This book is the Bible of money market trading. The course is loosely based on what one can find in this book, which has been written after many interviews with people who trade in such markets as their job.

The Fourth Edition of Stigum's Money Market delivers an all-encompassing, cohesive view of the vast and complex money market...offers careful analyses of the growth and changes the market has undergone in recent years...and presents detailed answers to the full range of money market questions.

Great channel. If you find the video series on @DTPrimers useful, you should check these out.

Each topic is covered in great detail including a chapter in the lecture notes above☝? and a lecture video posted on the channel to accompany it.

https://t.me/EconomicsMoneyBanking

Telegram

Economics of Money and Banking

This is a repository for Peter Mehrling's MOOC course, which is a great resource for learning about the modern monetary system which introduces "The Money View", a paradigm to understand the financial infrastructure of the world we live in. @PrecariousCow

Uncleared Bilateral RepoThe only repo venue with no central clearance nor third-party settlement is called Non-Centrally Cleared Bilateral Repo (NCCBR), or uncleared bilateral.

NCCBR is unique. It is the biggest repo venue, but the most opaque. Specials trading (specific, sought-after collateral) is possible. What's unique from DVP specials, however, is that NCCBR allows for collateral with great credit risk. This is where equities and garbage debt (like CRE bonds or downgraded EM debt) can be repo'd.

The SEC’s proposal for repo to be centrally cleared, which is set to take effect on June 30 2026, may improve the "safety" of uncleared bilateral but also reduce Treasury market liquidity by raising the cost of repo financing.

"Long Gamma" v. "Short Gamma" The gamma value is the same for calls as for puts. If you are long a call or a put, the gamma will be a positive number. If you are short a call or a put, the gamma will be a negative number. When you are "long gamma", your…

"Long Gamma" v. "Short Gamma"

The gamma value is the same for calls as for puts. If you are long a call or a put, the gamma will be a positive number. If you are short a call or a put, the gamma will be a negative number.

When you are "long gamma", your position will become "more long" as the price of the underlying asset increases and "more short" as the underlying price decreases.

Conversely, if you sell options, and are therefore "short gamma", your position will become shorter as the underlying price increases and longer as the underlying decreases. This is significant due to dealer delta-hedging, something I will cover soon.

This is an important distinction to make between being long or short options - both calls and puts. That is, when you are long an option (long gamma) you want the market to move. As the underlying price increases, you become longer, which reinforces your newly long position.

If being "long gamma" means you want movements in the underlying asset, then being "short gamma" means that you do not want the price of the underlying asset to move.

A short gamma position will become shorter as the price of the underlying asset increases. As the market rallies, you are effectively selling more and more of the underlying asset as the delta becomes more negative.

4/4

Gamma v. Time & Volatility

Adding more time to an option contract increases the likelihood of that option expiring in-the-money. Because higher volatility also increases the chances of an option's in-the-moneyness, both volatility and time have the same effect on an option's gamma value.

The above graphs show how increasing time/volatility value reduces the Gamma of the option and hence it's sensitivity to changes in stock price.

While adding more time to an option increases the value of the option, it generally reduces the option's Gamma. With more time to expiration the option becomes less sensitive to movements in the underlying asset. However, as the option approaches its' maturity date, its' time value will move towards zero and then become more responsive to changes in the underlying price.

These graphs (all of them taken from a college textbook) provide a great way to look at how gamma is effected by the passage of time. Both plot a $25 call option's gamma across a range of underlying prices, however, on each graph is shown 3 different times to maturity. This is so you can see how the Gamma value becomes the highest when it is both ATM and close to expiration. When this happens, option positions will have the highest fluctuations in position value (delta).

3/4

Like delta, gamma has curvature and is affected by the same inputs including moneyness, the time to expiration of the option, and the implied volatility used in the model.

The attention on a gamma's sensitivity is mostly focused on its' position relative to the underlying price. Looking at the above graph you can see that the gamma reaches its' peak when the option is at-the-money and tapers off either side. When an option position moves towards the ATM level, the changes in the position delta, and hence the position value relative to the stock, change with greater amounts.

Options that are either deep ITM or deep OTM experience less variability as the stock price changes and therefore will show low gamma values.

2/4

Directional Risk When an option expires, there comes a point of absolute certainty: It’s either in the money (ITM) or out of the money (OTM) (recall that perfectly ATM options have no moneyness). The holder of the option either exercises it, or they don’t.…