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 note asks why a paper might associate no-arbitrage with equal Sharpe ratios across bonds. One response derives a condition in a one-factor short-rate setting: represent bonds of different maturities as functions of the short rate, apply Itô’s formula to…
The document defines an index-linked certificate of deposit (CD) return multiplier as the CD’s return per invested dollar relative to the underlying index’s return per invested dollar. It asks whether the multiplier is below one for an at-the-money index…
The document addresses how to define plain vanilla interest rate swaps in Bloomberg and obtain their curve sensitivities over time through Excel. The suggested workflow is to create and save swap deals in Bloomberg’s SWPM interface using its swap uploader,…
The document answers a question about the expression e^(at)r(t) in solving a Vasicek short-rate exercise. It identifies e^(at) as an integrating factor: multiplying the differential equation by this term transforms it into a form that is easier to integrate.…
The document explains a simplified way to infer counterparty default probability from credit default swap spreads for credit valuation adjustment. For a one-year exposure, it proposes choosing a loss given default assumption and dividing the CDS spread by…
This note discusses pricing an accreting swaption in the Libor Market Model when a closed-form solution is unavailable. One response says that when the fixed and floating legs accrue nominal in the same way, the Rebonato approximation for equivalent Black…
The document presents a derivation for a European option that expires at one date and gives the holder the right to enter a forward contract maturing later. It uses a zero-coupon bond as numeraire and assumes the forward price is lognormally distributed…
The document asks how to construct a one-week LIBOR curve when no commonly traded instruments are available to bootstrap it, and how to estimate the short first coupon of a forward-starting swap that references one-week LIBOR. The answer says a dedicated…
The document considers how to detect and smooth anomalous points in a monthly term curve using the current curve alongside the previous two months. The questioner identifies outliers by comparing first derivatives, while noting that ordinary spline or…
The document presents a Python implementation intended to bootstrap spot rates from a sequence of par bond yields. For each maturity, it discounts earlier coupon payments using already computed spot rates, subtracts those payments from the assumed face…
The document asks how to infer intermediate discount factors from sparse swap quotes, particularly when only the one-year and four-year rates are known. Its answer distinguishes between assuming swap rates interpolate linearly and assuming discount factors…
The document decodes abbreviations in a national statistics trade series label. BOP refers to balance of payments, WW to worldwide, and SA to seasonally adjusted. It explains that CP means current prices: values are reported at the prices prevailing in the…
A classic repurchase agreement is described as a collateralized borrowing: one party receives cash against a bond and later repays that cash plus repo interest to recover the bond. The example illustrates how the repurchase amount accrues using a…
The document presents a fixed-income curve-return model that combines the effects of yield changes at nine par-rate tenors with a convexity adjustment based on the average curve move. Key rate durations describe a bond’s sensitivity to changes at particular…
The document explains what happens when a QuantLib Euribor tenor index is constructed with a yield-curve handle. Euribor indexes represent interbank reference rates for specific maturities and can be used in instruments such as forward rate agreements,…
The document asks how to value a long-term coupon bond from a yield curve. The accepted answer explains that each coupon and the principal repayment should be discounted using the spot rate for its own payment date. It also notes that rates quoted in annual…
The document considers how to estimate interest rate risk when valuing bonds in a VaR simulation. It describes calculating the standard deviation of daily yield changes, then simulating rates with zero-drift Brownian motion and revaluing the bond. This can…
The document explains how to derive the forward rate for the period between two maturities from annual spot rates when rates compound semiannually. It gives a growth-factor relationship: growth to the longer maturity equals growth to the earlier maturity…
The document explains how a derivative’s discount curve can depend on which eligible collateral currency is cheapest for the posting party to deliver. Collateral earns its currency’s overnight rate; translating that rate into the derivative currency using…
This discussion asks how to interpolate discount factors between quoted dates and extrapolate beyond the last available point. The response warns that naive smooth interpolation can create implausible rates between curve nodes, and recommends choosing a…
This question concerns valuing a four-year coupon bond purchased at the start of its tenth quarter. The attempted calculation discounts only the remaining six quarterly payments, using a quarterly rate derived from the stated annual discount rate, but…
The document explains a source of error when estimating a bond's yield to maturity from a standard time-value-of-money calculation. The example uses a bond bought between coupon dates and compares a software result with a financial calculator. The key issue…
A bond does not have one uniquely defined price at a given moment: buyers generally pay the ask, while sellers receive the bid. A yield calculated from those different transaction prices can therefore differ, producing distinct yields for the bid and ask…
The document asks whether a yield curve has a day-count convention of its own, given that rates are often displayed without one. It distinguishes the curve from the cash-flow conventions used in a swap: the floating leg's payment calculations require a…