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 explains how the issuer-pay model may apply to sovereign credit ratings. A rating agency can offer a rating to a government for a fee, while the government can decline. The agency may still publish a rating without payment, for example to make…
The note outlines ways to offset interest-rate exposure in a corporate bond using interest-rate futures or swaps. For a futures hedge, it recommends comparing the bond’s DV01 with the DV01 of the futures contract’s cheapest-to-deliver bond, using a contract…
The question compares two ways to discount 48 monthly payments when the available investment return is stated as 2% per year. One approach divides the annual rate by twelve and then applies another fractional-period exponent; the proposed solution instead…
The discussion offers two rough ways to assess whether a convertible bond may be inexpensive. One is to compare its market price with the value of a comparable straight bond, which isolates the premium paid for the embedded conversion feature. The premium is…
The discussion considers how to estimate loss given default (LGD) for agency mortgage-backed securities when a capital framework requires a figure despite the perception that the agencies have not defaulted. It suggests non-agency prime residential MBS as a…
This note explains why a bond’s clean price calculated with a z-spread may differ from a target market price even when the spread solver appears to converge. The example builds a fixed-rate bond and derives a spread with QuantLib’s BondFunctions.zSpread…
The document compares forward-rate dynamics in Hull’s LIBOR market model (LMM) and Brigo and Mercurio’s formulation. Hull’s displayed equation uses a single Brownian driver, so the drift term has no separate correlation coefficient: dependence is implicit in…
The document addresses how to derive forward-price dynamics when both the underlying asset and interest rates are stochastic. One response applies Itô’s lemma to a function of time, spot price, and rate, including the rate’s variance and the covariance…
The document explains why option rho is generally positive for calls and negative for puts as interest rates rise. It connects call sensitivity to put-call parity: a call can be viewed as a synthetic combination that includes exposure to the underlying and a…
The document distinguishes pricing a finite-maturity coupon bond from valuing an infinite-lived stream of coupons. For the example, a bond with a $1,000 face value pays $100 annually for ten years. If the discount rate falls to 5%, its price is the present…
The document asks how to price a fixed-to-floating bond in QuantLib when the library documentation does not appear to provide a dedicated instrument class. The proposed workaround is to price the fixed-rate portion as a fixed-rate bond ending on the switch…
The discussion explains how much issuer information can sometimes be inferred from a bond’s ISIN, particularly for US securities carrying a CUSIP. A CUSIP contains an issuer portion, an issue identifier, and a check character; a corresponding US ISIN…
The document describes how to locate bond yield datasets for analysis in R. It recommends searching a financial data catalog for yield series, identifying a dataset such as a US Treasury yield curve, and retrieving it over a chosen date range in a…
The discussion explains that FX forward points reflect the interest rate differential between two currencies, while the all-in forward price combines spot with those points. Changes in short-term money-market rates and funding conditions affect the points,…
The discussion addresses how to reproduce credit default swap valuations from Bloomberg using QuantLib or the ISDA Standard CDS model. It points to a QuantLib example that reportedly reproduces Markit prices closely and to the ISDA model source code as a way…
The document explains how to estimate the mark-to-market value of a credit default swap (CDS) after its market spread changes. It presents an approximation for a short-protection contract: multiply the difference between the contract coupon and current…
The document explains an apparent decline in regulatory credit-risk capital as a loan’s probability of default rises. The calculation described separates expected loss, based on default probability and loss given default, from unexpected loss, then applies a…
The document addresses a constructor error encountered while setting up swap rate helpers for a Canadian-dollar rate curve. The example passes the CDOR class where the helper expects an index object, and omits a required spread argument when supplying later…
State prices are the current values of claims that each pay one unit in exactly one state and nothing in the others. To infer them from traded assets, each state-specific payoff must be replicable by a portfolio of those assets. The example has a bond paying…
A credit default swap spread is set by market trading and reflects participants’ views about both the reference entity’s likelihood of default and the recovery value of its debt after default. Because recovery assumptions affect the protection buyer’s…
The document introduces asset-backed securities (ABS) and mortgage-backed securities (MBS), including structures such as collateralized mortgage obligations and collateralized loan obligations. It frames these products as difficult for retail investors…
The document surveys discrete-time short-rate models and whether their structure permits negative rates. It lists Cox–Ingersoll–Ross, Black–Derman–Toy, Black–Karasinski, exponential Vasicek, and Hull–White among models designed to keep rates nonnegative, and…
The document explains how corporate tax payments and Treasury debt issuance can reduce cash available to banks and money markets. Corporations may hold funds in short-term investments that flow through money market funds into repo lending. Paying taxes pulls…
The discussion relates bond duration to a cash-flow-weighted average payment time. For ordinary positive cash flows, the discounted payments divided by the bond value can be interpreted as probabilities. When a portfolio includes a negative net cash flow,…