Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
5,701 documents
The document examines how to convert tenor-specific parameters in a multi-factor Cheyette, or quasi-Gaussian, interest-rate model into factor parameters while preserving swap-rate variance. It describes a procedure that first matches the variance and…
The document addresses how to discount a payment when the yield curve uses one day-count convention and the instrument uses another. Its central principle is that the discount factor for a given payment date must be the same regardless of how the rate is…
The document explains how a repo can fund a bond position and addresses whether the bond purchase and repo must be simultaneous or use the same counterparty. It describes a repo as collateralized lending: the borrower transfers collateral and agrees to…
The document explains how a zero-coupon bond price can be derived when the short rate follows a stochastic process, and how the bond’s market price of risk relates to pricing. It first applies Itô’s lemma to a bond price that depends on the short rate, then…
The document asks how the size and frequency of bond trades affect subsequent bid–ask spreads. It frames the problem as a market microstructure question: trading can change liquidity, supply and demand, and sentiment, while the size of the effect is…
The document explains why a yen-based investor’s cost of hedging a dollar asset is connected to interest rates and forward exchange pricing. It describes using a cross-currency swap to exchange dollar interest payments for yen interest payments and lock in a…
The document explains how to calculate an interest rate swap’s bucketed delta in rateslib when the available market inputs are zero rates rather than quoted calibration swaps. It treats zero-rate observations as pseudo-instruments that calibrate the curve…
The document asks how the equivalent martingale measure changes when an asset follows an arithmetic Brownian motion with an additive drift, rather than a geometric Brownian motion whose drift multiplies the price. It frames the issue using a bank-account…
The document explores why an inversion between three-month and ten-year U.S. Treasury yields has preceded recessions. It offers several proposed mechanisms: risk aversion can shift demand toward government bonds and lower longer-term yields; investors may…
The document poses an interview question about calculating a bond position’s market value from available holdings and market data. It clarifies that the task is to value an existing position, rather than calculate a bond’s present value by discounting future…
The document considers how to reconstruct historical forward rate agreement (FRA) levels after a Mexican market moved from a 28-day fixing to an overnight index. With the new OIS index published only from September 2024, a direct history for the new-index…
The document explains how yield moves can change which bond is cheapest to deliver (CTD) into a bond futures contract. It defines net basis as a bond’s forward price at delivery minus its futures invoice price, calculated using the futures price and the…
The document discusses representing a fixed-rate, amortizing loan in QuantLib when a built-in loan or mortgage class is not apparent. The response constructs a fixed-rate bond for coupon payments, adds an initial amortizing payment for the loan principal,…
The document explains why the usual present-value sum of known cash flows and discount factors cannot be applied directly when the cash flows depend on future interest rates. In that case, the cash flows are random variables, so their discounted sum is…
The document explains why the risk-neutral long-run mean of the state variables in an arbitrage-free Nelson–Siegel term-structure model may be fixed at zero. The answer frames this as an identification restriction: latent factors can be rotated without…
The document explains how to calculate a six-month change from a monthly TED spread series. For each month, subtract the value from six months earlier from the current value. This gives the absolute change in the spread over the six-month interval. The…
The note resolves how to obtain a short-maturity yield expansion from a Taylor expansion of a zero-coupon bond price. Starting with the price written as one plus successive powers of time to maturity, it applies the logarithm series and then negates and…
The document asks how to estimate term structures of default probabilities when market data is unavailable, including for non-listed firms. It notes that migration-based Markov chains can turn historical rating transitions into rating-specific default…
The document proposes measuring possible conflicts of interest between credit rating agencies and countries through the share of agency revenue associated with each country. The idea is to look beyond direct payments from governments and consider fees paid…
The note considers whether a Treasury issue that trades special in overnight repo is cheap relative to a fitted Treasury spline. Its central lesson is that the value of repo specialness depends on how long the bond is expected to remain special. A current…
The note explains why the effective federal funds rate can trade below the Federal Reserve’s interest rate on reserve balances (IORB). The rate corridor has IORB as its lower reference point and the standing repo facility as a theoretical upper bound, but…
The document considers whether an FRA rate or an interest rate futures rate is the better proxy for an expected future fixing. The two instruments can imply different values because their settlement structures create a convexity difference. The answers…
The document asks how to set internal concentration limits for a retail credit portfolio and whether the Herfindahl-Hirschman Index (HHI) is suitable. It defines HHI as the sum of squared exposure weights and notes that its range depends on the number of…
The document explains how to represent principal repayments when constructing an amortizing fixed-rate bond in QuantLib. It first builds a semiannual schedule spanning the two stated repayment dates, then supplies a notional amount for each coupon period.…