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Nah, you got yerself a CHFJPY position, indeed. All good.

This is incorrect... The probability of default is fully priced into the funding rate used to build the replicating portfolio. This rate going bonkers (the way LIBOR did in 2007-08) doesn't mean that put-call parity needs re-thinking. The argument that you could make that would have...

Put-call parity doesn't "follow" from and doesn't depend on the validity of the risk-free rate of return.

What is an "insolvency problem"?

UST GC has traded up to arnd 30bps (that's O/N). Everything else is following, so yes, it's all about the repo mkt.

I am sure that's the case, but what's the unit you actually trade? Do you sell 100,000 USD vs CHF or do you sell one contract, whose notional is $100,000?

Erm, let's not panic just yet, please... Money mkt funds, as well as other mutual funds, have been experiencing outflows for quite some time now. If I had to guess, that's probably what's behind the whole M1 - M2 growth differential. It's also, in my view, a healthy process that makes the...

No probs... Glad I could be of help.

I'll be the first in line at my nearest bookshop...

The reasoning behind the 3:1 odds is simple. Your put spread has a max profit potential of 25 ticks (assuming 3M LIBOR settles at 1.25% or above). Therefore, you're spending 8.5 ticks to make 25, which means arnd 3:1 (unless my brain has been addled by the global debt crisis). Firstly, the...

Why not? Unless you believe in some sort of total armageddon and/or QE, I think one of the most obvious trades here is to be long 10y+ USTs (or, better yet, a flattener).

That's assuming your bank a) remains solvent; b) is willing to pass on the higher rate to you (which it probably won't be). So it's not at all like a rate hike, actually.

PORN RULEZ! More good porn on ET!

Hmmmmmm, I wonder what fraction of income earned by an average American's is spent on museum tickets?

"Spanked Bottom" by sle In reference to this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=223001&perpage=6&pagenumber=32

Well, it's just that I am not familiar with IB at all, so I don't know how it treats ccy trades. When you do your trade is it denominated in "contracts", for example, or is it done in terms of the notional of base ccy?

OKI-DOKI... Here's what my suggestion would be (treat with pinch of salt, as this is my individual opinion, nothing more). Eurodollar put skew is relatively expensive, which is understandable, while ATM vol is relatively low, which is also understandable. So, in my mind, this suggests that...

Yes, if you do it right...

It's a tough question... It's really very difficult to answer a question this vague. The very first questions to ask are: a) how high do you expect rates to go up by Jun13; b) how much money in total are you willing to spend.

There are all sorts of flaws, including the use of the "risk-free rate" shortcut. In reality, as mentioned above, it should always be based on the marginal funding rate, rather than some particular mkt rate. There are all sorts of other drawbacks, but they don't invalidate the theory.