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 explains how to hedge the foreign exchange component of P&L from American or global depositary receipts. An ADR position reflects both the local-currency value of its underlying equity and exchange-rate movements. A portfolio can aggregate its…
Convertible bond parity compares the value of the shares obtainable on conversion with the bond’s face value. When the stock and bond are quoted in different currencies, the share value must first be converted into the bond’s currency using the relevant…
The document describes how the currency weights in the U.S. dollar index relate to the adoption of the euro. It lists the current basket weights and explains that, before January 1999, the currencies that later formed the euro area appeared separately: the…
The document considers whether a trend-following trader should express a signal on a base currency, such as GBP, through several currency pairs rather than through a single pair. The response argues that a basket of terms currencies may better represent…
The document considers an embedded equity conversion option in a bond issued by an Indian company. The bond is denominated and repaid in US dollars, while the underlying shares trade in Indian rupees; the conversion price uses a fixed USD/INR rate. One…
The document explains why pricing a plain vanilla foreign exchange option from spot or from the outright forward can lead to equivalent formulations. Garman–Kohlhagen uses spot and domestic and foreign interest rates, while Black–76 uses the forward price.…
The document addresses valuation of a cross-currency basis swap whose two currency legs are collateralized in a third currency. Its example uses Indian rupee and South African rand cash flows with US dollar collateral. The stated procedure is to convert each…
The document describes a one-minute foreign-exchange backtest that chooses a trade direction using the next bar’s close. Because that information is unavailable at entry time, the apparent advantage is a look-ahead bias rather than a usable signal. It also…
The question concerns a spot forex system that uses digital filters and behaves poorly around news releases. Rejecting signals generated within two hours of an announcement has not resolved the issue, because signals shortly afterward can still react to…
The document examines why daily returns on a leveraged forex trade can become misleading when calculated as daily profit or loss divided by a small account balance. Its example starts with $40 of capital and shows losses pushing the balance close to and then…
The document explains how to locate historical CAD–USD cross-currency basis data for converting USD short-term yields into Canadian equivalents. The question proposes combining CORRA, the spread between a US yield and SOFR, and the CAD–USD basis, but reports…
The document asks how foreign exchange brokers decide whether to hedge a customer’s trades externally or keep the exposure in-house. It describes a proposed distinction: brokers may internalize trades from customers they expect to lose and hedge trades from…
The document explains why cross-currency basis swaps exchanging overnight risk-free rates may trade away from zero, despite a theoretical flat-pricing argument based on covered interest parity. It describes a proposed arbitrage: borrow in one currency at its…
The discussion considers a trading research process that clusters historical intraday observations, such as daily vectors of hourly exchange rates, and then measures the next day's average return for each cluster. A researcher might use the return associated…
The document discusses timestamp reliability in free historical data from Gain Capital, especially for combining non-FX instruments or multiple feeds in a backtest. One respondent reports that observations were correctly ordered within individual CSV files…
The document answers a request for mathematically rigorous foreign-exchange modeling references that also reflect a practitioner quant perspective. Its recommendations focus on books about pricing FX options, modeling smile risk, and valuing structured…
The document sketches a scalable way for a broker to monitor account equity against maintenance margin across many clients and instruments. Represent each account's positions as a row in a client-by-instrument matrix, and current instrument prices as a…
The discussion considers software requirements for currency arbitrage, including fast market-data updates, processing many combinations, exchange connectivity, account support, and algorithm scripting. The replies caution that FX markets are not generally…
The document raises a measurement concern for historical tests of covered interest rate parity (CIP). It notes that interbank forward quotes are commonly expressed against the US dollar, with a stated exception, and asks whether inconsistencies between…
The document explores how FX forward points and a known foreign interest-rate curve might be used to infer domestic forward rates. It illustrates the setup with EUR/USD, starting from a spot quote and forward points for several settlement dates, then relates…
The document explains that an FX swap carries interest rate exposure because its cash flows can be viewed as borrowing in one currency and lending in another. Changes in rates in the two currencies can alter the value of the locked-in funding terms, so the…
The document addresses the reverse of the familiar covered interest arbitrage example in which a forward exchange rate is too high. Its GBP/USD illustration explains that when the quoted forward is below the rate implied by covered interest parity, an…
The document compares traditional asset-class risk premia with factor investing and alternative risk premia (ARPs). It frames factors as return sources within established markets, such as equity value, size, momentum, and quality, which may have different…
The document considers the risks created when hedging a TRY/JPY call option with positions in other currency pairs. One answer observes that expressing the hedge through several currency spots introduces exposure to multiple currencies, and that the original…