry of a short bond futures position can be estimated by subtracting the cheapest-to-deliver bond's conventional yield from the futures implied repo rate. The answer explains why the direct subtraction is not generally valid:…
The discussion addresses a common fixed-income desk intuition: a receiver swap entered at a rate below a later spot swap rate may still have positive total performance because earlier carry can offset later mark-to-market losses. In its simplified example,…
The document explains the notation for a EUR trade combining three forward-starting interest rates with different start dates and tenors. It identifies the position as a curve fly, where the intermediate point is the belly and the shorter- and longer-term…
The document distinguishes two sources of bond price change. Pull-to-par is the movement of a bond’s clean price toward face value as maturity approaches, assuming its yield is unchanged. For a zero-coupon bond, the price converges to par as the remaining…
The note uses gold forward prices at two maturities to illustrate a carry-based arbitrage. If the later contract is priced above the earlier contract adjusted for financing and storage-related carry, a trader can buy the earlier exposure and sell the later…
The question examines how to price a contract paying the difference between an asset price and a fixed delivery price at maturity when the underlying pays a continuous dividend yield. It derives a risk-neutral measure by adjusting the Brownian motion so the…
The document questions media descriptions of US Treasury futures basis trades as arbitrage. It focuses on a cash bond and futures hedge, especially when the bond is the cheapest to deliver, and distinguishes a negative gross basis from a genuinely locked-in…
The document explains how to locate historical CAD–USD cross-currency basis data for converting USD short-term yields into Canadian equivalents. The question proposes combining CORRA, the spread between a US yield and SOFR, and the CAD–USD basis, but reports…
The document raises a measurement concern for historical tests of covered interest rate parity (CIP). It notes that interbank forward quotes are commonly expressed against the US dollar, with a stated exception, and asks whether inconsistencies between…
The document addresses the reverse of the familiar covered interest arbitrage example in which a forward exchange rate is too high. Its GBP/USD illustration explains that when the quoted forward is below the rate implied by covered interest parity, an…
The document explains how to describe and assess a roll between Treasury futures delivery months. The quoted market roll is the front contract price minus the back contract price, expressed in thirty-seconds. A theoretical comparison starts with the fair…
The document compares traditional asset-class risk premia with factor investing and alternative risk premia (ARPs). It frames factors as return sources within established markets, such as equity value, size, momentum, and quality, which may have different…
The document asks whether floating rate notes have no roll-down over a given horizon because they are relatively insulated from interest rate risk. The response distinguishes pure floaters from notes that pay a margin over the reference rate. For a pure…
A bond that trades special in the repo market can be financed at a rate below general collateral (GC). That financing advantage can support a higher bond price, or equivalently a lower yield, than would prevail without specialness. The document estimates the…
The discussion clarifies the difference between a cross-currency swap and a cross-currency basis swap, then illustrates how a basis swap can convert a foreign-currency bond exposure into a USD funding comparison. In the example, an investor exchanges USD…