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 to estimate default risk from market prices when a bond’s payoff depends on whether the issuer defaults. A simple comparison with a default-free bond can solve for default probability if recovery is assumed. The answer recommends…
The document shows how to order a QuantLib leg of cash flows by their dates in C++. A default call to the standard sorting algorithm cannot infer the desired ordering from cash-flow pointers, so the comparison must explicitly use each object’s date. The…
The document explains why secured 7% notes could be more valuable than a company's 5% bonds when both traded at the same price. The notes were backed by a larger face amount of the 5% bonds than the notes' own face value. Interest paid on that collateral was…
The document asks how to set market capitalization weights for a Black–Litterman portfolio holding international and emerging-market equities, gold, long-term Treasury bonds, and real estate. Its central advice is not to use the market values of the ETFs…
The document asks how to extend a Monte Carlo portfolio Value at Risk calculation to holdings from different asset classes, using a stock, a Treasury bond, and an option as examples. It refers to a simulation approach involving correlated random returns and…
The document explains why a sovereign credit default swap dataset can show an unchanged Greek spread for several years even though the number may look like a continuing market quote. Greece experienced a credit event in 2012, followed by an ISDA auction that…
The exchange explains why a bond arbitrage example can show a fractional face amount even though a bond’s coupon is quoted as a rate on par. The key distinction is between the denomination and trading increment of an individual bond and the aggregate face…
This exchange concerns checking coupon payment discrepancies on already specified overnight indexed swaps. The question asks for spreadsheet templates or guidance to recalculate payments from trade details, rather than to forecast rates. The response says it…
The document distinguishes a bond’s fixed coupon from its market yield to maturity. The coupon is set by the issuer, while the yield reflects the return investors require given market conditions, credit risk, and comparable bonds. Yield acts as the discount…
The document presents an inherited spreadsheet formula intended to price a coupon bond from its coupon and current yield. Its variables describe months to maturity, a semiannual payment frequency, the number of remaining coupon payments, and the fraction of…
The document explains why a balance calculated by applying annual compound growth at fractional points in time can differ from one built by allocating a fixed share of yearly interest to each month. Both methods can agree at the start and end of a full year…
The discussion examines why a USD SOFR overnight-indexed swap curve may show discount factors referenced to the curve date even when the quoted swaps settle two business days later. In the example, the one-week instrument’s discount factor is calculated…
The explanation resolves a confusion about market completeness and equivalent pricing measures. Completeness is characterized by uniqueness of the equivalent martingale measure for a fixed numéraire. In an incomplete market, multiple such measures can imply…
The discussion considers how to measure comovement between equity returns and Treasury yields, emphasizing that the sampling horizon and rolling window should match the question. Short windows can serve short-term signal research, while longer windows can…
The document asks how the Vasicek bond-pricing function can be determined from the condition that its value is zero at maturity. It gives a first-order differential equation and its general solution, which appears to contain two constants, then asks how the…
The note distinguishes three concepts in a credit default swap: the reference entity, the reference obligation, and the currency of the contract. A reference entity is the debtor, not an entity with a single currency denomination. Its debt instruments may be…
The note examines how to infer annual payment dates for a plain vanilla swap when its effective date and maturity have an ambiguous relationship to month-end. It explains that an end-of-month roll cannot produce a regular schedule without stubs when the…
The note derives how bond convexity can help estimate the change in modified duration after a yield move. Starting with the definitions of duration and convexity as price sensitivities, it rewrites convexity in terms of duration and the rate at which…
The document clarifies what bid yields shown on a government benchmark yield screen represent when pricing bonds. The answer says they are yields to maturity for actual government bonds, rather than spot rates. It recommends identifying the bond associated…
The document considers extending a constant-volatility trinomial stock option model to use a deterministic, time-varying interest rate curve. The suggested approach is to set the rate for each time step so that its discount factor matches the curve over that…
The document considers a position that is long a forward rate agreement and short a Eurodollar futures contract with matching fixing dates. It characterizes the position as having positive convexity because the FRA has positive convexity while the futures…
The document explains that receiving outright in a forward-starting interest rate swap means receiving the fixed rate and paying the floating rate over the swap’s term. In the stated example, the swap begins in six months and runs for two years. The term…
The document describes a historical simulation for a sovereign bond portfolio. Each bond is repriced under country yield curves shifted by historical scenarios, with shifts applied across markets together to retain their co-movement. Scenario price returns…
The document discusses bank gap analysis, which groups assets and liabilities by when they mature or reset their interest rates. Its example considers replacing short-dated Treasury notes with longer-dated notes. That change shifts rate-sensitive assets out…