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 discussion explains what collateralization means for an interest rate swap and why standard collateral agreements are associated with OIS discounting. When a swap is a liability to one counterparty, that party posts collateral to the counterparty holding…
The document outlines an approximate way to cover the cash flows of a fixed coupon Bermudan callable bond using a fixed rate bond and a Bermudan payer swaption. The proposed portfolio holds both instruments. If the callable bond remains outstanding, the…
This question considers how to estimate a company’s weighted average cost of capital in a market organized around Islamic finance. The author distinguishes transaction-based financing, where returns are tied to an asset purchase, from profit-and-loss-sharing…
The document considers how an investor might choose between a company’s equity and debt rather than allocating to each solely according to benchmark weights. Holding both securities can offset some of the company’s financing leverage, while giving the…
The document outlines a proposed approach to constructing the front end of a SOFR forward curve from one-month and three-month SOFR futures. It represents Federal Open Market Committee meeting effects as discrete rate jumps, places curve nodes at meeting…
The document explains why a corporate bond’s quoted yield is not the cash payment an investor automatically earns over a short holding period. Yield to maturity is a comparison measure based on the bond’s price and promised cash flows, with assumptions about…
The document asks how to separate expected returns from carry and from spread changes when estimating sovereign bond returns over a year. The response distinguishes holding a bond and earning its yield from the return associated with its market spread, but…
The document examines how to estimate the annualized total return on a long-term coupon bond held for part of its maturity. Its calculation accumulates coupon payments at an assumed reinvestment rate, estimates the bond's sale price using a terminal yield,…
The document examines a floating-rate note whose coupon resets every six months based on a five-year government yield, while its value is discounted using a curve that need not move in lockstep with the projection curve. It cautions that duration depends on…
The document asks what augmented data means in Bayesian estimation of the Cox–Ingersoll–Ross (CIR) process. It describes estimating the model’s parameters from observations of a square-root diffusion and gives a discrete-time approximation. The paper’s…
The discussion explains calibration questions for the one-factor Hull–White short-rate model. It focuses on fitting the time-dependent drift to the observed discount curve and the practical difficulty of differentiating instantaneous forward rates, whose…
The document considers how to track overnight or near-overnight interest rates across major and emerging-market currencies. It points to overnight LIBOR and overnight indexed swap (OIS) rates as possible series to follow, with LIBOR described as easier to…
The document sets up a continuous-time model of firm cash flows under a risk-neutral measure and values equity as the discounted cash flows received before default, plus the equity value at the default boundary. Cash flows follow geometric Brownian motion,…
The document explains how an annualized default probability can be lower for a longer horizon even when cumulative default risk does not fall. Its example assumes a firm faces a single default-triggering event during the first year, with a stated chance of…
The document responds to a beginner’s request for mathematically oriented references on modeling mortgage-backed securities prepayments. It recommends a collected guide to mortgage-backed and asset-backed securities, assembled from research reports…
The document explains why observing lower prices for zero-coupon STRIPS at longer maturities does not, by itself, reveal whether the yield curve slopes upward, downward, or is flat. A STRIP price is a discount factor: it reflects discounting a future payment…
The document explains why the Heath–Jarrow–Morton framework can be useful for modeling interest-rate term structures. It highlights that HJM can be constructed to fit the initial term structure, whereas some short-rate models cannot; it also notes that…
The document asks how to use interest rate swaps and swaptions to adjust a bond portfolio to target duration and convexity. It gives the portfolio’s assets under management and current risk measures, along with each derivative contract’s notional, duration,…
The document raises a question about whether a bond’s yield to maturity (YTM) is the same as the effective annual rate (EAR) on its cash flows. It points out that YTM incorporates the present value of future coupon payments and asks whether EAR reflects…
The document shows how an affine short-rate model maps the current short rate into zero-coupon bond prices and yields. Bond prices have an exponential-affine form: deterministic maturity-dependent terms multiply an exponential involving the current short…
The document explains why credit default swap spread histories are available even though CDS trade over the counter. It describes two data sources: trade summaries collected through clearing and reporting infrastructure, and indicative quotes submitted by…
The document asks how to determine the duration of a ten-year zero-coupon bond that can be called annually at par beginning in year six, given a flat yield of ten percent. Although an ordinary zero-coupon bond’s duration equals its maturity, the call feature…
The document discusses extrapolating credit default swap (CDS) curves when long-dated quotes are missing or illiquid, and calibrating a term structure from historical spread curves. It separates two practical uses. For marking positions, the response…
The document explains why an interest rate swap may have a nonzero net present value at initiation even when its discount and forecast curves were built from the same market quotes. The accepted answer points to the fixed rate: the swap’s fixed leg must use…