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 how to calculate a 10-day, 99% relative normal VaR for a short GBP zero-coupon bond when its value is measured in euros. The central issue is that the position’s euro-denominated profit and loss reflects both changes in the bond’s price and…
The document compares price alignment in loosely connected cryptocurrency exchanges with currency markets. In crypto, a trader may buy where an asset is cheaper, transfer it, and sell at a higher-priced venue; delays and limited coin availability can widen…
This discussion asks how to forecast a currency spot rate over a three-month horizon and whether the matching forward rate is the best estimate. It presents the random walk without drift as a difficult benchmark to beat and notes that forward rates can be…
An FX Targeted Accrual Redemption Note (FX TARN) is a structured note whose coupon depends on one or more exchange rates. The example links a coupon to the change in a yen–US dollar rate and ends the note once accumulated coupons reach a target; if the…
The document describes a preliminary Python and QuantLib approach to pricing fixed-fixed GBP-USD and EUR-USD cross-currency swaps with limited market inputs. It builds GBP SONIA and USD SOFR curves, applies a quoted cross-currency basis as a flat shift to…
The document explains how to infer the bid and ask for the reciprocal of a foreign exchange quote. Given a bid and ask for AUD/USD, the implied USD/AUD bid is the reciprocal of the original ask, while the implied USD/AUD ask is the reciprocal of the original…
The document explains how exchanges form prices from resting limit orders and incoming orders. A matching engine executes marketable orders against the best available quotes, while the best bid is the highest buying price and the best ask is the lowest…
The document explains why some options markets, especially over-the-counter foreign exchange, quote implied volatility by delta rather than by strike. In these markets, available strikes are not fixed and prices may not be directly quoted. Delta provides a…
The document explores whether sovereign default probabilities, potentially inferred from credit default swap prices, can help estimate a country's probability of hyperinflation. Its central response is that markets in countries with substantial…
The document outlines a practitioner’s framework for pricing FX forwards and swaps using spot, interest-rate curves for both currencies, and a cross-currency basis curve. The proposed construction uses overnight-indexed swap curves from market instruments…
The document points readers seeking current research on foreign-exchange market microstructure toward high-frequency trading studies. It argues that faster trading has changed how participants trade, how markets are organized, and how liquidity and price…
The document surveys the search for public measurements of electronic FX liquidity-provider response times, especially the far tail of last-look hold-time distributions during volatility spikes. It describes existing sources as incomplete: an older TCA study…
The document asks whether Vega-Vanna-Volga methods are used beyond foreign exchange derivatives and why they are common in FX. The response connects FX risk-reversal asymmetry to the possibility of central-bank intervention around exchange-rate levels. It…
The document explains why a same-strike FX call and put do not generally have offsetting deltas, so their straddle is not automatically delta neutral. Put-call parity links call and put deltas through the discounted forward, and a delta-neutral straddle…
The document compares two EUR/USD option hedges for a short-euro exposure: a call spread and a risk reversal consisting of a long call and short put. It explains that neither structure is automatically delta neutral. The option legs have their own deltas,…
The document asks how a UK investor can express the spread on a US dollar bank loan in sterling terms. The example is a five-year loan paying three-month USD LIBOR plus 100 basis points, with the desired result stated as three-month GBP LIBOR plus an…
The document distinguishes smile butterfly quotes from market butterflies, also called broker flies, in foreign exchange volatility markets. It explains that at-the-money volatility, risk reversals, and butterfly quotes together describe key features of the…
The discussion considers how to optimize a portfolio of currency exposures when a forecast sometimes points in the same direction against the U.S. dollar for every currency. Replies distinguish currency positions from currency pairs and emphasize defining…
The document frames a hedging comparison for an American issuer with Canadian-dollar bonds and an existing USD/CAD fixed-for-floating swap. The issuer wants to hedge the swap’s floating FX leg, choosing between an FX basis swap and a series of three-month FX…
The document separates Monte Carlo as a numerical estimation method from the model that generates simulated prices. It compares simulating an FX spot process under risk-neutral dynamics with assigning independent random shocks to each forward tenor.…
The discussion describes how practitioners may trade options on currencies held near fixed exchange rates, with examples involving Gulf currencies, the Argentine peso, and the Eastern Caribbean dollar. It distinguishes the near-zero at-the-money volatility…
This explanation frames interest rate parity as a covered arbitrage linking spot FX, borrowing and lending in two currencies, and a forward FX trade. The parity relationship requires rates that match the financing costs of the arbitrage. Historically,…
The answer explains how to set the time units when calculating Yang–Zhang volatility from hourly foreign-exchange prices. It distinguishes the basic time unit, which is the spacing between observed closing prices, from the result time unit, which is the…
The document poses a practical question about measuring a foreign-exchange forward hedge when the value of the underlying portfolio holding changes. It describes a USD exposure that is intended to be converted into EUR in one month and a forward contract…