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 challenges the idea that PCA and machine learning are rarely used in trading. It notes that machine learning covers many methods, from linear regression to random forests, and that firms have had varying degrees of success with them. It then…
The document explains why an uncollateralized OTC derivative can still impose funding costs on a bank, even though the trade itself requires no initial cash. One source is the hedge: the bank may hedge through collateralized interbank trades, and adverse…
The explanation frames interest-rate hedging as offsetting the sensitivity of a portfolio’s market value to movements in the risk-free curve. It values a debt instrument by discounting its dated cash flows using factors that reflect rates and other…
The document asks how to calculate the remaining principal on a loan when interest accrues using Actual/360 or Actual/Actual day-count conventions. It contrasts these methods with a 30/360 amortization, for which a level-payment annuity formula can express…
The discussion examines whether corporate bond OAS should be adjusted for price or coupon differences when comparing bonds from the same issuer. It distinguishes a bond’s long-term value relative to a credit curve from its short-term trading value, which may…
The note distinguishes quoted bond prices from bond yields. It explains that a U.S. bond price such as 99 1/8 represents 99.125 per 100 of par, while a yield is the discount rate that equates the present value of coupon and principal cash flows with the…
The document considers how to define carry for a USD payer swaption with a six-month expiry and a ten-year underlying swap. It questions a simple calculation based on subtracting a short-term LIBOR fixing from a ten-year yield, and whether that spread alone…
The document explains how trading in over-the-counter fixed income markets differs from trading listed equities. Rather than relying on one central exchange order book, dealers may maintain their own bond inventories and pricing books, especially for…
The note addresses whether Excel’s YIELD function can calculate the yield of an Italian government bond that pays coupons semiannually while its yield convention uses annual compounding. It explains that the bond’s price equation must discount each coupon…
The note gives an econometric rationale for adding lagged versions of predictors to a recession classification model. Its example is the yield curve: an inversion may precede a downturn by many months, so the curve observed earlier can be relevant to whether…
The note explains the inverse relationship between a bond’s yield to maturity and its price, then defines Macaulay duration as the cash-flow-weighted average time until payments are received. Under continuous compounding, bond price is the sum of discounted…
The document defines an affine term structure model through the relationship between bond yields and model state variables. In the simplest formulation, a zero-coupon bond price is exponential in a maturity-dependent constant and the short rate; taking its…
The document compares overnight index swaps (OIS) and Fed Funds futures as market inputs for estimating interest rates expected around an FOMC meeting. It distinguishes a measure based on recent realized Fed Funds trading from futures prices that reflect the…
The explanation distinguishes Eurodollar futures from forward rate agreements and interest rate swaps. In this context, Eurodollar refers to futures on a three-month interest rate, though the term can also refer to the Euro–US dollar currency pair. Compared…
The document defines a credit spread from the prices of defaultable and risk-free zero-coupon bonds, then relates default risk to a hazard rate and survival probability. It also introduces a structural company valuation in which equity resembles a call…
The document distinguishes basis between curves from the use of OIS discounting and explains how curve differences can affect swap values. It describes basis spreads as rate differences between curves, such as tenors or an interbank curve and an OIS curve.…
The document explains how to determine the floating coupon schedule and rate calculation for a QuantLib zero-coupon swap. It states that the index tenor controls the spacing of floating subperiods, and demonstrates inspecting a floating coupon’s dates,…
The document explains how to derive a theoretical 1.5-year Treasury spot rate from the price and cash flows of a semiannual coupon bond, using shorter-maturity Treasury bill yields as earlier spot rates. Each bond payment is valued using the spot rate for…
This question describes a QuantLib issue that occurs when a pricing workflow changes the evaluation date to an earlier date after calibrating a hazard curve with UpfrontCdsHelper objects. The reported runtime error says the cash settlement date falls before…
The document compares using an interest-rate level, a log change, a simple percentage change, or a first difference as a regressor alongside stock returns. One answer recommends beginning with the untransformed rate because it is itself a rate, while another…
The document raises valuation questions for a privately issued, illiquid Indian corporate bond with an amortizing principal schedule and a high coupon. It asks which components belong in a discount yield, how to update valuation over time, how to estimate a…
The document examines the annualized effective rate for borrowing over a period using backward-looking overnight rates. It presents a formula that compounds each observed annual rate over its applicable day count using simple interest for that accrual…
The document presents a curve-building setup intended to help benchmark a spreadsheet model for float-float cross-currency swaps. The question describes importing GBP, USD, and EUR par rates and cross-currency basis quotes, interpolating rates, bootstrapping…
The document presents a simplified way to infer default risk from a bond’s credit spread. It relates the spread to loss given default and default probability through the credit triangle: spread is approximately the product of one minus recovery and the…