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 examines whether a market maker should reverse the usual cost-of-carry formula when quoting a bid for a forward. It develops the standard no-arbitrage relationship by considering a short forward position hedged with a purchase of the underlying,…
The document compares CME expiration language for serial options on several grain contracts. Most examples specify the last Friday that falls at least two business days before month-end, with a fallback to the preceding business day if that Friday is not a…
The document explains several apparent irregularities in historical SPX options data from 2008–2009. Traditional options can show Saturday expiration dates for historical reasons, although the practical settlement reference is Friday: the index close for…
The document explains why options on E-mini S&P 500 futures may show different implied volatility from options on the SPY ETF, despite both being linked to the S&P 500. The underlyings and contracts are not identical: they have different trading hours,…
The document asks when VIX futures and options expire relative to settlement and describes the settlement calculation. The cited answer says both contracts use a final settlement value based on a Special Opening Quotation of the VIX Index. That quotation is…
The exchange explains why a probability measure defined over paths in a Cox–Ross–Rubinstein binomial model sums to one. Each path receives a weight determined by the number of upward moves, using the risk-neutral probability p* and its complement. Paths with…
The document clarifies that “tick data” can refer to different market event streams. Trade ticks record executions, typically with price, quantity, and time; bid/ask updates capture changes in quoted prices and sizes; order book or market depth data can…
The document outlines a way to estimate seasonal patterns in natural gas prices before analyzing or modeling the futures term structure. For each year, calculate the average daily spot price, then calculate the average for each month. Divide each monthly…
The document explains how to select an interest rate when converting future cash flows into present values for U.S. securities. Its main guidance is to match each payment date with the corresponding zero-coupon rate from a yield curve, rather than applying…
The document raises a modeling and hedging problem involving dividend index futures and the underlying equity index. A simple regression has been used to estimate their relationship, with its historical beta reused for forecasts. The author observes that…
The discussion clarifies how to initialize Average True Range when using Wilder’s volatility formula. It answers that the initial simple moving average of true range should use the same period, N, as the subsequent Wilder smoothing. The source cited in the…
The discussion considers how to account for convexity when bootstrapping a SOFR curve with futures and swaps. It distinguishes the task of calibrating to American options on SOFR futures from estimating futures convexity, and outlines approaches proposed by…
The document presents a question about applying a regression from Asensio (2013) to test forecast bias in the VIX term structure, motivated by the possibility that VIX futures are overpriced. It identifies the equation’s forecast errors and its horizon…
The document explains why a forward and a futures contract on the same asset need not have identical prices when interest rates are stochastic. With deterministic rates, their prices generally agree in the idealized model; random rates can affect the…
The document clarifies that a forward premium is not an option premium paid for a right to exercise. It describes the annualized forward premium as the continuously compounded rate implied by the ratio of the forward price to the current spot price over the…
The document considers whether futures options volatility behaves as sticky strike or sticky delta, and why intraday tick data can make the distinction difficult. Options and futures quotes may update at different times, while illiquid markets may not…
The document distinguishes Brazilian domestic debt indexed to the dollar from debt that provides investors with actual USD. For the historical NTN series D, it describes a USD notional with a fixed coupon: investors paid BRL at the spot exchange rate, and…
The document describes a QuantLib curve-building problem involving overnight index futures. Bootstrapping fails because a required historical fixing is missing; adding a fixing for a Mexican public holiday then triggers an invalid-fixing error. The example…
The document derives the foreign-exchange forward pricing relationship using the cost-of-carry framework. It treats the domestic interest rate as the opportunity cost of holding the currency and the foreign interest rate as the benefit earned by investing in…
The document corrects the claim that futures markets have no bid–ask spread. It explains how bids and offers at different prices form a spread in the central order book: after orders at the same price trade, a buyer may need to pay the next offer while a…
This explanation clarifies the role of conversion factors in bond futures and how they relate to the cheapest-to-deliver (CTD) bond. A conversion factor approximates the bond's price per unit of face value at a standardized 6% yield, using the bond's…
The document compares two definitions of carry for zero-coupon bonds and asks why their calculated values differ. One expression uses the forward rate over a short interval relative to the current risk-free rate, with a discount scaling factor. The other…
The document explains how to express historical spread volatility when using the Bachelier single-factor spread option formula. Since the option’s underlying is the price difference between two futures contracts, the volatility input is measured in…
The document describes factors behind the price difference between West Texas Intermediate and Brent crude. It first contrasts crude grades by API gravity and sulphur content, explaining how lighter, sweeter oils can be more valuable because of product…