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 explains how stress in bank credit can disrupt money markets and money market funds. During the 2008 crisis, concern about lending to banks weakened the market value of bank commercial paper. Investors seeking redemption at par could then prompt…
The note explains why the implied repo rate for a cash-and-carry bond futures trade uses a denominator adjusted for coupon timing. The initial financing requirement is the bond’s dirty price, but an interim coupon can be used to pay down the repo borrowing…
The document explains why duration remains meaningful for a floating-rate bond even though later coupon amounts are not yet known. Under the setup described, the bond price is based on the next coupon and face value discounted to the next payment date.…
The document compares a single-forward-rate Black model with a Libor market model that evolves multiple correlated forward rates. It asks how stepwise time-dependent volatility in the Black setting relates to a model with constant volatilities, and what…
The document sets up a global curve calibration problem using a piecewise cubic spline to represent rates across maturities. It proposes choosing the spline coefficients so that prices or rates implied by the resulting discount curve match observed market…
The document explains the Vasicek short-rate model as an Ornstein–Uhlenbeck process applied to the instantaneous interest rate. Its parameters describe a long-run rate level, the speed at which rates revert toward it, and the scale of random fluctuations.…
The document examines how to hedge a 10-year bond when only a 5-year credit default swap is available. It distinguishes two objectives: protection against an issuer default over the CDS term, and reducing sensitivity to changes in market-implied credit risk.…
The document explains that interest rate swap volatility is commonly expressed as an absolute change in the swap rate, measured in basis points, rather than as a percentage change in the rate. It describes a normal-volatility convention in which a daily…
The document considers how to compress a bond portfolio’s risk across an entire yield curve into exposures to a few liquid benchmark maturities. It outlines principal component analysis as one approach: project the bond risk vector onto a small set of…
The discussion compares two ways to value a bond for a future date: projecting a spot bond price using financing carry, or discounting its cash flows to obtain a price settled on that date. In theory, the approaches should agree when their financing…
The document asks how to express a dollar-valued CVA from Monte Carlo simulation as an annual running spread. The example uses future interest-rate term structures simulated with a one-factor Hull–White model. It describes dividing the CVA by a CDS risky…
The document raises a pricing question about a first-to-default contract on two names with a specified default correlation, using the Li model and a Gaussian copula. The author has tried generating Gaussian samples and correlating them with a linear…
The document explains an equivalence between two cash flows involving a bond discount factor. At the earlier date, the bond price for payment at the later date is known, so the positive-part payoff and the payoff scaled by the inverse discount factor can…
The document answers a practical question about retrieving descriptions for bonds identified by CUSIP and exporting the results to Excel. It recommends using Bloomberg’s Excel add-in with the BDP function to request the security description field for a…
The document discusses calibration of a plain-vanilla, multi-curve Libor Market Model to swaption data. The proposed volatility form has several parameters, while instantaneous correlations follow an exponential function of tenor separation. The questions…
The document asks how to express the volatility of a three-month EURIBOR forward rate when the corresponding futures price is quoted as a linear transformation of that rate. It distinguishes volatility inferred from options from a historical estimate based…
The document addresses how to obtain interest-rate yields for a country when a data platform returns currency performance instead. Its central point is that there is no single domestic risk-free rate suitable for every analysis: the analyst must choose a…
The document explains why market participants use overnight repurchase agreements instead of locking in financing for a longer period. A dealer or investor holding Treasury securities can borrow cash against them, using the repo to finance the position.…
The document explains how Brazilian DI1 interest rate futures are quoted and how their contract value and daily variation margin are derived. The quoted annual rate is compounded daily on a 252-day convention. The exchange converts that rate into a unit…
The document outlines a basic variance-covariance approach to estimating value at risk for an interest rate swap portfolio. First, choose benchmark swap tenors as market factors and calculate each portfolio’s profit or loss for a one-basis-point move in each…
The discussion shows how to calculate the terminal cash flows of a zero-coupon inflation swap that receives CPI performance and pays a fixed rate. The inflation leg is notional multiplied by the percentage change from the base index to the maturity index.…
The discussion distinguishes a pay-in-kind loan, whose unpaid interest is added to principal and compounds, from a bullet loan that pays periodic coupons while returning principal at maturity. It addresses whether quarterly or annual compounding belongs in…
This discussion explains the history and availability of the Lehman Brothers Fixed Income Database, a source of bond-level data used in corporate bond research. It describes archived Federal Reserve Board data covering individual bonds in Lehman indexes from…
The document poses a model-design question about discrete short-rate trees. The intended lattice should support risk-neutral pricing and analysis under alternative measures, such as the real-world measure, while maintaining positive branching probabilities.…