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
Bond duration summarizes how sensitive a bond’s price is to changes in yield. It provides a quick way to compare the interest rate risk of plain fixed-coupon bonds and to estimate price changes without repricing every bond. Modified duration expresses…
The document discusses why discount-curve choice depends on the liabilities or assets being valued. For active bank trading books, it emphasizes using curves that support accurate, consistent mark-to-market valuations across operations. It contrasts this…
The document explains two ways to calculate compounded SOFR coupons when rates are observed in arrears and the final daily fixing may arrive too close to the payment date for counterparties to reconcile and settle. With a lookback, each accrual day uses a…
The answer distinguishes the spot-market effects of outright forwards and FX swaps used to hedge foreign investments. It says forwards can have a substantial effect on spot, while swaps generally carry much less direct spot delta. As an illustration, it…
The document raises a calibration question for models of negative interest rates. It suggests that the magnitude of negative rates may move with fixed-asset prices and cross-currency basis spreads, then asks whether volatility and correlation estimates…
The exchange concerns whether researchers can obtain public or low-cost data on mortgage prepayment behavior, especially for European or German retail mortgage credits. One response points to the European Mortgage Federation as a possible source of…
The document compares two ways to construct a residual for a relative-value trade in a three-bond yield-curve fly. One approach regresses a fly measure on a belly yield and a wing-spread measure, aiming to remove level and curve exposures. The other…
The document raises the choice of interpolation method for discount factor curves. It states a preference for log-linear interpolation and suggests that the reason may be its relationship to avoiding arbitrage in forward rates. The central issue is whether…
The document distinguishes calendar-based business-day counts from bond day-count conventions such as Thirty/360. A day-count convention measures time for purposes such as coupon calculations; it does not, by itself, use a market calendar to exclude weekends…
The discussion explains why hedging agency mortgage backed securities with Treasuries alone can leave substantial spread risk. Treasury yields may move independently of mortgage spreads, while mortgages also have duration and prepayment related convexity:…
The document introduces benchmark yield curves as shared reference curves that help market participants price interest rate products consistently. It gives government bond curves and inflation adjusted curves as examples of benchmarks, emphasizing their role…
The document explains why six-month LIBOR can stand well above three-month LIBOR, Eurodollar futures, and swap rates without creating an executable arbitrage. The rates refer to different borrowing periods and, in some instruments, different floating-rate…
The document considers how to calibrate constant mean-reversion and volatility parameters in a one-factor Hull–White model when market swaption prices use OIS discounting, while the available closed-form model assumes a single curve. It describes two…
The document compares the change-of-measure argument used to make a discounted asset price a martingale in Black–Scholes with the case of a mean-reverting Vasicek process. The question observes that discounting the Vasicek state variable does not produce the…
The document explains how ACT/360 day-count conventions enter a money market forward-rate calculation. Under this convention, simple interest accrues using the actual number of days in the period divided by 360. The example equates growth from investing for…
This document addresses an apparent conflict between the conventional discounted-cash-flow price of a coupon bond and the martingale condition for its price relative to a bank-account numeraire. The key distinction is between the bond’s quoted price and the…
This note derives a pre-default forward delivery price for a zero-coupon bond that can default before delivery. Under a market-value recovery setup, it expresses the bond’s pre-default value using the risk-free short rate, default hazard, and recovery…
The document asks how to combine calibration errors for two instrument groups, each containing multiple assets. It compares an unweighted sum of group-level Euclidean errors with versions that apply weights within each group and a mixing parameter between…
Credit exposure is the value at risk of loss if a counterparty defaults at a given future time; it is not inherently conditioned on default. A standard CVA calculation often treats exposure and counterparty credit quality as uncorrelated. Wrong-way risk…
Normal and shifted lognormal volatility quotes can represent the same current swaption or cap/floor price. The document explains why this price agreement does not make the models’ Greeks agree: Greeks describe how prices change as market inputs move, and the…
The document considers how to validate through-the-cycle (TTC) credit rating systems, which aim to represent default risk across changing economic conditions. It contrasts them with point-in-time (PIT) systems: PIT forecasts over a defined horizon can be…
The document describes an attempt to simulate stock returns, bond returns, and inflation jointly using a Gaussian copula. The author generates correlated normal variables from an estimated covariance matrix, converts them to uniform values, and applies…
The discussion examines how few observed defaults affect probability of default estimates, contrasting simple frequency estimates with Bayesian estimates that depend on a prior. It illustrates the zero-default case with hypothetical credit data, comparing a…
The document shows how to change the fixing-day convention for a floating leg when valuing an interest rate swap in QuantLib Python. A standard VanillaSwap built with an Ibor index inherits the index’s fixing-day setting; the example reports that the…