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 considers how to convert independent country signals into equity portfolio weights while preserving a neutral allocation and bounding each country's deviation. Its proposed construction treats the signal vector as a point in a multidimensional…
The document considers a claim paying the time average of squared Brownian motion when the underlying follows standard Brownian motion and the interest rate is zero. It gives the initial fair value as the expected payoff, then uses Itô calculus to rewrite…
The document explains why market makers often do not set displayed size through a single theoretical optimization such as a Kelly-style rule. They quote across many strikes, expirations, and sometimes underlyings, while trying to balance incoming flow or…
The document compares worst-case arbitrage allocation with expected-value betting across two simultaneous matches. For the first match, the offered payouts allow a guaranteed profit if the stake is split between Pink and Maroon within a specific range.…
The document outlines a Monte Carlo framework for estimating portfolio value at risk when positions have different gearing. Rather than treating broker margin as the risk measure, it starts with a model that generates future returns for each underlying…
The document distinguishes Avellaneda–Stoikov quote placement from the choice of order quantity. The model’s quoted prices respond to inventory and other model inputs, while its trade units are relative: scaling every unit by the same factor does not change…
The document presents questions about a continuous-time Kelly allocation derived for a risky asset modeled as a diffusion and a risk-free asset. Under the stated assumptions of self-financing trading, continuous rebalancing, and no market frictions, the…
The note raises two implementation questions about the time-series momentum method described by Moskowitz, Ooi, and Pedersen. First, it asks how to interpret the paper’s ex-ante volatility estimate when the strategy uses a twelve-month return signal: whether…
The document considers whether the optimal risky-asset weight in the classical Merton portfolio problem must lie between zero and one. In the setup described, the investor allocates a fraction of wealth to a risky asset, with zero interest rates assumed for…
The document turns a set of bets with different success probabilities and payouts into a portfolio-optimization problem. It proposes minimizing portfolio variance using the covariance matrix of the investments, with each bet’s expected value and variance…
The note addresses a pairs trading setup that selects pairs using the sum of squared distances between normalized prices, then monitors the resulting spread. It raises concerns about unequal dollar values in the long and short positions and whether the…
The document considers how to reduce the worst losses of a bullish call spread by adding a bearish option position in a later expiry. It discusses balancing hedge size, the hedge’s cost, and the different rates of time decay across expiries. The proposed…
The document discusses how to size the legs of a steepening yield-curve trade using Treasury futures. It clarifies that futures prices are market quotes; the practical sizing question is how many contracts to hold on each side. One common approach is DV01…
The document poses a portfolio optimization problem in which asset positions determine portfolio weights, all weights must sum to one, and each weight must remain below a specified cap. It asks whether a standard algorithm can adjust positions to satisfy the…
The accepted answer explains how to raise a portfolio’s volatility by combining a tangency portfolio with a risk-free asset. Since the risk-free asset has zero volatility and is uncorrelated with the tangency portfolio, the combined portfolio’s volatility is…
This discussion distinguishes full Kelly betting from choosing a bet size to pursue a particular, submaximal wealth target. Full Kelly maximizes expected logarithmic growth, while a smaller fractional Kelly stake may be appropriate when the objective is a…
The document asks how to assess three portfolios against the Capital Market Line (CML) and how to allocate capital to achieve a target return. With a 2% risk-free rate and a market portfolio expected to return 10% with 20% standard deviation, the CML slope…
The document explains why the Brazilian Ibovespa futures and Mini Ibovespa futures can track the same index while having different contract values. Their quoted index movement is translated into profit and loss using a point value: the full-size contract has…
The document considers how to estimate a hedge ratio for offsetting movements in one equity index with another. It compares the conventional return-based beta, the inverse regression orientation, and a beta calculated from absolute price changes. The key…
The document solves a two-asset allocation problem for an investor with quadratic utility over terminal wealth. The investor begins with $100 and chooses a share to place in a risky asset, with the remainder earning the risk-free rate. The risky asset has…
The document considers how to hedge an 11-year off-the-run Treasury bond when direct access is limited to on-the-run securities. Its practical suggestion is to use the Treasury futures contract with duration closest to the bond and determine an appropriate…
The document considers how to rank prospective trades using return, duration, liquidity, and probability of failure. It cautions that directly multiplying raw inputs can produce a misleading score because the variables may use different scales and units.…
The document considers a game that pays a fixed amount only if five coin flips all land heads, then asks how much a player should pay for one round versus many repeated rounds. It starts from the expected payoff, but notes that this value does not capture…
This note asks how to pace the build-up of a target position according to price movement rather than elapsed time or traded volume. It frames the problem as accumulating a desired position while price travels from one level to another, and wonders whether…