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 considers how to validate credit VaR assumptions about dependence, such as sector correlations, when a portfolio has relatively few obligors and defaults are sparse. It distinguishes this problem from validating default probabilities or credit…
The document presents a fixed-income portfolio optimization problem implemented with a convex optimization package. The setup uses expected returns, a covariance matrix, a benchmark or reference rate, and constraints related to nonnegative positions and…
This brief exchange asks whether Japanese-style yield-curve inversions under negative rates should be read as recession or credit-risk signals, or instead attributed to scarce liquidity. The response challenges the premise for the Japanese curve discussed,…
The document explains rate inputs for pricing a one-year EUR/GBP option and distinguishes OTC options on spot FX from listed options on FX futures. For spot FX, it describes the Garman–Kohlhagen form of Black–Scholes, in which domestic and foreign rates both…
The document surveys several ways to estimate a convertible bond’s delta for hedging. A rough option-based approximation treats the conversion price as the strike in a standard Black–Scholes pricer. For a more direct estimate, one reply proposes a symmetric…
The note explains why a market instantaneous forward rate is not a directly observable Bloomberg quote. An instantaneous forward rate is a theoretical curve quantity whose value depends on the model and assumptions used to infer it, so separate…
The document discusses a student’s portfolio-management exercise involving three risky assets, expected returns, standard deviations, a tangency portfolio, and a mix of that portfolio with a risk-free asset. The response focuses on clarifying how to generate…
The document asks why a ratio of discount factors for a generic currency and the euro can be equal under euro-collateralized and US-dollar-collateralized agreements. The answer interprets this relationship through forward foreign-exchange pricing: it amounts…
The document derives an algebraic relationship between a basis swap spread and a set of adjustment terms, denoted CA, applied to forward CMS rates. Rearranging the spread equation expresses a discounted sum of the CA terms using the spread, forward rates,…
The document explains why the internal rate of return that equates a set of cash flows to their present value cannot generally be used as a single rate to accumulate those cash flows to a future date. Its example discounts payments with distinct forward…
This explanation distinguishes a return from the amount of interest paid. Return is defined as the gain relative to the original investment, so receiving the same amount invested produces no return, while receiving more produces a positive return. The…
The document clarifies how a bond callable at par shortly before maturity handles its final coupon and how to interpret its quoted yield. The call price is the clean price; when the issuer calls the bond, the holder also receives accrued interest.…
The document describes an attempt to estimate monthly zero-coupon bond prices for a fixed maturity using simulated interest-rate paths. It expresses each bond price as the expected exponential of the negative accumulated short rate over the remaining…
The document explains how the modified following business-day convention adjusts dates for a one-month PLN WIBOR instrument and a forward rate agreement. Under this convention, a date is first moved forward to the next business day; if that adjustment would…
The document considers whether principal component analysis of on-the-run Treasury yields and overnight SOFR can estimate how yield-curve changes relate to repo rates. The proposed setup includes several Treasury maturities alongside SOFR. A move at one…
The document asks why short-maturity overnight index swap discount factors are often calculated using a simple-rate expression instead of an annual-compounding expression. The answer relates the quoted swap rate to the compounded overnight rates on the…
This QuantLib discussion explains why repricing a SONIA overnight indexed swap at a later valuation date can fail when the swap has already accrued. QuantLib reports a missing index fixing for an overnight date within the elapsed period, even though the…
The document derives the exponential-affine bond-price form for the Cox–Ingersoll–Ross short-rate model when its constant drift term is set to zero. Substituting an exponential trial solution into the Feynman–Kac pricing equation reduces the problem to a…
The document explains how to estimate risk-neutral default probability from a credit default swap spread, maturity, and assumed recovery rate, and how to invert the calculation to obtain a spread from a probability. Under a flat spread and constant recovery…
The document explains why a handful of short-term USD Libor quotes cannot define a full zero-rate curve. It outlines a typical instrument sequence: use cash or deposit rates for the short end, Eurodollar futures to extend the curve through the intermediate…
The discussion explains how standardized CDS quoting conventions changed after the market’s Big Bang. For most credits, a conventional spread is paired with a recovery assumption; together with an interest-rate curve, these inputs are used to infer…
The document describes how market expectations for a central bank decision can be inferred from liquid interest rate derivatives whose accrual dates closely match the period between policy effective dates. The suggested approach is to identify a tradable…
The document considers how to compare the relative value of zero-coupon bonds and a coupon bond when their yields to maturity appear equal. Its central point is that the three bonds form a replication relationship: given prices for two instruments, cash…
The document explains how to value the protection and premium legs of a homogeneous basket default swap when constituent default times are independent and exponentially distributed. It derives the first-to-default survival probability and density, then…