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 compares QuantLib Greeks for a stylized foreign exchange option with Bloomberg values, focusing on a mismatch in theta. It explains that QuantLib's analytic Garman-Kohlhagen engine reports model theta: the derivative of option value with respect…
The note explains why an American investor who buys a U.S.-traded receipt for a Japanese company can still face foreign-exchange risk. Although the purchase and trading price are quoted in dollars, the receipt’s value reflects the underlying Japanese shares…
The document asks how to obtain an FX option’s volatility from a surface quoted by delta and tenor. The proposed workflow first reads the at-the-money volatility, determines the option’s corresponding delta, then interpolates the volatility surface at that…
The document considers principal component analysis for estimating risk in an international equity portfolio whose stocks are denominated in several local currencies. It asks whether PCA can be applied to local stock returns separately from exchange-rate…
The document derives the stochastic dynamics of a reverse exchange rate. If the quoted rate gives domestic currency per unit of foreign currency and follows geometric Brownian motion, the reverse rate is its reciprocal, representing foreign currency per unit…
This note compares three structured foreign-exchange derivatives: snowball, knock-in knock-out (KIKO), and target redemption forward (TRF). It describes shared features, including periodic settlements and limited potential gains paired with potentially large…
The document explains when a cross-currency swap can be viewed as two interest rate swap legs. For a typical physically delivered fixed-for-fixed or fixed-for-floating structure, each currency has its own interest cash flows, and principal exchanges must…
A deliverable FX forward exchanges the two contracted currencies at maturity. A non-deliverable forward instead calculates a net payment in a settlement currency from observed exchange rates on a fixing date, usually before maturity. NDFs are used where…
The document answers whether Python trading libraries can support forex strategies. It describes three routes: combine plotting tools with a broker's REST API, use a backtesting framework that accepts OHLC data regardless of instrument, or run Zipline…
The document addresses whether an exchange rate and its reciprocal, such as a currency pair and the inverted pair, should have the same at-the-money implied volatility. It models one exchange rate as a diffusion with proportional volatility and applies Itô's…
The document outlines a proposed workflow for pricing a quanto option: estimate marginal distributions for the underlying asset and exchange rate, connect them with a copula, then calculate the expected payoff under the resulting joint distribution. Its main…
The document describes the gap risk a broker can face when it immediately hedges a customer's leveraged spot FX trade with a liquidity provider. If the market jumps through a liquidation level, the customer may incur a negative balance that cannot be…
The document asks whether a Hurst exponent near 0.5 in one-second EUR/USD prices supports modeling developed markets as geometric Brownian motion, with constant volatility over short intervals. The author reports estimates around 0.5 from a week of February…
The document points readers seeking research on currency baskets to two approaches. One cited paper applies principal component analysis to a basket of nine foreign-exchange pairs over a rolling two-month window. It then uses the first principal component as…
The document examines delta hedging a quanto call when the underlying is priced in a foreign currency and the portfolio is accounted for in a domestic currency. A hedge based only on the foreign share count misses the currency conversion: the domestic value…
The document explains why a simple interest-rate-differential formula may fail to match observed three-month FX forward points. It identifies cross-currency basis as the key market adjustment that emerged prominently after the global financial crisis. The…
The document asks for a historical catalog of long-term support and resistance levels, using EUR/USD as an example. It presents price zones alongside qualitative strength ratings and the year or period associated with each level. The example includes levels…
The post asks how to hedge the cross gamma between interest rates and foreign exchange in a callable power reverse dual currency note. The brief answer is that this exposure may be difficult or impossible to hedge because the market has too few…
The question highlights a difficulty in analyzing foreign exchange rates: bilateral pairs that share a currency can move together because of changes affecting that currency. It asks whether another asset, such as gold, could serve as a common reference for…
The post explains two treasury uses of FX swaps: obtaining needed local-currency cash and putting idle balances to work through carry. In an emerging-market banking example, depositors and businesses shifted toward US dollars amid fears of devaluation, while…
The document answers which exchange rate to enter as the spot parameter when pricing an FX option with the Garman–Kohlhagen model. Its central point is to use the current spot rate; the forward rate for the option’s expiry is already implied by the model’s…
The note asks how to define risk factors for scenario testing of a portfolio containing several currency pairs. It outlines a basic stress-testing workflow: identify portfolio-relevant drivers, specify scenarios, shock those drivers, and interpret the…
The document responds to a beginner’s difficulty identifying widely traded ETF symbols by outlining how funds can be grouped into asset classes and investment styles. One answer points to a commercial fund-classification service and gives an example of how a…
The document explains how to estimate the units of a EUR/JPY spot short when the account balance is denominated in USD. The key step is to convert the available USD balance into the base currency, EUR, using the EUR/USD exchange rate. In the example,…