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.
4,613 documents
The document argues that optimal trade size is not determined by a price forecast alone, even when leverage is treated as unlimited. Position changes should follow from an objective that balances expected alpha against portfolio risk and trading costs,…
The document explains how to represent and calculate returns for an equal-dollar long-short portfolio. Dollar neutrality means the current market values of the long and short sides have equal magnitude; a short position still has a market value even though…
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 document considers how to size three long and short currency positions to target a specified annual portfolio volatility while allocating risk equally. The proposed procedure first scales each currency position separately so that each standalone position…
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 asks how to compute the hindsight-optimal sequence of holdings across a universe of stocks when an investor can trade daily, compounds returns, pays transaction fees, and cannot short. It considers dynamic programming and presents an attempted…
The document examines whether a trader can earn positive expected value from a zero-drift random walk. It presents the martingale framework: when position sizes are chosen using only past information and remain bounded, the gains process has zero expected…
The document asks what traders may need that quants do not, beyond mathematical training. Its answer emphasizes calibrated confidence and the ability to take risk with other people’s capital without becoming overconfident. It also highlights staying composed…
The document addresses how to represent a stock portfolio that is rebalanced periodically while daily positions need to be recovered over time. It presents a trade-journal approach: record each instrument, transaction amount, date, and price, then derive…
The document discusses the difficulty of turning an inverse valuation ratio into portfolio weights when its inputs can be negative or near zero. One proposed approach is to maximize EBIT divided by enterprise value instead of minimizing enterprise value…
The document asks how to size overweights and underweights in a ten-asset portfolio relative to benchmark weights. The investor has views on four assets and wants to scale active positions so their risk contributions are balanced, while keeping the remaining…
The discussion asks how small correlations might support reliable financial gains, while observing that strong correlations alone do not guarantee a dependable strategy. One answer links the idea to the Kelly criterion, which sizes bets according to expected…
The document uses a game with a uniformly drawn numbered card to explore how expected value, risk aversion, repeated play, and redraw options affect willingness to pay. For a risk-neutral player, the value of one play is the mean card value. With many…
The document examines why adapting a long-only risk-parity objective to a dollar-neutral portfolio is difficult. Long-only risk parity seeks equal risk contributions, often by minimizing the dispersion of each asset’s weight multiplied by its marginal…
The document derives expected negative exponential utility when an investor’s wealth is the product of a fixed share position and a normally distributed security price. Scaling the price by the share position makes wealth normal as well, with its mean and…
This document examines how units and parameter choices affect the Avellaneda–Stoikov market-making model. It gives the reservation-price skew and optimal spread equations, then asks how price variance, order-arrival intensity, inventory, and remaining…
The document examines why adding a gross-exposure constraint to a return-maximizing, risk-constrained portfolio can produce weights concentrated in a few assets. It describes a mean-variance setup that maximizes expected return subject to a covariance-based…
The document presents a bond-based approach to creating exposure to a five-year-five-year forward rate. The proposed portfolio is short a five-year bond and long a ten-year bond, with relative weights determined using duration-based interest-rate…
The document explains how to convert a Treasury bond futures quote written in points and thirty-seconds into a percentage of par, then into a dollar contract value. In its example, the quote 91-12 means 91 plus twelve thirty-seconds, or 91.375 percent of…
The document compares a two-outcome Kelly formula, expressed using win and loss payoffs, with the approximation that relates the optimal fraction to expected return divided by return variance. It asks why the variance term does not appear to match the payoff…
The document explains how to estimate one-day Value at Risk for a single-asset portfolio when its delta, the asset value, and daily volatility are given. It interprets delta as the portfolio’s sensitivity to a small percentage move in the underlying, then…
An airline expects to buy jet fuel later and uses heating oil futures to reduce the risk that fuel prices rise before the purchase. Because the airline is exposed to higher costs if jet fuel rises, it takes a long position in the positively correlated…
The document proposes an aggressive ETF rotation strategy inspired by dual momentum. Instead of comparing a small set of broad holdings, it would compare ETFs across asset classes, regions, sectors, and leveraged products, then select the strongest performer…
The post asks how to manage a short strangle after the underlying rises and the short call develops a large unrealized loss. The trader has been rolling the put to keep the overall position near delta-neutral and wonders whether moving its strike toward or…