Freddy

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	5,629 reputation	bio	website		visits	member for	1 year, 2 months
1316 badges		location	Tokyo, Japan		seen	2 hours ago

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Feb 25	comment	How to hedge the fixed leg of a swap contract? @bonCodigo, and regarding your other question about alternative assets that can be used to get to a lower rate. Yes, that again exists and is the precise reason some borrowers "re-package" and "bundle" their credit card debt into a mortgage loan, meaning they pay a lower rate albeit over a longer term. But what you are asking and I guess "hoping" for does not exist: You cant sit around and suddenly realize market rates are 5% lower than your fixed rate and expect to come out flat. However, I believe you bark up the wrong tree here with swaps, they do not work the way you hope.
Feb 25	comment	How to hedge the fixed leg of a swap contract? @bonCodigo, to be more precise re mortgage re-financing, there is not really a refinancing option embedded but a mortgage loan borrower can refinance by entering into a mortgage obligation at more favorable terms while pre-paying the existing mortgage loan.
Feb 25	comment	How to hedge the fixed leg of a swap contract? @bonCodigo, you now ask about retail players. First retail does not have access to institutional swap contracts (though there are certain ETFs that mimic swaps). But a good analogy here is a re-financing of a mortgage. A swap is not a good choice if one wants to reserve the option to re-finance, in this instance a non-linear product with optionality is called for, which is precisely what most mortgage contracts provide, a re-financing option. A swap on the other hand can only be cancelled by paying off the net of all future legs at prevailing forward rates.
Feb 25	answered	How to hedge the fixed leg of a swap contract?
Feb 25	comment	Why FX Vanilla Options are quoted in volatility Good points. It highlights the distinction between quoting assets and the settlement of a trade in such asset.
Feb 23	comment	Leveraged and inverse leveraged ETFs - what is the exact defintion? @cdcaveman, your link makes the claim volatility is behind it, without providing any proof, rational, or any sort of empirical evidence. I find that, claiming volatility being the reason for decay, as ridiculous as saying the upward drift in stock pricing models exists because of volatility, utter nonsense. Please make your case here instead of sending people to websites that fail at arguing coherently.
Feb 23	comment	Leveraged and inverse leveraged ETFs - what is the exact defintion? This "mathematical decay" is called contango. In fact there is really nothing mathematical about it at all. But yes, there is a direct link between the divergence of leveraged ETFs vs their inverse brethren and the cost of hedging each of those guys, especially the leveraged ETF versions.
Feb 23	revised	Leveraged and inverse leveraged ETFs - what is the exact defintion? deleted 571 characters in body
Feb 23	revised	Leveraged and inverse leveraged ETFs - what is the exact defintion? added 43 characters in body
Feb 23	answered	Leveraged and inverse leveraged ETFs - what is the exact defintion?
Feb 22	comment	Why FX Vanilla Options are quoted in volatility glad it helped ;-)
Feb 21	revised	Is there an Australian Interbank Rate? added 404 characters in body
Feb 21	comment	Why FX Vanilla Options are quoted in volatility For quoting purposes, pretty much everyone is using the same model, thus, as long as you input identical parameters everyone should arrive at an identical price. But I cannot stress enough of how little importance the price is. Its just the currency which you use to pay for the volatility you buy and sell in the market, never the other way around.
Feb 21	answered	Why FX Vanilla Options are quoted in volatility
Feb 20	awarded	Nice Answer
Feb 20	comment	Regression giving the return on a stock this smells awfully like homework. And by the way your setup is not clearly outlined at all. You make people assume the risk free rate is 3.28% although later on you state it is 4.8%. I guess you copied the first equation from somewhere and 3.28% only constitutes an example? And I thought we all learned in middle school that one equation with two unknowns cannot be pinpoint to one solution.
Feb 20	comment	Kelly criterion and Sharpe ratio @experquisite, of course one can say that the size of a bet (one way to size it is through usage of Kelly C.) in some way impacts risk and that one measure of risk is volatility and that volatility is part of the Sharpe Ratio computation, hence Kelly and Sharpe are related. I resort such logic to hogwash. After all Kelly measures position size, Sharpes measure relative asset return out-performance standardized by return volatility. How someone can link those logically is beyond me.
Feb 19	comment	Is there an Australian Interbank Rate? being flippant was really not my intent, I apologize if you took it as such. I have to admit I reach the ceiling of my knowledge what concerns interbank loans, I am not sure of the specifics of collateral arrangements. I am not sure how my earlier comment got lost but I actually praised you on your neat table and suggested to attach it also to an IRS related question. Its nice to have something like this on this site to look up reference rates for different IRS markets.
Feb 19	comment	Is there an Australian Interbank Rate? @PhilH, fair point, about swaps I really like your answer, maybe you should keep it here or aside and try to utilize the table regarding an IRS question, its a very neat little overview. If you wanted to knock yourself out then you could also include ref rates for OIS trading.
Feb 19	comment	Is there an Australian Interbank Rate? who does it? Every bank you can think of, from the smallest mom and pop shop until the largest tier 1 megabanks settle amounts from the tens of millions to tens of billions in whatever currency you can imagine at every single day. I am willing to bet (though cannot prove it ;-) that not one day over the last 10 years went by in which at least one investment bank or banking institution did not settle interbank loans. Liquidity and cash management is the bread and butter of every financial institutions treasury department. Just to give some perspective.