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.
610 documents
The document compares two definitions of carry for zero-coupon bonds and asks why their calculated values differ. One expression uses the forward rate over a short interval relative to the current risk-free rate, with a discount scaling factor. The other…
The document raises a fixed-income analysis question: how to estimate expected returns on local currency government bonds by separating carry from rolldown, then compare those returns with a risk-free rate and historical volatility to form an annualized…
The document asks how to find the fair value of a three-month futures contract on a two-stock index when each stock pays a dividend before expiry. The answer gives the cost-of-carry approach: express financing costs and expected dividends in index points,…
The document poses a fixed-income valuation question about a pay-fixed interest rate swap held for a year. It asks how a positive mark-to-market on the remaining swap, calculated as the difference between the original forward rate and the prevailing…
The discussion explains why an FX forward calculated from two interest-rate curves may differ from a market quote. It recommends using the relevant zero-coupon rates for the forward’s maturity rather than compounding a one-year rate, and describes covered…
A power reverse dual-currency note can be viewed as a leveraged bet on the exchange rate relative to its forward curve. In a simplified USD/JPY example, each coupon is a positive-part payoff that becomes a call option on USD/JPY, with the strike determined…
The document examines whether borrowing short term and lending long term can reliably profit when the yield curve slopes upward. It explains that this maturity transformation resembles a traditional banking activity, but it is not arbitrage because the…
The document discusses how to construct a daily carry return index for a currency pair and compare it with a vendor index. The proposed approach combines the spot return with the interest earned on the funded currency and the interest cost on the borrowed…
The document asks whether comparing bond yield to maturity is less informative for relative-value analysis than comparing yield to duration. The concern is that bonds with the same maturity can have different coupons and therefore different yields, even when…
The discussion explains why holding a Treasury futures contract to expiration does not imply a loss equal to a simple difference between a quoted yield and a repo rate. Under the stated assumption that rates and market prices do not move, the futures price…
The document asks whether calendar spreads become pure arbitrage when implied volatility is flat across strikes and maturities, as in the Black–Scholes framework. Its answer cautions that equal implied volatility across maturities does not guarantee that…
This discussion explains why a higher repo rate can raise a bond’s forward price even when expensive financing might seem to make the bond less attractive. It distinguishes demand to borrow a bond from demand to sell it outright: high repo rates can reflect…
The document gives a basic cost-of-carry expression for the fair value of an AUD/USD currency futures contract. It relates the futures price to spot and the difference between the local and foreign interest rates, compounded continuously over the time…
The discussion addresses whether a deferred oil futures contract should fall toward spot when it becomes the front-month contract after a roll. Futures prices reflect more than the current spot price: financing and storage-related costs can raise futures…
The document examines whether a Treasury futures basis trade can earn more than the implied repo minus the bond’s actual repo financing cost. It proposes adding an overnight indexed swap hedge, with the answer correcting the hedge direction: pay fixed and…
The document asks how a bond futures carry measure can make sense when a futures holder does not directly receive the underlying bond’s coupons or pay its repo funding. The cited index description ranks eligible government bond futures by estimated carry,…
The document considers how to build a total return time series for interest rate swaps, including market-value changes and carry or roll, for use in trend-following research. One suggested route is to use an existing swap total-return index if accessible.…
The document considers a short-front, long-back bond futures calendar roll when both contracts share the same cheapest-to-deliver bond. The trader asks whether a low conversion factor dampens the change in implied repo when the calendar spread widens, and…
The document explains bond carry as the return expected when time passes and market conditions otherwise stay unchanged. For a bond, pure carry can be estimated from coupon income less repo financing costs, expressed relative to DV01, or approximated through…
The document outlines forces that may shape yen exchange rates as markets anticipate further Bank of Japan tightening. It connects yen weakness to interest-rate gaps with other economies and explains that a policy move already reflected in prices may have…
The document explains contango as an upward-sloping futures curve, where deferred contracts trade above nearer contracts or spot, and backwardation as the reverse. It links these shapes to supply conditions: abundant inventories and stable expectations can…
The document explains contango as an upward-sloping futures curve, where deferred contracts trade above nearer contracts or spot, and backwardation as the reverse. It links these shapes to supply conditions: abundant inventories and stable expectations can…
The article explains how Japan’s long period of very low interest rates supported yen-funded carry trades, with investors borrowing cheaply in yen and investing in higher-yielding assets. It argues that a shift toward higher Japanese rates could raise…
The article explains a macro-driven framework for interpreting dollar strength through relative yields. It links a reported rise in the 10-year Treasury yield after a jobs report to increased appeal for dollar-denominated assets, then applies the yield-gap…