Best Thread STIR's from Scratch

[Martinghoul]

You mentioned banks hedging their loan books & activity from mortgage markets.My conjecture is that both these group of players will be hedgers & will always hit at market.
If the majority trading volume is hedgers' then activity in their markets ( whatever they are , i only know FRAs & swaps) will drive majority of orderfow in STIR futures.

Is this line of thinking correct?


Can i see the pricng as you mentioned on Bloomberg?

Yes, that's what I am suggesting... Pls take with a pinch of salt, as this is just my view based on my personal experience. I don't have any sort of evidence/data to corroborate.

What pricing do you want to see in BBG?

 

[STIRNoob]

On Bloomberg i want to arrive at White Strip price the way you described it i.e SONIA curve & then add credit risk based on FRA-OIS.

I dont know much about FRAs but i assume beyond 1 year they may be replaced with swaps( just a guess).
So is it that Reds & Greens will be priced based on swaps.

Thanx for your help Martinghoul .Its good to know that somebody has answers & willing to share.

Anyone who trades based on pure orderflow & have some inputs please chip in.

 

[Martinghoul]

Well, you can find most of what you're looking for on the ICAB page, which is the ICAP GBP "portal". I am not sure you can get the IMM-dated SONIAs there or you actually need to build a SONIA curve separately. FRAs can be traded pretty much however far you want, but you're right, normally people use swaps 1y, 18m or 2y out. In general, as I said, it's difficult to say unequivocally what's priced based on what, but yes, in short stg, most of the flows in greens would come from the swaps mkt.

 

[coreed]

Algo/HF traders in STIRS will in turn produce their own price behavior patterns, which will in turn be 'seen' and provide an edge to next generation traders coming into the market. Thats how markets evolve. Nothing scary in that. I trade a simple mean reversion strategy in GE's. That works fine, more than fine. Complexity doesn't always lead to higher profits. Remember Warren Buffet's great comment about quants: 'To a guy with a hammer everything starts looking like a nail'

 

[tripleogstar]

Another point regarding most of the order flow in the STIR futures market is orders from STIR options traders. Big funds like brevan, tudor and obviously a lot smaller ones all trade options, the market makers taking the other side of this trade need to delta hedge, so it is not unusual to find single trades doing a couple of thousand STIR futures to hedge their delta and they do so throughout their day to trade the gamma.