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 note explains that the Black model does not depend on the standard spot-to-forward relationship in which the forward price equals spot grown at the risk-free rate. Currency futures are given as an example where borrowing and lending in the two currencies…
The document poses an instrument-selection problem: how to hedge an interest-rate differential sensitivity produced by a statistical model of spot FX returns on an intraday basis. The author seeks low trading costs and near-continuous availability, with an…
The document explains how to distinguish a DV01 hedge ratio from a ratio based on quoted price ticks for Bobl and Euribor futures. DV01 measures the cash change in a contract’s value for a one-basis-point rate move, so dividing the contracts’ DV01s gives a…
The document describes a strategy using 30-second bars on E-mini S&P 500 futures that performed well in backtests and walk-forward tests but lost in live simulation because small execution-price differences erased its edge. The question asks whether…
The document explains how trading in S&P 500 futures can be connected to movements in the cash index, even though a futures trade does not directly sell shares in the index constituents. Futures are marked to market daily and ultimately settled against the…
The document addresses why cross-hedging calculations often estimate a minimum-variance hedge ratio by regressing percentage changes in spot prices on percentage changes in futures prices, rather than regressing absolute price changes. The explanation is…
The document explains why a calculation of a 3M SOFR futures final settlement can differ from values in a Bloomberg historical price table. It distinguishes the daily exchange settlement, which is quoted on a futures tick grid, from final settlement, which…
The document discusses what a payer of fixed interest on a swap can do when market rates move, distinguishing the original purpose of a fixed-for-floating swap from a wish to exit or offset it. One answer frames the floating leg as a hedge for floating-rate…
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…
The document explains how Eurodollar futures can provide a strip of implied forward rates and how those rates can be used to construct a fixed-for-floating interest rate swap rate. For payment dates, the forward floating rates are weighted by discount…
The document addresses which S&P 500 options determine the settlement value of VIX futures with expirations beyond the nearest contract. It explains that each VIX future references the option maturity that will be the front month when that future expires. As…
The answer describes a historical approach to constructing a SOFR term structure while direct SOFR instruments were still developing. SOFR itself is an overnight rate, so curve construction relies on market instruments that reveal expectations or spreads…
The document addresses how to obtain prices for a specific futures contract rather than a continuous series. It uses a wheat contract identified by exchange, delivery month, and year as an example, and asks whether Quandl provides this contract-level data or…
The document asks whether an unknown process parameter can be recovered from the sample variance of an observable series that approximately equals a latent process. Given a known variance formula for the latent quantity, the proposed estimator rearranges…
The document questions whether a nearby-versus-next-month futures spread is a stable mean-reverting series suitable for high-frequency arbitrage. It challenges the assumption that the spread should track an interest-rate benchmark, explaining that futures…
A call option on a forward gives its holder the right to enter a forward contract at the option’s expiry. Whether exercise is worthwhile depends on the forward price at that time relative to the strike. The resulting exposure is to the forward contract; it…
The document asks why a futures price is not simply the expected future spot price, and contrasts this intuition with cost-of-carry pricing. Its answer frames futures and forwards through arbitrage-free pricing: if an asset can be bought and financed until…
The document describes a cross-exchange futures pairs strategy involving products whose prices are expected to remain close. The trader enters one leg with a limit order and the other with a market order, aiming for price neutrality. The strategy’s signal is…
The document asks how to value commodity futures options when an investor has a specific view about the future return distribution: a substantial oil price spike is considered possible over a stated horizon, with the move expected to be brief. The goal is to…
The document explains how to take a short position in a synthetic instrument that can have a negative price, using spreads as examples. It lists calendar spreads, butterflies, and double butterflies, then gives a January–February calendar spread: the long…
The document presents a fixed-income futures position and asks why its realized price-based loss differs from a loss estimated using the change in the underlying Treasury note’s yield. The trader reports buying a US two-year note futures contract, later…
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…
For a European option on the December Brent futures contract that expires earlier, the relevant volatility describes the distribution of that same December contract at the option’s expiry. Under the Black model for futures options, the payoff is determined…
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…