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 interpret a yield-curve steepener when the curve is inverted. It describes a common two-leg position: buy the shorter-maturity exposure and sell the longer-maturity exposure, with sizing adjusted for the legs’ differing…
The discussion distinguishes using the Hull–White short-rate model for market-consistent valuation and hedging from using it to express a trader’s own interest-rate view. For fair valuation, the parameter function is calibrated to the current term structure…
The answer describes how bond portfolios can immunize a liability or another bond against interest-rate changes using duration and convexity. Given the ability to short, two bonds with different durations can match a target duration, while three…
The document develops a finite-state valuation example using state prices for consumption claims. It forms a state price matrix, values a cash flow paid in a future period by applying powers of that matrix, and sums the resulting prices to construct a…
The document explains why interest rate swap sensitivities may be assigned to a standard tenor bucket, such as reporting a two-month swap under a three-month tenor. Bucketing groups nearby maturities whose rates are expected to move similarly, making risk…
The document examines a bank’s arbitrage when the rate implied by borrowing and lending over different periods disagrees with the rate available through a forward rate agreement. It compares a six month deposit and a nine month borrowing rate with a…
The document addresses whether a public line-by-line list of European commercial banks with assets or deposits is available. It explains that central bank and European-level statistics can provide aggregates, while detailed figures for individual smaller…
The document explains a global macro trade based on the expected narrowing of government bond yield spreads before the euro’s launch. Investors went long higher-yielding Italian or Spanish bonds and short German bunds. As yields converge, bond prices rise;…
The document considers whether to construct a forward curve for the spread between three-month and one-month LIBOR directly, rather than bootstrap separate projection curves. The motivation is to reduce apparent P&L variability caused by having exposure to…
The document collects suggestions for sourcing fixed-income data when a Bloomberg terminal is too costly or unavailable. The requested coverage includes swaption and cap quotes across strikes and tenors, as well as swap curves, with an emphasis on modular…
The document explains why the short rate in the Hull–White model has a normal distribution. Solving the model’s stochastic differential equation expresses the rate as deterministic terms plus a weighted Itô integral of Brownian motion. The key question is…
A callable bond gives its issuer the right to redeem the bond on specified dates at scheduled call prices. When a call price differs from par, the schedule is described as non-par. Because the issuer owns this option and the investor is short it, a callable…
The note addresses a QuantLib pricing error that occurs when a Black swaption engine is used with a negative forward rate. The error indicates that the Black model requires the forward rate, after any displacement, to be positive; with no displacement and a…
The note explains why a EURUSD cross-currency swap can carry sensitivity to the EUR 6-month versus 3-month basis, in addition to USD LIBOR, EURIBOR, and the currency exchange rate. The explanation links the basis exposure to how the EUR leg is built:…
The document presents spread duration as the present value of a one basis point coupon stream, weighted by survival probability and risk-free discounting. It connects this quantity to the first-order sensitivity of credit value to spread changes. Under…
The document explains how the chosen numeraire affects drift in the LIBOR Market Model (LMM), which models several forward rates at once. Under a measure associated with a bond maturing at a particular date, the forward rate tied to that bond's payment…
The document explains why an FX swap should have zero value at inception under idealized interest rate parity. It distinguishes the spot exchange, which is agreed at the prevailing spot rate, from the forward exchange, whose fair rate reflects the interest…
The answer offers a funding-based explanation for why cross-currency swap basis was close to zero before the 2008 financial crisis. It argues that European banks were structurally short US dollars and used FX swaps to obtain dollar funding. Before the…
The document addresses the Brownian motion adjustment used when changing from a risk-neutral measure to a forward measure associated with a numeraire. The response says that both formulas in the question are incorrect: the Radon–Nikodym density should…
The document outlines two ways to infer yield volatility from bond option prices. One approach expresses a put payoff on bond price in terms of yield differences and the bond’s price sensitivity to yield. Assuming normally distributed yields, it then applies…
The note explains why an asset swap spread is not simply a bond’s yield minus a risk-free rate. It describes the spread as the additional floating rate, typically over a reference benchmark, received when a bond’s fixed cash flows are swapped into floating…
The document asks why some financial companies appear to lack filings or XBRL companyfacts data in SEC EDGAR, despite having financial information available through commercial market-data sites. Examples include several banks whose EDGAR records appear…
The discussion examines whether customer deposits should be included as debt when estimating a bank’s weighted average cost of capital. One answer argues that deposits should be excluded when valuing a parent bank whose financing consists of equity and…
The discussion asks whether the no-arbitrage framework and the Fundamental Theorem of Asset Pricing can determine prices for underlying assets such as equities, bonds, and commodities, whose payoffs may not have a clearly tradable causal basis. It…