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.
610 documents
The document considers which interest-rate maturities are appropriate when calculating the rate differential for AUDUSD, using a one-month currency futures contract as its example. It distinguishes the question of which maturity to select from the practical…
The document explains dollar rolls from the perspective of the buyer, who purchases TBA mortgage-backed securities for a nearer month and sells them for a later month. Because delivery follows SIFMA guidelines and allows variation in pool characteristics…
The document offers a qualitative explanation for why the Australian dollar three-month cross-currency basis may be positive while euro and yen basis measures are often negative. It connects the sign of the basis to banks’ currency-denominated assets and…
The note addresses which interest rate to use when evaluating stock index futures arbitrage. It recommends matching the financing rate to the expected life of the trade, typically the time remaining until futures expiry at the outset, because the…
The discussion examines how to estimate the six-month roll-down of a five-year interest rate swap. It challenges simply subtracting a five-year spot rate and a four-and-a-half-year spot rate, then explains how to represent the original swap after time…
The note explains why posting bonds as collateral is treated differently from posting cash when considering price adjustment interest (PAI). A party receiving bonds can generally use them in a repurchase agreement to borrow cash, and the repo rate is the…
The document explains how currency hedging can affect the risk and return of foreign investments. Long-run studies cited in the discussion suggest hedging may leave returns similar while reducing volatility, which can benefit mean-variance investors. Over…
A calendar spread between two bond futures can carry repo exposure even when both contracts have the same cheapest-to-deliver bond. The key mechanism is that contracts with different delivery dates respond differently to financing rates: the later contract…
The discussion explains a first-order way to think about a bond’s return over a holding period: combine its yield with the price effect of changes in yield, scaled by the bond’s DV01. Roll-down return is a special case of that price effect, calculated under…
The document explains how to think about intraday trading in currency forwards by relating a forward quote to the spot exchange rate and the cost of carry. It describes the forward as exposure to the underlying currency pair, adjusted for the interest-rate…
The document explains how a US investor can hold a euro-denominated German bond while hedging the currency exposure. The investor exchanges dollars for euros at spot, buys the bond, and sells euros forward to lock in the dollar value of the maturity…
This discussion asks how to forecast a currency spot rate over a three-month horizon and whether the matching forward rate is the best estimate. It presents the random walk without drift as a difficult benchmark to beat and notes that forward rates can be…
The document explains why futures prices can exceed forward prices when the underlying asset is positively correlated with interest rates. Daily settlement gives a futures position cash flows along the way: a long can reinvest gains at higher rates and faces…
The document responds to a request for advanced reading on global macro investing, where views on economic conditions are expressed across asset classes such as currencies, rates, commodities, real estate, and equities. It offers a varied list of…
The document explains how to estimate the compounded floating payment on an EONIA swap. The realized rate compounds daily fixings over the accrual period, with the day count for each fixing reflecting how long it applies. Before those fixings are known, the…
A one-year-forward 2-year versus 5-year Treasury steepener can be built from bonds with settlement in one year or expressed through forward-starting interest rate swaps. For bonds, the examples construct forward exposures by combining securities that mature…
The document examines a proposed foreign exchange carry trade based on differences between brokers that accrue rollover interest continuously and those that apply it at a daily cutoff. The proposed trade briefly holds a high-yield currency position through…
The discussion asks whether investors can access systematic risk premia through funds, indices, or exchange-traded products. It names carry, curve or term premium, size, value, momentum and trend, liquidity, and volatility as areas of interest, and notes…
The document explains why stock index futures are not generally read as forecasts of how much an equity index will rise, even though interest rate futures are often used to infer rate expectations. Index futures can be used to derive a forward curve and…
The document distinguishes the overnight federal funds rate from the yield on a ten-year Treasury and explains that their spread is calculated as the long-term yield minus the short-term rate. The spread is not a fixed mathematical function of the policy…
The discussion considers why dual range accrual notes may reference a long-minus-short swap-rate spread, such as the 30-year minus 2-year rate, alongside a separate swap rate. It distinguishes risk-neutral pricing probabilities from historical frequencies:…
Uncovered interest rate parity (UIRP) relates the interest rate differential between two currencies to the expected change in their exchange rate. The answer corrects an incomplete equation by including both the current spot rate and the future expected spot…
The document describes a trade that starts with dollar funding, converts it to yen through a one-year FX forward arrangement, invests in a Japanese government bond, and later uses the bond proceeds to settle the currency exchange. It examines whether the…
The document clarifies how slide or rolldown relates to basis net of carry (BNOC) in a Treasury futures trade based on the cheapest-to-deliver bond. To calculate net basis, the response says to account for all economic effects before delivery, including…