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
This note explains one implementation’s method for choosing the initial Parabolic SAR value when calculating the indicator from FX price data. It uses the first two bars’ highs to infer the initial direction: when the first high is below the second, it…
The document explains how an FX options collar can hedge a foreign-currency receivable while preserving some favorable exchange-rate movement. It contrasts the structure with a forward, which locks in a conversion rate, and with leaving the receivable…
The document explains how to value the EUR leg of a EUR-GBP cross-currency swap when GBP collateral is specified. The EUR leg needs both a three-month EURIBOR forward curve and a EUR discount curve that are consistent with GBP collateral. In theory, these…
The document considers whether a trader who needs tight spreads should post non-marketable limit orders inside the quoted bid–ask spread instead of crossing it. It explains why the chance and timing of a fill are difficult to estimate in spot foreign…
The discussion considers why an exchange rate might be modeled with geometric Brownian motion, a process whose proportional changes have a drift and a volatility term. With constant coefficients, its solution is an exponential of a drift-adjusted time…
The document examines how to relate options written on reciprocal currency pairs. It asks whether the delta of a USDJPY put corresponds to the delta of a JPYUSD call at the reciprocal strike and with the same maturity. The answer derives the terminal payoff…
This explanation distinguishes an ETF’s reporting or base currency from the currencies of the assets it holds. Using a Japan equity fund as an example, it says the fund owns Japanese yen-denominated stocks and converts their value into US dollars for daily…
The discussion clarifies the difference between a cross-currency swap and a cross-currency basis swap, then illustrates how a basis swap can convert a foreign-currency bond exposure into a USD funding comparison. In the example, an investor exchanges USD…
A non-deliverable interest rate swap exchanges fixed and floating interest cash flows linked to one local currency, but settles the net amount in a deliverable currency such as USD or EUR. The example describes paying a fixed local-currency rate and…
The document explains how to translate a USD Libor curve into an equivalent EUR funding curve. Its central method is to convert EUR into USD at spot, accrue the USD cash at the relevant Libor rate, and convert it back to EUR at a forward FX rate. Comparing…
The document asks how to read a vector autoregression impulse response when the variables are log differences, using exchange-rate volatility and interest rates as an example. It focuses on the vertical-axis value and whether a plotted response should be…
The document asks how to adjust discounting and projected forward rates when valuing collateralized derivatives under a CSA currency with no directly quoted swap or OIS curves. Its response says that FX forwards, local-currency rates, and collateral discount…
The document addresses how to make a long exchange-rate history comparable when a currency has been redenominated more than once. It treats each redenomination as a scale change, similar to adjusting historical prices for a reverse stock split. If official…
The document derives the dynamics of EUR/USD from a model for USD/EUR. It assumes the USD/EUR exchange rate follows geometric Brownian motion with drift r and volatility σ, then represents the reciprocal exchange rate as 1/S. Applying Itô’s formula to that…
This document presents a method for estimating the parameters of an Ornstein–Uhlenbeck process from an equally spaced historical time series. It defines the process through a mean-reverting rate, a long-run level, and a volatility term, then gives formulas…
The document explains what a currency pair position represents, why a newly opened trade can show a loss, and why three pair trades may not automatically leave an account flat. In a spot-market interpretation, buying a pair means acquiring the base currency…
The post considers how to compare profit factors across forex strategy runs when trades arrive in bursts. The author proposes treating nearby orders as one cluster and weighting each trade according to the number of subsequent orders within a short window. A…
The document concerns the pricing of foreign-exchange options with American-style barriers. The question contrasts closed-form formulas for European barrier calls and puts with the apparent lack of comparable guidance for American barriers. The response…
The document examines an FX option whose payoff is denominated in the foreign currency. It rewrites the payoff of a call on the exchange rate as a scaled put payoff on the reciprocal exchange rate, then compares two proposed Black-Scholes-style expectation…
The note considers how to extend an equity local volatility model, initially calibrated to vanilla options, so it can also match liquid quanto option prices. It outlines an approach based on market smiles: use the liquid FX smile and calibrate a compo option…
The document asks how to construct an FX forward curve from basic concepts such as interest rates and discounting, using EUR/USD as an example. It raises the roles of instruments such as IMM dates and overnight index swaps, but the response does not explain…
The document asks how covered interest rate parity should be applied when spot foreign-exchange trades settle after a delay. Its starting point compares investing domestic currency at the domestic rate and converting at a forward rate with converting into…
The discussion considers how to obtain timestamped news for research linking Forex price series to news releases, especially when professional machine-readable feeds are costly. Suggestions include collecting headlines from websites, parsing RSS or Atom…
The document considers a portfolio that is short EUR/USD and long GBP/USD, and asks how options could limit losses while preserving the possibility of gains. The key observation in the response is that the two positions create an implicit short EUR/GBP…