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 which interest rates are appropriate for empirical covered interest parity testing between Canada and the United States across several forward maturities. It raises a practical concern with Treasury bill rates: their lending yield may not…
The document considers a long-run relation between exchange rates and purchasing-power parity whose residual appears stationary only when a deterministic trend is included. It asks whether that trend is acceptable and how to justify its inclusion. The…
The note distinguishes two short-dated foreign-exchange swap tenors used to move settlement forward. Under the usual T+2 spot convention, a tomorrow/next swap exchanges currencies on the next business day and reverses that exchange on the following business…
The document distinguishes the return skewness of momentum strategies across asset classes and strategy types. It reports that equity cross-sectional momentum has negative skewness, associated in the cited literature with sharp rebounds among prior losers…
The document asks whether transaction records and candlestick summaries can reveal the highest bid, lowest ask, or quote sizes in the foreign exchange market. The available data includes trade times, amounts, prices, and bar-level measures such as highs,…
The document explains why converting an FX option delta into a strike requires the market’s quoting conventions and the correct definition of at-the-money. In the example, the pair uses unadjusted deltas, and the at-the-money strike is delta-neutral: the…
The document raises a fixed-income valuation question: whether CDS spreads quoted in different currencies can be subtracted to adjust a bond’s credit margin for a change in issuer country. The example compares five-year U.S. and Polish CDS quotes, then adds…
The document investigates why a calculation for the delta of a foreign-exchange down-and-out call appears to produce an implausible negative value when the spot, strike, and barrier are entered on a larger numerical scale. The accepted answer approaches the…
The document contrasts last-look foreign exchange market making with firm, no-last-look quoting. With last look, the market maker streams indicative prices and receives incoming orders that it may reject. Under no-last-look arrangements, the venue streams…
This discussion considers how a shift from a currency peg toward a freer float could affect over-the-counter FX option prices, using the Moroccan dirham’s EUR and USD relationships as context. It notes that a regime change may bring a spot jump together with…
The question concerns a chart that overlays exchange-rate log differences with a conditional volatility series and observes that the latter is much smaller, despite similar-looking peaks in other examples. The response emphasizes that log returns and…
The document derives the expectation of the product of two correlated geometric Brownian motion processes, such as a foreign asset price and an exchange rate. It reduces the weighted sum of their Brownian shocks to a single Gaussian shock whose variance…
The document lists potential sources for historical foreign exchange tick data, including TrueFX, Dukascopy, TickStory Lite, and HistData.com. It presents Dukascopy as an option for downloading hourly data files, either through a website or direct scripted…
The document asks how long an FX order book takes to recover after a large trade consumes available liquidity. It defines recovery as the return of the spread for a specified trade size to its prior level, using a hypothetical EUR/USD book as an…
The document raises modeling and portfolio attribution questions about minimum lower partial moment hedging with order two, in the setting of currency hedges for international equity portfolios. It contrasts downside co-moments with covariance matrices,…
The document examines a currency-options parity exercise and questions whether the reciprocal of a lognormal exchange rate can be priced with the same Black–Scholes setup. It derives the reciprocal rate’s log distribution, observes that the variance…
The document considers which interest-rate maturities are appropriate when calculating the rate differential for AUDUSD, using a one-month currency futures contract as its example. It distinguishes the question of which maturity to select from the practical…
The document asks how a weaker dollar could keep borrowing costs low, given that U.S. firms generally borrow in dollars. The included answer links depreciation to higher dollar revenues for exporters earning foreign currency, then argues that stronger…
The document offers a qualitative explanation for why the Australian dollar three-month cross-currency basis may be positive while euro and yen basis measures are often negative. It connects the sign of the basis to banks’ currency-denominated assets and…
The document explains how banks may price and hedge target redemption forwards (TARFs), emphasizing that the approach resembles hedging other derivatives but becomes complex because TARFs have many structural variations. Pricing commonly relies on stochastic…
The document describes how a US-based investor could hedge the currency exposure of a euro-denominated bond while also holding a dollar bond. Its example matches the foreign bond’s coupon dates and principal repayment with euro payments surrendered under a…
The document poses a valuation question for a cash flow paid at a future date and resetting earlier. The expression combines a floating rate and a discount bond price in one currency with a discount bond price denominated in another, under a forward measure…
The document explains how to calculate account performance when deposits, withdrawals, and currency conversions can occur at any time. It recommends treating the account like a fund: track the number of units outstanding and the net asset value per unit in a…
The note distinguishes the bid–ask spread from the mid-price: the spread is the difference between the best offer and bid, while the mid-price is their arithmetic midpoint. It then cautions that this quote midpoint is only a simple proxy for fair value,…