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.
10,263 documents
The discussion asks which day-count convention applies to U.S. Treasury bills, notes, and bonds, and who sets the rules. It contrasts a general claim that bills use Actual/360 and Treasury bonds use Actual/365 with an answer pointing to the Treasury’s…
The discussion considers derivatives whose payoff combines a weather measure, such as temperature or snowfall, with a financial asset or index. It does not identify a specific contract with the proposed basket payoff. Instead, the answers point to related…
This note explains why a one-year cash flow discounted with QuantLib’s FlatForward curve may not produce the value expected from a nominal annual rate. The key is the curve’s default compounding convention: the rate is treated as continuously compounded, so…
The document addresses implementing a characteristic function for option pricing in Excel VBA, where Excel's complex-number worksheet functions represent complex values as strings. The answer shows that these functions can be composed by passing their string…
The document explains how Markov Chain Monte Carlo can approximate an integral when a target density is known only up to a normalizing constant. In Metropolis–Hastings, a proposal distribution generates candidate states; moves toward higher target density…
The document describes a pricing problem involving a derivative exposed to both a near risk-free short rate and a credit-risky short rate. The proposed setup models the rates with correlated Vasicek processes. For the near risk-free rate, the author can…
The document diagnoses unexpected zero rates from a QuantLib yield curve. Its main finding is a units error: rates supplied to the curve are decimal values, so entering values such as 0.43902 represents 43.902%, not 0.43902%. Converting percentage-style…
The discussion examines whether Strata’s use of currency-aware amounts and market-data lookups creates meaningful overhead in FX forward pricing. It explains that CurrencyAmount carries references to immutable Currency and String objects rather than copying…
This note illustrates how least squares Monte Carlo can approximate a conditional expectation using simulated observations. For independent uniform variables X and Y, it forms an observable Z from a nonlinear function of both, then regresses simulated X…
The document derives the pricing relationship for a EUR-denominated option whose payoff is converted into COP. It applies the change-of-numéraire formula to the COP and EUR money-market accounts, accounting for the exchange rate that converts one EUR into…
The document explains the cross-product of infinitesimal changes in two Wiener processes under a common martingale measure. For Brownian motions with correlation rho, their quadratic covariation is rho times elapsed time; in differential notation, the…
The document considers integrals of two correlated Brownian motions against a deterministic function. For this setting, each stochastic integral has zero mean, and its variance is the integral of the squared function over time. The covariance between the two…
The document suggests two routes for finding data to calibrate Lévy copula techniques. One is to consult research on dynamic copulas that uses credit default swap index products such as iTraxx and CDX. This points researchers toward multi-name credit…
The document explains the basic logic behind replicating an option in the Black–Scholes setting: when the underlying asset is the model’s sole source of uncertainty, a position in that asset and a risk-free account can hedge the option’s exposure. It…
This exchange explains why the fixed leg of an interest-rate swap often shows most of the reported DV01 while the floating leg appears less sensitive. Under a convention that treats the legs as including offsetting principal exchanges at maturity, the fixed…
The discussion explains why some callable bonds switch from a fixed coupon to a floating coupon with a very large spread if the issuer does not call them. The step-up is intended to make continued borrowing costly: even if benchmark rates fall, the issuer…
This discussion explains why the constant-volatility assumption in Black-Scholes can be restrictive and outlines broader ways to extend the model. Stochastic-volatility models make volatility vary over time, with model dynamics linked to quantities such as…
The document presents a learner's attempt to derive a call option price by integrating the positive payoff over a lognormal terminal-price distribution, then substituting the risk-neutral expected price to determine the distribution's location parameter. The…
The document addresses why a collateral valuation adjustment can become more negative when a counterparty posts more collateral. The displayed expression weights expected collateral by a reinvestment spread and discounts the result, while the questioner's…
The document raises a question about very negative AUDJPY market strangle volatility quotes at long maturities. It gives examples for 25-delta and 10-delta strangles, alongside an at-the-money-forward volatility level, and asks whether the resulting concave…
The document describes a zero-coupon-style claim on mortgage principal that pays when the borrower prepays or, if no prepayment occurs, at maturity. It models the prepayment time as a stopping time triggered when a mortgage reference rate falls below a…
The answer explains why a discount curve described as risk-free is used in derivative valuation even though the valued instrument can carry market and liquidity risk. It frames the curve as a reference rate for replication and comparison: in a replication…
The document addresses how to calculate a swap rate from a rolled curve in RatesLib. The questioner builds an EUR interest-rate curve from market quotes, solves for discount factors, and prices a swap at its initial start and maturity dates. They then roll…
The document explains how an interim coupon affects the no-arbitrage delivery price of a forward contract. Its example assumes a security worth 100 today, a one-year delivery date, a coupon of 5 paid after two months, and a fixed continuously compounded…