What tools are missing if I start a hedge fund today ?

Discussion in 'Professional Trading' started by ramaTrade, Nov 13, 2009.

  1. Surdo

    Surdo

    You are missing common sense, experience, and capital me thinks!
     
    #11     Nov 13, 2009
  2. 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.
     
    #12     Nov 13, 2009
  3. sjfan

    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.

     
    #13     Nov 13, 2009
  4. 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.
     
    #14     Nov 13, 2009
  5. sjfan

    sjfan

     
    #15     Nov 13, 2009
  6. 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?

    I also need the interest rates on borrowing and lending in the two countries.
     
    #16     Nov 13, 2009
  7. sjfan

    sjfan

    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.

     
    #17     Nov 13, 2009
  8. sjfan

    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; now you go back to settling trades and sending confirms)

     
    #18     Nov 13, 2009
  9. I understand how to do it, but you obviously don't program, so we're at an impasse.
     
    #19     Nov 13, 2009

  10. I'm telling you that they exist for a second, and the only way to get it is through automation.
     
    #20     Nov 13, 2009