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What tools are missing if I start a hedge fund today ?
- Thread starter ramaTrade
- Start date
Quote from sjfan:
You.... are.... kidding.... right? What's stopping you from doing covered interest rate parity arb is ... a bloomberg? You do realize that FRAs are priced so there is not possible covered int rate parity arb?
I got a blp here right now.... i'll quote you whatever you want and if you can show me how you can do a covered interest rate parity arb, I'll put in money for an investment fund with you this instance.
True, but with massive amounts of capital, it is possible, and I do know how to do it. It's dependent on the price of the currency, and the forward rates available. If the domestic rate is greater than forward rate discounted at the foreign interest rate, then borrow foreign, lend domestic. Opposite if the domestic rate is less.
Quote me 30,90,120,180, 270, 360 day FRA's and the current spot and forward price of EURUSD, GBPUSD, JPYUSD, rather USDJPY, and yen and yuan per USD. There's tens of combinations, but there might be one in there. If you could send it in Excel I can do something with it.
Either way, just having the data is enough if you can automate this process. In fact I'd give anything to hire a programmer with access to that data to automate covered interest rate parity. It wouldn't be hard. You program all the possible combinations one time and the only variable that changes is the prices. I wish I had software available with that information on it, but it requires some development.
Wait.... there isn't.... every FRA is priced against the spot rate and the forward curves of rates. FRA pricing formula makes it impossible for any arbitrage to exist (that is, the calculated Fair Value is arbitrage free). In order for there to be an actual arb, you need a dealer to seriously screw up by not looking at his FRA pricing screen (which, as you surely can guess, it's on Blp!).
The number of possible pairs don't matter if each fra is priced "fair" against the curves and the spot. It's basic pricing 101.
The number of possible pairs don't matter if each fra is priced "fair" against the curves and the spot. It's basic pricing 101.
Quote from bwolinsky:
True, but with massive amounts of capital, it is possible, and I do know how to do it. It's dependent on the price of the currency, and the forward rates available. If the domestic rate is greater than forward rate discounted at the foreign interest rate, then borrow foreign, lend domestic. Opposite if the domestic rate is less.
Quote me 30,90,120,180, 270, 360 day FRA's and the current spot and forward price of EURUSD, GBPUSD, JPYUSD, rather USDJPY, and yen and yuan per USD. There's tens of combinations, but there might be one in there.
Either way, just having the data is enough if you can automate this process. In fact I'd give anything to hire a programmer with access to that data to automate covered interest rate parity. It wouldn't be hard. You program all the possible combinations one time and the only variable that changes is the prices. I wish I had software available with that information on it, but it requires some development.
Quote from sjfan:
Wait.... there isn't.... every FRA is priced against the spot rate and the forward curves of rates. FRA pricing formula makes it impossible for any arbitrage to exist (that is, the calculated Fair Value is arbitrage free). In order for there to be an actual arb, you need a dealer to seriously screw up by not looking at his FRA pricing screen (which, as you surely can guess, it's on Blp!).
The number of possible pairs don't matter if each fra is priced "fair" against the curves and the spot. It's basic pricing 101.
I would ask you to try to find one, because I agree, they don't exist...<i><b>for very long.</i></b> That's not to say never, though.
Are you dense? It doesn't exist because fair value pricing explicitly makes it impossible. Of course, there's some chance that someone screws up and for a tiny second, somewhere someone did a FRA that's off-fair-value (post t-costs). But this isn't what you said. You said that you'd kill for a blp because you'll be able to do arbs with it.... I would exactly be excited about paying $1500 (or whatever it is) a month for a chance to do an almost impossible to exist arb.
Quote from bwolinsky:
I would ask you to try to find one, because I agree, they don't exist...<i><b>for very long.</i></b> That's not to say never, though.
Right away, boss...
(seriously... don't be such a sore loser; there's no shame in no understanding how a particular trade works; to be willfully annoying about it is why you'll never get past entering data; now you go back to settling trades and sending confirms)
(seriously... don't be such a sore loser; there's no shame in no understanding how a particular trade works; to be willfully annoying about it is why you'll never get past entering data; now you go back to settling trades and sending confirms)
Quote from bwolinsky:
I'm not one for dataentry, even though that's mainly what I do at DST, so could you try to get all of the rates into an understandable format into excel?
Quote from sjfan:
Right away, boss...
(seriously... don't be such a sore loser; there's no shame in no understanding how a particular trade works; to be willfully annoying about it is why you'll never get past entering data; go back to settling trades and sending confirms)
I understand how to do it, but you obviously don't program, so we're at an impasse.
Quote from sjfan:
Of course, there's some chance that someone screws up and for a tiny second, somewhere someone did a FRA that's off-fair-value (post t-costs). But this isn't what you said. You said that you'd kill for a blp because you'll be able to do arbs with it.... I would exactly be excited about paying $1500 (or whatever it is) a month for a chance to do an almost impossible to exist arb.
I'm telling you that they exist for a second, and the only way to get it is through automation.