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 the cash flows of a resettable EUR/USD cross-currency basis swap. It corrects a worked example’s direction of the initial currency exchange and basis spread, then describes how periodic notional resets affect interest and principal…
The question considers pricing a call on a foreign equity whose domestic-currency value is defined as the foreign share price multiplied by the exchange rate raised to a fractional power. It asks whether the drift obtained by applying Itô’s lemma under the…
This question asks whether otherwise identical derivative payoffs should have the same value when paid in different currencies, given a fixed USD SOFR collateral agreement. It compares a fixed sterling payment with payments converted at the future GBP/USD or…
This brief exchange asks which discount curves market participants use to value FX forwards under collateralized and uncollateralized arrangements. The response points readers to research on collateral currency choice, multiple swap curves, and…
The document examines a proposed foreign exchange carry trade based on differences between brokers that accrue rollover interest continuously and those that apply it at a daily cutoff. The proposed trade briefly holds a high-yield currency position through…
The document examines an apparent price gap between Telecom Argentina’s New York listed American depositary receipts and its locally traded shares. The question is whether the difference creates a cross-market arbitrage opportunity, given the apparent…
The document considers a ten-day, 99 percent value-at-risk estimate for a portfolio of options on the USD/GBP exchange rate. It presents a delta-equivalent position and a daily-volatility-based calculation that scales daily risk by the square root of the…
The document presents a discrete-time stochastic model for an exchange rate within a target zone. Its components include a drift linked to the interest-rate differential, a reference rate, a coefficient representing central-bank leaning against exchange-rate…
The document derives how premium-adjusted Greeks differ from Black–Scholes Greeks when an option is settled in a currency different from the underlying’s currency. In the example, the option value in the settlement currency is the value in the underlying…
The document asks whether a time-delay neural network (TDNN) could use economic-calendar information to predict forex prices. Its motivating challenge is that news effects may persist beyond the release time and may appear in market movements beforehand, so…
The document asks how a trader whose account is denominated in SEK can profit when the RUB weakens, and whether buying USD/RUB means simply buying USD. The answer models a long USD/RUB position as exposure to 100 USD against a short position of 100 RUB. When…
The document describes a forex market-making bot that places offers around the mid price and refreshes them at regular intervals. In the market described, thin order books can cause sharp mid-price jumps after a large order; the moves are said to last…
The document asks how to combine daily equity curves from strategies trading commodities and currencies, with the goal of maximizing the portfolio Sharpe ratio. The reply points to Modern Portfolio Theory and the Markowitz model, which allocates across…
This question asks how to express a foreign short-rate model under the domestic risk-neutral measure so both domestic and foreign rates can be simulated consistently. It introduces correlated Brownian motions under different measures and a spot FX process…
The document considers hedging a USD corporate bond into GBP using either rolling three-month FX forwards or a cross-currency swap, with rates risk hedged separately through interest rate swaps. It asks how to compare the approaches’ costs as an effect on…
The document explains why implied volatility often rises away from the at-the-money strike, drawing on three complementary interpretations. One links smile curvature to higher moments of the return distribution: convexity can reflect positive excess…
The document examines why lower yields on Hong Kong dollar government bonds than on US dollar bonds do not necessarily create a risk-free arbitrage, even though the currencies are pegged. The responses identify possible loss of the peg, restrictions on…
The document asks why a foreign-currency forward can be treated as a linear instrument for value-at-risk analysis. The quoted textbook framing represents a forward to buy foreign currency as a long position in a foreign bond and a short position in a…
The document derives a closed-form price for a European currency call when domestic and foreign interest rates follow Hull–White dynamics and spot FX has constant volatility. It changes from the domestic risk-neutral measure to the domestic maturity-forward…
The document describes why valuation of the foreign leg of a mark-to-market cross-currency swap can require a convexity adjustment. It writes the foreign-leg cash flows and explains that the relevant expectation is taken under the domestic measure, while the…
The document explains that novating a non-deliverable forward does not necessarily change its risk-free forward mark to market. The effect depends on how the trading desk separates the contract’s market value from adjustments for counterparty exposure,…
The document explains ways to obtain FX forward prices and points through Bloomberg and Excel, and gives theoretical pricing relationships based on spot rates and the interest-rate differential between two currencies. It describes a swap as combining spot…
The document asks how to classify an FX forward whose currency exchange occurs after its stated maturity date. In the example, the forward rate is set for an earlier expiry, while settlement is delayed by a month. It also asks whether gross settlement, with…
The document derives the domestic-currency value of an FX forward that pays the difference between the spot exchange rate at maturity and a contracted strike. It starts with the domestic risk-neutral discounted expected payoff, then changes to the domestic…