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 raises a market-structure question: when a futures exchange imposes daily price limits but the underlying spot market does not, can the two prices temporarily diverge? It asks whether that divergence would force a sharp futures adjustment when…
The document distinguishes the Samuelson effect’s maturity-related volatility pattern from volatility measured directly on futures price levels. The effect concerns returns volatility: nearby commodity contracts are often more volatile than deferred…
The document explores representing Brazilian DI1 interest rate futures with rateslib for curve calibration and sensitivity analysis. It proposes a zero-coupon swap representation and distinguishes the futures’ annualized compounded internal rate of return…
The document distinguishes precious metals from foreign exchange when describing spot-price dynamics under a risk-neutral measure. In FX, the domestic and foreign interest rates reflect the ability to invest in short-term sovereign instruments in each…
The exchange explains how a deliverable bond moving from general collateral repo to special repo can affect its gross and net basis against a futures contract. Special financing lowers the bond’s carrying cost, which can attract demand and raise its price;…
The example asks how a company can exploit a forward contract offered at an unfavorable price. It assumes a non-dividend-paying stock, a continuously compounded interest rate, and a transfer of an existing long forward position for a fee before maturity. The…
The document explains a data choice for studying market expectations of Federal Reserve policy. Actual 30-day Fed Funds futures reference the average effective rate over a calendar month, so they do not offer a contract with a continuously rolling 30-day…
The document explains why investors may hold VXX despite the ongoing value decay commonly associated with contango in VIX futures. It presents two uses: a short-term directional view on volatility, or a hedge for portfolios and trading strategies that are…
The document explains how to obtain a zero-coupon yield curve and distinguishes observed spot rates from a curve calibrated to traded instruments. A curve can be interpolated from spot rates when they are available, but spot rates are generally not directly…
The document compares two descriptions of risk remaining around a commodity futures hedge. It describes “basic risk” as residual exposure after hedging, including the difference between futures and spot prices if a futures position is closed early. The cited…
The document clarifies that asking whether futures follow a physical or risk-neutral distribution depends on the purpose of the analysis. The risk-neutral measure is a pricing tool: under suitable assumptions, prices of contingent claims can be represented…
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 raises a data-continuity question for a pair-trading model using futures contracts. It says the training series for each contract has been forward-adjusted and asks whether live prices should receive the same adjustment when the model is tested.…
The document explains how an investor can sell shares they do not own by borrowing them, selling them, then buying shares later to return to the lender. A custodian may locate shares from a long holder and arrange the loan, while passing along fees,…
The document asks how to infer an interest rate from a stock futures price when the spot price, expiry, and expected dividend are known. With one dividend, the pricing equation includes the compounded spot value and the dividend discounted according to the…
The discussion explains that equity prices can move outside regular trading hours, so the next session’s opening price is not independent of overnight activity. It cites research describing investor preferences for trading near the open versus during the…
The document compares two instruments that can both be called calendar spreads. A calendar spread in options combines a long option at one maturity with a short option at another maturity on the same underlying and strike. Under that interpretation, pricing…
The document distinguishes estimating volatility with a GARCH model from forecasting future volatility. It also considers realized volatility calculated from high-frequency price observations as another way to quantify volatility. Its central point is that…
The document compares overnight index swaps (OIS) and Fed Funds futures as market inputs for estimating interest rates expected around an FOMC meeting. It distinguishes a measure based on recent realized Fed Funds trading from futures prices that reflect the…
The explanation distinguishes Eurodollar futures from forward rate agreements and interest rate swaps. In this context, Eurodollar refers to futures on a three-month interest rate, though the term can also refer to the Euro–US dollar currency pair. Compared…
The document discusses pricing and risk analysis for derivatives on dividends paid by constituents of equity indices, with particular interest in dividend futures. One response distinguishes futures from options: dividend futures are linked directly to…
The document asks how to approximate the difference between a SOFR futures rate and the corresponding forward term rate in a continuous-time affine term-structure model. It writes the bond price using deterministic functions of maturity and the short rate,…
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…
The document compares SOFR and three-month LIBOR as indicators of credit risk. SOFR is based on secured overnight borrowing, while LIBOR included unsecured bank credit and term liquidity premia. Futures on both rates offer exposure to expected future rates,…