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 derives the fair delivery price for a forward contract on a zero-coupon bond. If the underlying bond matures at t2 and delivery occurs at t1, the forward price at an earlier time t is the current price of the t2 bond divided by the current price…
The example calculates 95% expected shortfall for a portfolio of two independent bonds, each with a 2% default probability, $100 face value, and zero recovery. The possible losses are $0, $100, and $200, with probabilities obtained from a binomial model. To…
The document asks how to obtain a discount curve when the short rate follows a Vasicek model. It starts from the model’s analytical zero-coupon bond price, expressed using deterministic maturity-dependent functions and the current short rate. Applying the…
This question explains why a QuantLib piecewise yield curve depends on the global evaluation date even when a calendar, reference date, or function-specific date is supplied. The answer says the curve uses the evaluation date to determine when the deposit,…
The document explains how to construct a bond’s scheduled coupon dates from maturity. For a bond paying every six months, dates are stepped backward from maturity in calendar-month increments, rather than by counting half of a year’s days. The resulting…
The document contrasts how corporate and public pension plans account for liabilities and asks whether public plans need tail-risk protection. Under the simplified description, corporate plans discount liabilities using market interest rates, so rate changes…
The document considers how to combine a coupon bond and a perpetuity to create a portfolio with zero duration. It identifies an error in multiplying weighted durations and replaces it with a linear duration condition: the sum of each bond’s weight times its…
The document derives modified duration from the present value of a bond’s coupon payments and principal. It differentiates the bond price with respect to yield to obtain the absolute price sensitivity, then divides by price and changes the sign to express…
The document sets up a two-bond credit portfolio and asks how to calculate its Expected Shortfall across confidence levels. Each bond has a stated market price, default probability, recovery amount, and independent default event. Those assumptions define a…
The document answers a question about locating LIBOR and overnight indexed swap rates for constructing an OIS discount curve. It distinguishes OIS swap rates from the questioner's phrasing of OIS zero-coupon bonds, and points to commercial market-data…
The document addresses whether a reverse convertible coupon should exceed the sum of a risk-free rate and the premium from a short put because the put premium could earn interest after inception. The answer emphasizes that a buyer purchases a packaged…
The document asks about common specifications for forward-rate volatility in the Heath–Jarrow–Morton (HJM) framework, with particular interest in two- and three-factor models used in industry. It gives one example: instantaneous forward-rate volatility…
The document explains what the single stochastic driver in a one-factor short-rate model represents. It distinguishes the short rate, which the model describes, from the Wiener-process shock, which represents new information that could not have been…
The document offers practical advice to a junior analyst who finds the many concepts and terms used on a bond trading desk difficult to follow. It emphasizes that fixed-income work depends not only on academic knowledge but also on market conventions,…
The document examines why least-squares Monte Carlo (LSMC) regression often uses only in-the-money paths when valuing American options, and how to adapt path selection to callable convertible bonds. The explanation frames this filter as a way to omit paths…
The document explains the roles of time-dependent parameters in the Hull–White short-rate model. A time-varying drift term can fit the initial yield curve, but matching that curve alone does not ensure accurate prices for more complex interest-rate products,…
The note proposes a way to value backward-looking compounded risk-free-rate caplets when a liquid volatility surface is available for forward-looking LIBOR options. It separates the problem into estimating the relationship between LIBOR and RFR volatility,…
The document explains how to read a Bloomberg-style rate label that combines a three-month LIBOR reset tenor with a 25-year maturity. The three-month period describes the floating leg’s rate-setting interval; it does not mean the quoted rate is simply an…
The document addresses how to interpret and value a bond whose interest is paid only at maturity. Its example asks whether a stated annual coupon rate should accrue simply over the bond’s life, be compounded, or represent the total interest paid at maturity.…
The document raises a valuation question about a cleared cancellable interest rate swap with Bermudan-style early termination rights. The term sheet does not identify which party owns the termination option, and the questioner asks whether the option holder…
The document asks whether a conditional expectation identity involving two zero-coupon bond prices and a tradable asset’s future value holds under any probability measure. The proposed intuition is that the product of bond prices across adjacent maturities…
The question examines the BlackCallableFixedRateBondEngine in QuantLib using a zero-coupon callable bond with a call price well below the bond's expected value, a nearly zero volatility, and a flat interest-rate curve. The author expects the bond's value to…
The document distinguishes the ordinary valuation of a repo from the risks associated with its collateral. In the explanation provided, a repo’s loan cash flows are valued using the repo rate in the currency of the cash advanced. If those cash flows are…
The document raises a fixed-income valuation problem: how to calculate yield to maturity, dirty price, duration, and related measures for a bond that pays coupons on a nonstandard interval. It describes a QuantLib setup with a 26-week schedule, a Russian…