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.
4,574 documents
The document asks how practitioners might extend a long-dated foreign exchange option hybrid model that captures volatility level and skew but may not reproduce the full smile. The questioner wants to retain a three-factor setup, avoid stochastic volatility,…
The document considers whether official central bank exchange rate fixings can stand in for end-of-day spot forex data in lower-frequency analysis. The response points to the European Central Bank’s daily exchange rate series, noting that its rates are fixed…
The response outlines a pricing approach for an FX-linked payoff when payment is made in a third, quanto currency. It defines the exchange rate with the foreign currency as the numerator and gives its drift under the quanto currency measure. The drift…
The document derives a simple FX forward relationship from covered interest parity. For two currencies, it compares converting at spot and investing at the domestic rate with investing at the foreign rate and locking in the maturity conversion rate through a…
The document considers how to recover FX option strikes from broker volatility quotes, forward points, deposit rates, and delta conventions. It explains that the ATM strike formula depends on the convention: a delta-neutral strike with premium-adjusted delta…
The document asks how to interpret a bond investment denominated in one currency when the investor hedges the currency exposure using a forward rate whose implied yield differs from the bond’s yield. It frames the question as whether a 10% bond yield…
The document explains why spot forex historical data cannot be interpreted like exchange consolidated equity data. Spot foreign exchange is fragmented across dealers and electronic venues, so there is no single source that captures all quotes, orders,…
The document asks how to obtain implied volatility for a specific overnight period in foreign exchange, such as the night before a particular trading day. It then asks how to translate an overnight volatility quote into an implied breakeven exchange-rate…
The document illustrates how a company with dollars can use an FX swap when it needs francs to settle a bond purchase and later expects to receive foreign-currency proceeds. In the example, the company exchanges dollars for francs for near-term settlement,…
The discussion considers a foreign-exchange volatility market maker who is long a EURUSD straddle and short a USDJPY straddle, then must quote a EURJPY straddle. It asks whether the existing positions imply an appropriate trading bias for the cross-currency…
The document asks about software for valuing foreign exchange forward deals from trade details such as currencies, notional, forward and spot rates, and relevant dates. It frames fair value as having sensitivity to both exchange-rate changes and…
The document explains how to calculate the gain on a foreign-currency investment from the perspective of an investor whose home currency differs from the asset’s trading currency. The relevant comparison is between the home-currency amount originally paid…
The discussion explains how Black-Scholes is used in over-the-counter FX vanilla options. Market quotes commonly express implied volatility in delta space; traders convert those quotes into prices using the relevant market inputs, such as spot, rates, and…
The document resolves a terminology question about Japan’s overnight reference rate. The question contrasts the Bank of Japan’s use of TONA with the TONAR name found in another reference source, and asks whether they identify distinct rates. The accepted…
The discussion outlines factors for selecting an execution management system and aggregating fragmented FX liquidity. It compares ECNs and bank channels in terms of currency-pair strengths, liquidity, fees, technology, and available execution algorithms. It…
The document describes an exploratory analysis of one-minute XAUUSD log returns over a long historical sample, compared with fitted normal and Student-t distributions. It raises questions about irregular density peaks, a pronounced concentration near zero,…
The document explains how covariance between two currency-rate returns can be inferred when a third rate is related to them through a currency triangle. In log terms, the cross rate is represented as the sum or difference of the two component rates,…
The document discusses hedging a known future expense of 2,500 USD when the home currency is euros. Using the stated spot and six-month forward rates, the answer calculates the euro amount fixed by the forward contract: dividing the dollar expense by the…
The document lists a small set of quantitative trading competitions in response to a Singapore-based participant seeking opportunities beyond the International Quant Championship and SMU Alphathon. It mentions a stock-prediction model competition run by XTX…
This note explains an approximate way to translate the spread on a USD-denominated bond into an equivalent spread over a euro reference rate. It considers a euro issuer that borrows in dollars and uses the SOFR–ESTR cross-currency basis to express the USD…
The document addresses how a reader with undergraduate probability and statistics can approach an empirical currency risk paper that uses asset pricing concepts such as stochastic discount factors, linear beta pricing, and efficient portfolios. The response…
The document explains why foreign exchange option data may arrive as volatility quotes and delta-based smile points rather than as a ready-made table of implied volatilities by strike and maturity. In much of the over-the-counter market, options are quoted…
The discussion examines why observed broker spreads across currency pairs may look counterintuitive and whether spreads are useful as a rough measure of trading cost. One explanation is a quotation-unit effect: comparing the dollar cost of one unit of each…
This note outlines ways a Europe-based investor can hedge the currency exposure of a USD bond. One approach is to align a cross-currency swap with the bond’s payment schedule, paying USD fixed to match the bond coupons and receiving either fixed or floating…