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 considers how to hedge an obligation to buy an asset under a forward contract at a future date. Buying a put with a strike equal to the forward purchase price establishes a floor on the value obtainable by selling the asset, but it requires…
The document asks how quantitative strategies can compare derivatives with different expiries, prices, and volatility characteristics, using commodity futures as an example. It highlights a limitation of applying a single-price time-series method, such as a…
The document works through a hedge for a company planning to issue 180-day commercial paper. Because the company benefits from higher short-term rates when issuing the paper, it can short Eurodollar futures; the example scales the position by comparing the…
A baker who will need wheat later can hedge the uncertain purchase price by going long futures contracts that mature when the wheat is needed. The document explains the cash flows at maturity: the futures gain is the spot price at maturity minus the initial…
The note explains daily variation margin by contrasting futures with assets such as stocks and options. When an investor buys a stock or an option, cash changes hands at the initial transaction; later price moves alter the account’s marked value. The…
The question compares a probability shown by the CME FedWatch Tool with a calculation based on a fed funds futures price, the effective rate for part of the month, and the number of days affected by a rate decision. The author finds that the calculation…
The document addresses why a futures contract’s notional value can be difficult to define, using a Eurodollar futures position as the motivating example. Its main point is that notional is not necessarily governed by one universal formal definition. In…
A portfolio long the EuroStoxx 50 total return index and short its futures appears to earn about 15% over ten years, exceeding the return of three-month Euribor. The discussion explains why this spread should not be treated as a risk-free arbitrage. A…
The document asks whether Quandl’s Wiki Continuous Futures series are already adjusted for contract rolls and how to handle them in rolling train-and-test backtests. It distinguishes continuous series from explicitly back-adjusted data: the presence of a…
The discussion explains the contract convention behind the $25 DV01 of a Eurodollar futures contract. The contract quote is 100 minus annualized three-month LIBOR, so a one-basis-point rate move corresponds to a small change in the quoted price. The…
The document explains why a futures backtest needs to model the transition from an expiring contract to a later-dated contract. A price difference between those contracts is not itself a trading gain or loss: a live trader closes the expiring position and…
The document explains why a futures quote usually does not predict where the underlying asset’s spot price will be at expiration. For storable commodities and financial products, arbitrage links futures and spot prices: financing, storage, insurance, and…
The document asks when an American put and a European put on the same underlying can have equal value, motivated by checking an American put binomial-tree implementation. It notes that early exercise does not benefit a call on a non-dividend-paying stock, so…
The note outlines a way to express a Eurodollar futures rate when the short rate follows a Vasicek process. It treats the futures settlement rate as the risk-neutral expectation of the three-month LIBOR rate at its fixing date. LIBOR is written as an…
The document analyzes the carry of a long bond, short futures position used to hedge interest rate exposure. It frames carry as coupon income minus financing cost. When the bond yield is below the short-term rate used to fund it, the financing expense…
The document explains how to request historical data outside regular trading hours through Interactive Brokers’ API using the R IBrokers package. The key setting is the historical-data request’s regular-hours flag: disabling it allows the request to include…
The document explains how a Monte Carlo simulation can align with Black 76 without first converting futures prices into spot prices. It starts from a lognormal spot-price process with drift and volatility, then substitutes the spot-forward relationship so…
The document explains Trade-at-Settlement orders in futures markets. A TAS trade sets the transaction price relative to the eventual futures settlement price, with the chosen offset recorded in the TAS order book. The reply characterizes the trade as an…
The document describes a volatility pattern in monthly electricity futures that changes as the delivery month progresses. Because electricity is delivered throughout the month, the contract price converges toward the monthly average as delivery unfolds. The…
The document explains why comparing two delivery months of a bond future generally cannot isolate the underlying bond’s price using a simple carry relationship. Futures pricing depends on the cheapest-to-deliver bond, its conversion factor, the repo rate…
The note addresses why Treasury basis traders commonly express a bond-to-futures hedge using conversion factors rather than a DV01 ratio. Its central point is that the two approaches are equivalent when the futures contract’s DV01 is calculated from the…
This note asks about buying an off-the-run Treasury bond that is deliverable into a bond futures contract but is not currently the cheapest to deliver, while shorting the futures. The proposed relative-value rationale is that the cash bond may richen against…
This discussion describes fitting a SABR volatility surface to options on SOFR futures. The workflow solves for implied Black or Bachelier volatilities at selected out-of-the-money strikes, calibrates SABR with QuantLib, adjusts parameters by hand, then…
The document compares Interactive Brokers demo and personal paper-trading accounts for testing Trader Workstation API applications. Demo accounts provide simulated data and can help check connectivity or exercise account types, but the answers describe…