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 asks how to bootstrap spot rates from a yield curve with maturities that become more frequent at the short end. It considers treating the one-month yield as a spot rate, using discount factors to derive later maturities, and deciding whether to…
The document asks how to model future yield scenarios for a basket of bonds and measure how an initial yield-curve shock affects those scenarios and bond futures prices. It proposes using the Heath–Jarrow–Morton framework to simulate forward rates for…
The document addresses two implementation questions for an amortizing floating-rate bond in QuantLib: whether its payment schedule begins at issuance or settlement, and how to relate discount margin to price. The guidance is to build the schedule from the…
The document derives a pricing framework for a defaultable zero-coupon bond under recovery of market value. It begins with a hazard rate: conditional default probability over a short interval is approximated by the intensity times the interval length, while…
The document raises questions about how synthetic collateralized debt obligations obtained enough credit default swap exposure to reference mortgage-linked assets, and who took the opposite side of those contracts. It distinguishes cash CDOs, described as…
The document explains how FX forwards can represent the cashflows of a cross-currency basis swap when combined with interest-rate swaps. It builds the argument in stages: an FX swap can be represented by two opposing FX exchanges, and a single-period FX swap…
The document explains how to convert a portfolio’s sensitivities to par swap rates into sensitivities to zero rates. It presents the conversion as a Jacobian problem: first derive how each par rate changes when individual zero rates move, then apply that…
This discussion explains how principal component analysis can inform yield-curve stress scenarios. The leading components describe common historical patterns in rates: the example’s first component has positive, similarly sized loadings across several swap…
The document considers how to connect an integral to internal rate of return in a cash-flow example with an initial outflow, a single terminal inflow, and no intervening payments. It notes that integrating an isolated IRR expression is not meaningful because…
The document formulates a Gaussian process as a combination of two independent Brownian motions plus a drift involving a Vasicek short-rate process and a deterministic volatility-related function. It asks how to choose a new probability measure under which…
Fannie Mae and Freddie Mac debt attracted attention as a possible substitute benchmark for long-dated US Treasury bonds when Treasury supply was shrinking. As government-sponsored enterprises, the two agencies were widely believed before the financial crisis…
This document raises a model-validation question: how to compare two streams of net present value changes converted into daily return series, one projected and one realized. The author currently uses Excel’s LINEST regression and is unsure whether that is…
This document clarifies how the payment date determines the numeraire term when pricing a floating-rate coupon under a forward measure. The example has a rate fixed at an earlier date and paid later, with the zero-coupon bond maturing on the payment date…
The document explains why derivative valuations can differ between counterparties when funding costs vary and collateral is incomplete. In the classical idealized setting, a common risk-free rate supports a shared price. A funding-aware framework instead…
This document asks how to interpret a quoted premium for an option on an index CDS series after constituent defaults have reduced the index factor. The example concerns a payer option with a stated notional, strike, expiry, and bid–ask quote, and asks…
The document explains why Heath-Jarrow-Morton interest-rate models are often described as infinite-dimensional. In the fixed-maturity formulation, the model specifies dynamics for the instantaneous forward rate at each maturity. Since maturities form a…
The document asks whether one SABR parameter set can be fitted to an entire implied volatility surface, and whether the at-the-money volatility can still determine alpha when fitting across expiries. The accepted response says standard SABR describes one…
The document distinguishes a forward price of a zero-coupon bond from the bond’s future spot price, then applies that distinction to valuing a caplet whose payoff is fixed at the start of its interest period. A forward bond price is the expectation of the…
The document begins with the conventional decomposition of nominal yields into real rates and inflation breakevens. It presents the traditional interpretation that breakevens reflect expected inflation while real rates reflect expected real economic growth.…
The document explains how a simulated short rate in the Hull–White model can be used to obtain Euribor 3M for projecting derivative cash flows. In the stated Euribor discounting framework, the forward rate over a three-month accrual period is derived from…
The document raises a pricing question about initiating an interest rate swap when discounting and floating-rate projection use different curves. Under a single-curve setup, the floating leg is treated as having value equal to notional at inception, so the…
The document asks how spot rates and forward rates respond when markets anticipate a Federal Reserve rate cut. The replies point to federal funds futures as the most liquid instrument relevant to the question, and also mention OIS rates and three-month SOFR…
The document explains how the ECB’s two-tier reserve system can create an incentive for banks to trade excess liquidity. In a simplified example, banks have different daily reserve balances and different allowances for deposits exempt from negative rates. A…
The document gives a calculator procedure for finding the yield to maturity of a fixed-coupon government bond with the HP 10bII+. It uses a bond priced at 100.44, with a 1.5% annual coupon, a 10-year term, and a face value of 100. The answer maps these…