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 investigates why correlations derived from a Kalman filter’s posterior covariance estimate for a commodity forward curve appear nearly constant across contracts. The described setup uses a latent state containing forward values and drift…
The document explains why bond duration is not a straightforward measure for Eurodollar futures. A bond’s duration relates its percentage price change to a yield change, while a futures contract has no meaningful cash value at inception for calculating that…
The document poses a derivatives-pricing question: how to derive the stochastic differential equation for a futures price when the underlying stock follows geometric Brownian motion but its interest rate and volatility vary randomly over time. It notes the…
The discussion explains why holding a Treasury futures contract to expiration does not imply a loss equal to a simple difference between a quoted yield and a repo rate. Under the stated assumption that rates and market prices do not move, the futures price…
The document asks whether calendar spreads become pure arbitrage when implied volatility is flat across strikes and maturities, as in the Black–Scholes framework. Its answer cautions that equal implied volatility across maturities does not guarantee that…
The note describes an approximate way to hedge a short VIX futures position using SPY shares. It first estimates the beta of the relevant VIX futures contract relative to SPY, then scales that beta by the stated contract multiplier and SPY price to obtain a…
The document derives the dynamics of a log forward price in a Schwartz model where the logarithm of the spot price follows a mean-reverting diffusion. The forward price is given as an explicit function of time and the current log spot. Applying Itô’s lemma…
The document addresses forecasting daily asset prices with explanatory data published weekly or monthly. It recommends beginning with a market hypothesis and testing whether the slower series contains information at the forecast horizon. The discussion…
The document compares one-month and three-month Term SOFR and asks how tenor relates to discounting cash flows. Its answers describe Term SOFR as an annualized rate derived from expected overnight SOFR over the relevant period, with the rate reflecting…
The document explains why market quotes may appear with different numbers of decimal places by connecting display precision to minimum price variation, also called a minimum price increment. It says public U.S. equity quotes and U.S. stock indices are…
The document compares two ways to express a daily high–low range as a percentage: divide the range by the opening price, or compare the high with the low. It argues that the open is a practical reference when measuring the range during the day, since the…
The document examines why practitioners may price options on futures under a forward measure when a risk-neutral measure is also available. The accepted reply distinguishes futures from forwards: futures prices are martingales under the risk-neutral measure…
The document considers how to optimize a gas storage schedule using a forward curve, subject to facility volume and injection and withdrawal limits. The initial intuition is to buy gas for cheaper months and sell for more expensive months, with storage…
The document examines the costs of maintaining an equitized Euro Stoxx 50 exposure by rolling quarterly futures into the next liquid contract. It asks whether reported increases in index futures holding costs are plausible and what components could explain…
The document investigates whether Vince’s optimal f can be used for futures position sizing without look-ahead bias. The author assumes log utility and is reluctant to estimate expected returns, then reproduces a historical profit-and-loss example in which…
The document addresses why a Treasury futures contract's quoted price may imply a yield different from the spot yield of a Treasury with a similar stated maturity. Its answer emphasizes that the futures price should be interpreted through the eligible…
The note examines how to hedge an inverse-price product using a second instrument whose payoff changes linearly with the same underlying. It distinguishes a finite-period payoff, based on the change in the reciprocal of price, from a possible continuously…
The document discusses how to assemble futures data for regressions that forecast monthly Brent spot prices at several future horizons. Its model uses the futures quote available at time t for a maturity matching the forecast horizon, alongside other…
The document gives a basic cost-of-carry expression for the fair value of an AUD/USD currency futures contract. It relates the futures price to spot and the difference between the local and foreign interest rates, compounded continuously over the time…
The document addresses whether futures-versus-forward convexity adjustments require a perfect correlation between a short rate and a forward rate. The question describes a possible mismatch: gains on a Eurodollar futures position might coincide with rising…
The discussion clarifies how to simulate an oil spot price trajectory when starting from observed market data. For each simulated path, the first simulated value uses the actual starting spot price; subsequent values should be generated recursively from the…
The discussion addresses whether a deferred oil futures contract should fall toward spot when it becomes the front-month contract after a roll. Futures prices reflect more than the current spot price: financing and storage-related costs can raise futures…
The note explains that a 1x4 forward rate agreement locks in a three-month LIBOR borrowing or lending rate beginning one month ahead. Its rate is determined by the relevant discount factors or LIBOR curve points at one and four months, rather than by simply…
The document addresses how to identify the implied volatility of a 25-delta call or negative-25-delta put, and how to infer the corresponding strike when volatility is known. It presents the Black–Scholes call delta as a function of spot, strike, time to…