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 contrasts market-risk portfolio outcomes with credit-risk losses. Market risk is commonly described through profit and loss because market positions can produce gains as well as losses. Its distribution may be roughly normal in shape, but the…
The document considers how to build forward-looking financial stress scenarios for assessing pension fund solvency. The proposed shocks include a lower discounting curve, reduced returns on equities and property, and weaker credit bond returns that vary by…
The question asks how to use a swaption’s delta and gamma ladder to estimate historical P&L when the underlying swap curve moves substantially. It describes the first-order delta estimate and asks how to extend the second-order Taylor term when gamma varies…
The document explains that a bond trades flat when the buyer pays an all-in price without a separate payment for accrued interest. This convention can reflect local market practice, or concern that the issuer may not pay accrued or future coupons. The…
The document reports a QuantLib usage problem involving a fitted bond discount curve. The author first optimizes an exponential-spline curve against bond helpers, then reuses the fitted parameters as a guess while setting the iteration limit to zero,…
The document clarifies the division of responsibility between an overnight index and a coupon when modeling overnight rates. The index supplies a fixing for a date when one is available; the coupon handles accruing that rate across the relevant period. For…
The document describes an attempt to explain a swap’s profit and loss using sensitivities to instruments across a rate curve, including money-market rates, futures, and swaps. The author applies separate one-basis-point shocks to the curve instruments and…
The document explains why FRTB delta sensitivities divide a mark-to-market change by the size of the market bump. For a linear cash equity or foreign exchange position, this scaling makes the sensitivity equal to the position’s mark-to-market value, so it…
The document explains the relationship between FX swap points and cross-currency swaps. It states that a single-period cross-currency swap has the same four start and end principal cash flows as an FX swap, so their fair values are linked. To derive a…
The document interprets a negative coefficient on a credit-related factor in a regression of bank excess returns. The factor is constructed from BBB bond returns after removing the component associated with interest rate movements. The answer suggests that…
The document explains why an interest rate option's volatility convention matters for pricing and hedging. Normal volatility is associated with the Bachelier model, while lognormal volatility is associated with Black-style models. Although conventions can…
The note distinguishes new coupon-bond offerings from zero-coupon bonds and reopenings of existing issues. A zero-coupon bond is sold at the present value of its face amount, typically below face value when rates are positive. When an issuer reopens an…
The document examines why a calculated CZK swap zero rate does not match a Bloomberg curve when bootstrapping from deposit and forward rate agreement quotes. The questioner combines two simple-interest accrual periods using a 360-day basis, but obtains a…
The document explains how currency forward carry relates to the return on a hedged foreign bond. A long position in foreign currency has carry when the spot rate is unchanged at maturity; a hedge against that exposure takes the opposite, short…
The document describes how to identify on-the-run and first-off-the-run U.S. Treasury securities when working with bond data. The latest auctioned security in a given maturity category is classified as on-the-run; the previous one becomes first-off-the-run.…
The document poses a practical hedging question for an interest rate derivative. It assumes a hedge is built from linear positions in instruments such as interest rate swaps and forward rate agreements, and seeks positions that make the hedge’s change in…
The document addresses an error encountered when fitting a Nelson–Siegel yield curve using bond maturities and yields in R. The accepted answer points out that the question omits key details needed for diagnosis, including the package that provides the…
The document derives a bond forward price by replicating the position with a spot bond purchase financed through repo. When a coupon arrives before settlement, the investor uses it to reduce the repo borrowing, then finances the remaining balance through the…
The document asks how to adapt a globally diversified portfolio of US-listed funds for an investor in Europe who would prefer euro-denominated products. The portfolio spans international and emerging-market bonds, commodities, gold, global and US equities,…
The document discusses calibrating a Vasicek short-rate model under both the real-world probability measure and the risk-neutral measure. The questioner estimates mean reversion, the long-run rate, and volatility from historical daily short-rate data using…
The document clarifies repo terminology by focusing on the transaction’s cash flow and economic purpose. A party that sells securities while agreeing to buy them back is raising cash against those securities, or economically lending securities, and is on the…
The document considers whether changes in a bond’s yield to maturity should be regressed on changes in a bond index’s yield to estimate a beta. It argues that stock-style beta is not the usual framework for bond risk: interest-rate sensitivity is more…
The document explains that short-rate models such as Vasicek, CIR, and Hull–White are not primarily historical-data forecasting tools. Early models helped describe links between the interest-rate term structure and its volatility, including bond convexity.…
The document discusses the use of geometric Brownian motion for short-term interest rates in a model of embedded bond options, and asks how that assumption relates to the Pure Expectations Hypothesis. The response interprets the hypothesis as specifying…