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 distinguishes initial margin posting from its later reassessment. It describes initial margin as collateral intended to cover potential closeout costs if a counterparty defaults, with an initial amount posted when a trade is entered. It…
The document explains how to handle the curve handle when bootstrapping a discount curve from overnight indexed swap quotes in QuantLib. An overnight index can be created without a linked curve for this stage because the bootstrap helpers use it to obtain…
The document explains how assumed and real recovery rates relate to converting between quoted CDS spreads and upfront amounts. Its answer says the assumed recovery rate is used for quotation conversions: the quoted spread and coupon are mapped to an upfront,…
The document discusses moving from a single-factor credit risk model, in which one latent factor represents the economy, to models with multiple risk drivers. Suggested factors depend on the portfolio and available data. For corporate portfolios, sector,…
The document explains why a CDS spread depends on its recovery assumption and distinguishes two ways to compare contracts with different recoveries. A rough spread adjustment scales the quoted spread by the ratio of loss given default under the alternative…
The document raises a modeling question about estimating product-level credit conversion factors (CCFs) when borrowers’ credit limits change between the observation date and default. It notes that regulatory guidance from the FCA is understood to recommend…
The document explains why a swap’s floating payments are valued using forward rates and zero-coupon bond prices. Forward rates are implied by today’s yield curve under no-arbitrage pricing; the first period’s forward rate corresponds to the currently known…
The discussion distinguishes a vanilla forward swap rate from rates inferred from futures or from cash flows paid under a different measure. A forward swap rate paired with its corresponding swap annuity is treated as a martingale under the annuity measure,…
The discussion explains how more frequent coupon payments can change a bond’s present value by moving some cash flows earlier. Under a stated setup with fixed coupon rate and a monotonic discount factor, the answer expresses price as the discounted sum of…
The document discusses how no-arbitrage is represented in the LIBOR market model (LMM). It raises the question of whether a numeraire can make bond-price processes martingales and where the model’s arbitrage-free construction is justified. The replies…
The document introduces practical conventions for a JPY-USD cross-currency basis swap. It describes the usual start lag after trade date, the exchange of notionals at the spot exchange rate set when the trade is executed, and the common convention for…
The document presents ways to convert between lognormal Black implied volatility and normal Bachelier implied volatility, a useful distinction in interest rate markets where quoted volatility conventions vary. It gives an approximation attributed to Hagan…
The document compares cleared interest rate swaps with collateralized bilateral OTC swaps, focusing on collateral remuneration and valuation. It explains that cash margin is generally remunerated at an overnight indexed swap rate in both settings, so OIS…
The note explains why a QuantLib overnight-index swap helper can generate a one-month curve pillar on October 31 when the valuation date is September 30, even though the overnight index reports its end-of-month flag as false. The cause is the OISRateHelper…
The document considers how to turn forecasts of a logged, differenced bond-yield series back into yield levels. Its example uses a four-period log difference: recovering the next logged level requires adding the forecasted change to the logged yield from…
The document explains an example involving a bond trading near its announced call price before redemption. An investor buys the bond and borrows most of the purchase cost; the bond’s coupon accrual exceeds the borrowing cost if it survives until the call…
The document considers how to recover latent returns from reported returns that have been averaged over time, a problem associated with private equity performance data. It describes a state-space formulation in which the hidden state contains current and…
The document presents a question about the meaning of a discount for an older U.S. Treasury bond. The quoted passage says the bond traded at 60 during 1970 and ended that year above 77, while describing it as available at a large discount. The questioner…
The document addresses how to estimate annualized volatility for a European swaption, using a 2y5y forward rate as an example. For a historical estimate, it recommends calculating the standard deviation of daily changes in the forward rate and scaling by the…
The document clarifies two S&P sovereign-rating notations. The suffix “u” identifies an unsolicited rating, meaning the rating was initiated by a party other than the issuer or its agents. “SD” means selective default: the agency considers the obligor to…
The document explains where distributed ledgers may help parties record information or transfer assets without relying on a mutually trusted intermediary. It describes an Austrian cash-register system in which merchants record and cryptographically link…
The document raises a modeling question about predicting credit transitions, such as movement from current status to delinquency or default. It proposes estimating state-to-state probabilities with a logit model or another method that includes covariates,…
The discussion asks how traders and modelers should respond when a widely used market rate is manipulated. It challenges the idea that market prices are necessarily correct and observes that valuation models are often calibrated to market inputs, including…
The document discusses fitting an arbitrage-free Nelson–Siegel term-structure model to observed yields with a Kalman filter and likelihood optimization. The proposed setup uses three yield-curve factors, a maturity-dependent loading matrix, a model-implied…