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 examines a Bloomberg convention for setting volatility in a Hull-White short-rate model. The described calculation converts a cap volatility into a rate volatility by multiplying the quoted cap volatility by the corresponding swap rate expressed…
The document explains how interpolation can reduce the number of free discount factors when calibrating a swap curve. With two swap quotes but multiple payment-date discount factors, fitting every factor independently leaves the problem underdetermined.…
The document simplifies the Solvency II interest-rate capital requirement for a single asset and liability as a parallel rate shock multiplied by the difference between their DV01s. It then expresses the SCR ratio as own funds divided by that capital amount.…
The document asks how setting interest on excess reserves (IOER) to zero might affect the federal funds rate (FFR). It describes a possible incentive channel: IOER offsets some of the cost to a borrowing bank of obtaining reserves in the federal funds…
The document explains that an interest rate cap can be valued as the sum of its caplets, with each caplet treated as a put option on a zero-coupon bond. It distinguishes a caplet whose reset has passed, whose payoff is known and discounted to its payment…
The document discusses fitting a EUR interest rate curve from overnight, outright Euribor swap, and inter-tenor basis quotes. The questioner models each basis instrument as two vanilla swaps and adds the quoted spread to the shorter-tenor floating leg, but…
The document addresses the intuition behind the growing perpetuity formula, which values a stream of payments that increases over time. It contrasts this with the no-growth perpetuity formula and asks why growth appears subtracted from the discount rate in…
The note outlines a proposed mean-reversion trade in a five-, ten-, and thirty-year SOFR swap butterfly. The trader regresses the ten-year swap rate on the shorter and longer rates without an intercept, then uses the residual as a signal. The suggested…
The document shows how to estimate an interest rate swap’s DV01 in QuantLib by repricing the swap after parallel upward and downward shifts to its yield curves, then taking the centered change in NPV. It explains why this result should not be compared…
The document describes a comparison between a QuantLib valuation of a forward rate agreement and a manual calculation. It sets up a three-month-forward, three-month loan-period FRA using a USD Libor index, a zero curve with flat quoted rates, simple…
The document asks whether the Vasicek short-rate model can produce a zero-coupon bond price under the physical, or real-world, probability measure. It gives the familiar affine bond-price form under the risk-neutral measure, including its coefficient…
The document describes an attempt to reproduce Bloomberg prices for a USD interest rate swap in QuantLib using separate forward and discount curves. It shows how the author assembled curve helpers from copied market quotes and compared the resulting fixed…
The document addresses why monthly returns calculated from a bond fund’s month-end NAV can differ from its published performance figure when the fund makes cash distributions. It emphasizes using the prior month-end value and the current month’s final…
When spot rates and their dates are already available, a discount curve can be constructed directly from those inputs, without using bond helpers calibrated from par yields. The answer describes the required data as dates, zero yields, and a day-count…
The document introduces duration as a measure of a bond price’s sensitivity to interest rates and notes that its formula depends on the rate convention. For a discretely compounded rate, it identifies modified duration as the relevant measure and gives its…
The document compares calibrating a one-factor Hull–White interest-rate model to quoted cap prices versus first using a SABR surface to recover consistent at-the-money cap prices. It explains that Hull–White does not represent strike smiles, so fitting…
The document explains what enabling extrapolation does for QuantLib curves. A curve is built from supplied data points, and a request for a value beyond the final point can otherwise raise an error. Enabling extrapolation permits the library to return values…
The document sets up a pricing problem for a perpetual defaultable coupon bond whose value depends on an underlying asset value and a stochastic coupon rate. Both state variables are modeled as geometric Brownian motions, with potentially correlated shocks.…
The document derives the pricing PDE for an equity whose variance follows a Heston process and whose interest rate follows either a Hull–White or CIR process. It applies Itô’s lemma to the price as a function of time, spot, variance, and rate, including the…
The document explains that the securities accepted in exchange for ETF shares can vary in composition and change frequency. The answer distinguishes between corporate bond ETFs, where underlying securities may be illiquid and a flexible basket can be…
The note outlines a simplified way to infer a risky issuer’s cumulative default probability from the yields on a risk-free zero-coupon bond and a risky zero-coupon bond with the same maturity. It assumes a fixed recovery rate and equates the discounted…
The document asks how to put a Heath–Jarrow–Morton model into practice after bootstrapping separate risk-free and risky curves. It describes a two-factor Brownian setup with distinct forward-rate processes and asks whether both drift conditions can be…
The answer explains the wildcard option through the adjustment needed between a Treasury futures position and its associated cash-bond position after the futures settlement price is fixed. It defines the tail as the portion of the basis position associated…
The document describes one practitioner’s approach to constructing the very front end of a SOFR discount curve. The suggested inputs are short-dated fixed-for-floating SOFR swaps, swaps dated to upcoming Federal Open Market Committee meetings, and on-the-run…