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 discusses simulating the one-factor Hull–White short rate, whose drift includes mean reversion and a time-varying term calibrated to the yield curve. A basic Euler scheme advances the rate using the current drift plus a Gaussian shock. One…
The document investigates why QuantLib’s daily valuations of a short-dated FX option diverge from Bloomberg on some dates, despite matching on several others. The accepted answer identifies differing date conventions: Bloomberg distinguishes the pricing…
The discussion examines why a stock can have value even when its company pays no dividend and an investor holds too few shares to influence management. Replies describe several sources of value: expected future cash flows, retained earnings, buybacks,…
The discussion concerns finding a starting point for implementing trinomial trees and comparing them with Monte Carlo simulation. A researcher describes using a Hull–White trinomial tree in a project modeling a guaranteed minimum death benefit rider, with…
The discussion considers which UK rate to use as the risk-free input when estimating CAPM beta from market data, with a short investment horizon and gaps in short-maturity government bond yield data. One answer recommends SONIA, identifying it as the UK’s…
The document addresses how to calculate an ACT/ACT year fraction when a date interval spans both leap and non-leap years. Instead of dividing the entire number of elapsed days by a single denominator, the answer separates the interval into day counts…
The document asks whether notional and maturity alone can support a quick mental estimate of interest rate swap DV01 and credit default swap CS01, and whether being at or away from fair value matters. The response gives a rough PV01 estimate based on…
The document considers how to divide a loan exposure across collateral, a guarantee, and an uncovered portion when calculating risk-weighted assets under the Foundation IRB approach. Its example assigns different loss-given-default assumptions to real estate…
The explanation distinguishes the financing economics of general collateral from the securities lending value of a special bond. A repo is presented as a collateralized loan whose interest is embedded in the difference between the purchase and repurchase…
The document describes a research problem: studying whether ESG ratings help explain credit ratings or default probabilities over time. The researcher has ESG data and company fundamentals for more than 900 European firms, but the database provides only…
The document addresses confusion about converting lognormal volatility to normal volatility for a bond option. A calculation using a 5.9% lognormal volatility, a forward of 134.5, a strike of 132.5, and a short maturity produces a normal volatility near 7.87…
The document asks how to price a fixed-rate bond in QuantLib when the holder’s purchase date predates the most recent coupon date. It describes a semiannual bond valued between coupon dates and shows that QuantLib reports accrued interest based on the…
The document explains how to approximate a one-year fixed swap rate indexed to three-month Libor from a six-month Libor swap rate and a three-month versus six-month basis spread. At a first pass, subtract the basis spread from the six-month fixed rate to…
The document explains why deposit quotes used to build a QuantLib yield curve may not match zero rates queried from that curve. In the example, the curve is built with deposit and bond helpers, then zero rates are read at curve dates using a compounded…
The document explains a one-factor latent-variable model for correlated defaults. Each entity’s standardized financial condition is represented as a weighted sum of a shared systematic factor and an independent idiosyncratic factor. Default occurs when that…
The document resolves a sign discrepancy when finding the dynamics and expected value of the square of a driftless geometric Brownian motion, a calculation relevant to the expectation of a squared forward rate. Applying Itô’s lemma directly to the logarithm…
The document explains a shifted lognormal model for an interest rate that may be negative. A positive constant is added to the rate so the shifted quantity follows ordinary lognormal dynamics; simulation is performed on that shifted rate, and the constant is…
This answer shows how to approximate a Cox–Ingersoll–Ross short-rate process over a discrete time step using the Euler–Maruyama scheme. It evaluates the drift and diffusion at the current rate, multiplies them by the step length and the corresponding…
The document explains how to infer one currency’s interest rate from spot and forward FX rates when the other currency’s rate is known. It applies interest rate parity, adjusting each rate for its own day-count convention over the swap’s accrual period. The…
The document traces the shift in US swap spread analysis from Libor swaps versus Treasuries to cleared SOFR swaps versus cash Treasuries. It asks whether matched-maturity asset swap spreads should be near zero if SOFR approximates general collateral funding,…
The document examines confusion about whether Libor and a zero rate are martingales under a forward measure. The question defines a rate over the interval from the present time to a future date, then reasons from bond prices and numeraires to compare that…
The document investigates why OIS swaps repriced on a bootstrapped QuantLib curve show nonzero NPVs and a fair rate below the input quote. It asks whether the discrepancy comes from the curve bootstrap’s stopping condition or accuracy settings, using an…
The document clarifies that basis risk arises when a futures hedge does not move exactly with the asset or exposure being hedged. It gives examples where the deliverable or referenced instrument differs from the hedger’s actual exposure: wheat from one…
The document derives a rating-level adjustment that maps through-the-cycle default probabilities to point-in-time estimates when the portfolio-wide default forecast changes. It defines odds for the overall TTC and PIT rates, then scales each rating’s…