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 question concerns valuing an interest rate swap whose schedule began before the valuation date. It raises two implementation issues: representing a declining notional and including a floating coupon whose rate was fixed earlier. The response gives a…
The document explains how to value a CMS indexed range accrual when simulated zero-coupon rates follow a short-rate model under the risk-neutral measure, while the desired probability is expressed under the payment-date forward measure. The payoff event is…
The document sets up a structural credit model in which a firm’s asset value follows geometric Brownian motion and default occurs when it reaches an absorbing barrier. A coupon bond pays coupons while the firm survives, pays principal at maturity if it has…
The discussion asks whether a liquid interest rate swap curve can exist without a liquid government bond market, and how dealers hedge the risk they absorb. One answer describes the typical development of local currency markets: governments issue short-dated…
The document explains how to obtain a zero-coupon yield curve and distinguishes observed spot rates from a curve calibrated to traded instruments. A curve can be interpolated from spot rates when they are available, but spot rates are generally not directly…
The document illustrates how a company with dollars can use an FX swap when it needs francs to settle a bond purchase and later expects to receive foreign-currency proceeds. In the example, the company exchanges dollars for francs for near-term settlement,…
The question asks whether regional central banks provide programmatic access to their statistical data, after the author encountered CSV downloads and web scraping. The response points to the Federal Reserve Bank of St. Louis’s FRED service as a widely used…
The document gives an intuitive explanation of the Merton model’s representation of risky corporate debt. A lender to a company that cannot default would receive the promised repayment, like holding a risk-free bond. With default risk, however, the lender…
The document examines why a QuantLib ImpliedTermStructure appears to change shape after the evaluation date is advanced. The example compares discount factors before and after moving the date by six months. The accepted explanation is that the underlying…
The document raises a calculus question that appears when differentiating the product of an exponential time factor and a Vasicek short rate. It asks how the ordinary time derivative relates to the differential expression and whether multiplying the…
The note distinguishes a zero-coupon bond price from the pathwise discount factor used to discount cash flows. In the Vasicek model, the bond price has an analytic expression conditional on the current short rate. The discount factor along a simulated path…
The document outlines a workflow for representing swaption volatility data in QuantLibXL and using it to price a swaption. First, construct an at-the-money volatility matrix with the QuantLibXL matrix function. Then extend the matrix into a volatility cube…
The document explains how to interpret a default probability inferred from a credit default swap spread. A quoted CDS spread is observable, while default probability, hazard rate, and recovery are not directly observable. The simple…
The document distinguishes a curve of rates across lending tenors from a forward curve for a single LIBOR tenor. A three-month LIBOR forward curve describes rates for successive future three-month periods; it is not just today’s three-month fixing. Similar…
The discussion addresses how to find the fair spread on a single-currency basis swap built with QuantLib’s floating-for-floating swap instrument. The instrument does not expose a direct method for solving the fair spread, so the suggested approach is to…
The document explains how an investor can sell shares they do not own by borrowing them, selling them, then buying shares later to return to the lender. A custodian may locate shares from a long holder and arrange the loan, while passing along fees,…
The document asks about software for valuing foreign exchange forward deals from trade details such as currencies, notional, forward and spot rates, and relevant dates. It frames fair value as having sensitivity to both exchange-rate changes and…
The document explains how dependence among loan defaults affects a portfolio’s loss distribution. If portfolio loss is the sum of individual loan losses, its expected value is the sum of their expected values, so changing correlation alone does not change…
The document discusses why swap spreads can decline with tenor, especially at the long end, and emphasizes that the drivers vary by market and maturity segment. In developed markets, pension funds and other asset-liability investors may receive long-dated…
The document addresses a mistaken identity for a zero-coupon bond under stochastic interest rates. The bond price at a later time is a conditional expectation of future discounting; it cannot generally be obtained by multiplying its initial price by the…
The document outlines a framework for stressing a bank’s net interest income (NII) with three yield curve factors: shift for level, twist for slope, and butterfly for curvature. It proposes estimating the factors, shocking them, constructing a stressed…
The document poses an asset-pricing question about why long-duration bonds typically earn positive excess returns. It frames the issue through the covariance between an asset’s return and the stochastic discount factor: positive expected excess returns are…
The document clarifies a differential step in the Musiela parameterization of forward-rate dynamics. A forward rate can be described either for a fixed maturity date or for a fixed time-to-maturity point on the yield curve. Since the latter point moves…
The document explains why investors searching SEC filings may not find loan-level ABS-EE data for residential mortgage-backed securities. The key distinction is between publicly registered offerings, for which loan-level disclosures are required, and Rule…