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.
10,263 documents
The document explains how the standard maturity for a five-year single-name credit default swap is determined under the post-2015 convention. Although a simple five-year anniversary calculation might suggest a September maturity for a trade made in early…
The document explains why a zero curve built from continuous-rate data can fail when its dates are mapped to times using an Actual/Actual day-count convention. Curve interpolation requires distinct times, but the convention may assign the same year fraction…
The document investigates why a calculation for the delta of a foreign-exchange down-and-out call appears to produce an implausible negative value when the spot, strike, and barrier are entered on a larger numerical scale. The accepted answer approaches the…
Commodity Asian swaps settle against an average reference price over an averaging period rather than a single final observation. The discussion describes a typical payoff as the period’s notional multiplied by the difference between a fixed strike and the…
The document explains why calling the amount or rate method on a QuantLib IborCoupon can fail with a “pricer not set” error, even when the relevant Euribor fixing has already been supplied. In the implementation described, coupon rate calculation delegates…
The document explains why a higher risk-free rate can raise the value of a call on a non-dividend-paying stock, despite also increasing the discount applied to its future payoff. In the Black–Scholes framework, the same rate affects both the stock’s assumed…
The document presents a European call pricing comparison under the Heston stochastic volatility model. It gives a characteristic-function integral for the closed-form price and a Milstein-style discretization for simulating variance and log spot, then…
The document illustrates a convexity adjustment by comparing two ways to price cash flows when an interest rate can take one of two values. One calculation discounts the amount using the average of the rates, while the other averages the two prices obtained…
The document raises a model-calibration question: whether parameters in the Heston–Nandi GARCH option-pricing model can be estimated by fitting model prices to observed option prices instead of using maximum likelihood. The proposed approach is to choose a…
The document explains the claim that a derivative can be represented as a portfolio of its underlying asset and a risk-free asset. It connects this idea to continuous delta hedging in the Black–Scholes framework: adjusting the stock and bond positions can…
The document compares using historical index returns directly in Monte Carlo option pricing with fitting a return distribution or a dynamic stochastic-volatility model. Its central pricing point is that option values are expectations under a risk-neutral…
The document asks why QuantLib’s implementation of Margrabe’s formula computes forward prices using a risk-free discount factor when the familiar formula for an option to exchange one asset for another is often presented without an explicit risk-free rate.…
This discussion considers how a shift from a currency peg toward a freer float could affect over-the-counter FX option prices, using the Moroccan dirham’s EUR and USD relationships as context. It notes that a regime change may bring a spot jump together with…
This discussion examines whether European put options with the same maturity can have equal prices when one has a higher strike. It presents a no-arbitrage argument: if the lower-strike put were at least as expensive as the higher-strike put, an investor…
The question asks why a butterfly spread’s value might be expressed using the probability that the terminal asset price falls between the outer strikes, multiplied by half the spacing between adjacent strikes. The answer frames pricing under the risk-neutral…
The document compares exercising a call with selling it before expiration. In its example, a call bought for $1 has a market value of $2.10 when the stock reaches $12, above the $10 strike. Exercising and immediately selling the shares produces a $1 gain per…
The question considers a discrete price process with normally distributed independent shocks and asks whether the affine closure property of normal random variables can replace the Central Limit Theorem in deriving a continuous-time limit. It specifies an…
The document works through the reciprocal of a stochastic process that follows geometric Brownian motion, as a step toward finding the process for a ratio of two correlated processes. It identifies a likely notation error in the stated reciprocal formula:…
The document explains why buying a bond and shorting a futures contract can be viewed as a synthetic reverse repo. In a reverse repo, an asset is sold with an agreement to repurchase it later; the price difference represents financing interest, while the…
The document compares a covered call with a cash-secured put on the same underlying, strike, and expiration. Their similar payoff profiles can still show different displayed maximum gains when the call and put have different prices or implied volatilities.…
The document presents an attempt to calibrate the raw SVI parameterization to market implied volatilities. The code converts quoted volatilities to total implied variance, computes model variance at log-moneyness values, and minimizes the root sum of squared…
The document asks how to evaluate the integral in the semi-closed Heston formula for call options. Its answer says Monte Carlo simulation can approximate the integrals, while Newton-Cotes formulas and Gaussian quadrature are also possible numerical methods.…
The document examines why sponsors may not issue an exchange-traded note alongside an inverse version. It explains that daily leveraged and inverse notes are path-dependent: their exposure resets as their values change, so the pair’s gains and losses do not…
The document explains why at-the-money implied volatility can rise or fall across option maturities. It challenges the assumption that the term structure should be monotonic and identifies several possible drivers, including return autocorrelation,…