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 examines an estimate for the one-year holding-period return on a three-year zero-coupon bond. It asks why the duration used in the estimate corresponds to the bond’s remaining two years at the end of the holding period, and how the forward rate…
The document derives the relationship between futures and forward prices when the underlying asset and short rate are stochastic and correlated. It assumes a geometric process for the asset price and a mean-reverting short-rate process, then integrates the…
The document resolves an apparent conflict between duration and convexity for bonds. Lower-coupon bonds tend to have both higher duration and higher convexity. Duration describes the first-order sensitivity of price to yield changes, while convexity captures…
The document examines how a funding cost adjustment (FCA) arises in Burgard and Kjaer’s framework for pricing derivatives with counterparty and issuer default risk. It quotes an FCA expression whose integrand depends on the issuer’s default intensity,…
The note explains why traders compare a current yield-curve trade with its forward curve level. Its example contrasts a steeper spot slope with a flatter slope implied for a future date. A trader could enter a steepener at the forward slope; if the spot…
The note asks how to describe risk in a LIBOR–SOFR basis swap when standard DV01 appears small and a basis-curve sensitivity is unavailable. Its example is a five-year swap paying SOFR and receiving three-month LIBOR, whose value changed as both reference…
The document presents a fixed-income pricing exercise: infer spot rates for successive maturities from the prices of Treasury bills and coupon bonds. The quoted securities include two bills and two bonds that pay coupons every six months. The task is to…
The document diagnoses why a QuantLib calculation of the present value of irregular cash flows returns zero. The cash flows and flat discount curve are constructed for a historical date, but QuantLib’s evaluation date defaults to the current date. Since all…
The document discusses the standardized initial margin formula for bilateral trades under the cited Basel Committee framework. Net margin is calculated as gross margin multiplied by a factor that combines a fixed base component with a component scaled by the…
The document explains that EONIA capitalisé jour is a daily compounded total return measure for overnight euro money market lending. An investor earns the overnight rate for one day and reinvests that interest at the same rate, so the index reflects…
The document explains how premium payments on a collateralized debt obligation tranche depend on remaining tranche notional and the basket’s outstanding notional. It defines cumulative portfolio loss and the portion allocated to a tranche between attachment…
The document clarifies that describing net present value as biased toward long-lived projects is not a claim about statistical bias. Rather, NPV and internal rate of return can rank the same projects differently because they measure value in different ways.…
The document explains how to simulate a Vasicek short rate at a future time without generating every intermediate value. Starting from the model’s mean-reverting stochastic differential equation, it applies an integrating factor and integrates over the full…
The question asks how to measure asymmetric responses between two related series, using equity returns and inversely related Treasury yields as an example. The responses suggest rolling historical beta, computed from recent log returns, as a way to track how…
The document clarifies the distinction between independence across Monte Carlo trials and dependence among variables within a trial. In the example, each of 1,000 simulation draws contains 100 credit-related components. The draws can be independent of one…
The note explains why a positive CDS–asset swap (ASW) basis does not automatically create an arbitrage. In its France Telecom example, the trader shorts the bond through a reverse repo, enters the short asset swap position, and sells CDS protection. The…
The document discusses a time series of implied repo for the cheapest-to-deliver bond in a Treasury futures contract. The author finds that implied repo tracks SOFR reasonably well but has sharp spikes, especially near the end of the delivery month, and asks…
The document explains why parallel-shift DV01 alone cannot describe a steepener, flattener, or butterfly position. It proposes calculating each instrument or portfolio’s sensitivity to fixed tenor buckets by shifting one market-observable rate at a time,…
The document poses a parameter-recovery problem in an arbitrage-free Nelson–Siegel term-structure model. A known integrated covariance matrix is expressed as an integral involving a matrix exponential, the state-dynamics matrix, and an unknown volatility…
The exchange asks whether option-adjusted spread (OAS) on mortgage-backed securities can be interpreted as a default or prepayment hazard. One answer rejects those interpretations when projected cash flows have already been adjusted by credit and prepayment…
This exchange recommends The Rise of Carry to readers seeking an account of how markets and economies changed over roughly two decades, including central-bank policy, quantitative easing, low yields, and stimulus. The recommendation frames the book as a…
This example shows how to inspect payment dates and amounts for a fixed-rate bond built in QuantLib. It creates a monthly schedule, adds a fixed-rate coupon leg and a maturity redemption, and reads each cash flow from the resulting bond. The displayed first…
The document describes a calibration problem in a Libor Market Model. The author simulates forward-rate paths with Euler steps, computes swaption rates, and aims to calibrate correlations among the Brownian motions. They report that subtracting a term…
The document addresses whether QuantLib’s Hull–White tree engine for callable fixed-rate bonds can value an otherwise plain bond, so the callable bond’s option value can be inferred by comparing the two prices. The answer says the engine cannot be used…