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
Nominal government bond pricing conventions vary across the US, UK, and euro area. The document identifies the Street convention in the US, the DMO convention in the UK, and the ICMA convention in the euro area, while noting that Germany also commonly uses…
This exchange explains how exposure at default can be expressed using a drawn balance, an undrawn facility amount, and a credit conversion factor. The question proposes adding the drawn amount to a fraction of the undrawn amount, illustrated with an…
The document considers a zero-coupon loan with an annual stated interest rate, an ACT/360 day-count basis, and a maturity that falls between annual compounding dates. It asks whether to apply simple interest to the stub period after the first anniversary or…
The document asks how to approximate the difference between a SOFR futures rate and the corresponding forward term rate in a continuous-time affine term-structure model. It writes the bond price using deterministic functions of maturity and the short rate,…
The document answers a question about measuring the DV01 of a European interest rate swap when the yield curve is not flat. The proposed method is to value the swap using the current curve, bump the curve by one basis point, revalue it, and take the…
The document addresses how to estimate future three-month USD LIBOR for budgeting floating-rate cash flows. It frames the task as yield curve estimation rather than a search for a uniquely correct forecast. One proposed approach is a yield curve model such…
The document explains why faster mortgage prepayments tend to raise yield to maturity for a bond bought below face value, but lower yield for one bought above face value. It uses fixed coupon bond examples with different repayment dates to show how the gain…
The document explains why legal entity identifiers, Bloomberg tickers, and security identifiers do not generally map one to one. An LEI identifies an entity, while instruments such as bonds issued by that entity have their own identifiers. A single entity…
The document explains the intuition behind a claim that a par bond has zero key rate duration at curve points other than its maturity-matched rate. The key assumption is that a shocked par yield curve remains a par curve. Under that convention, a shift at a…
The document compares guidance on how banks should represent non-performing exposures (NPEs) in interest rate risk in the banking book. EBA guidance says to treat exposures net of provisions as interest-sensitive instruments, using expected cash flows and…
The document surveys modeling concerns when interest rates can fall below zero, focusing on products whose pricing frameworks assume lognormal rates. Black-style option formulas and some volatility conventions become unsuitable when rates may be negative.…
The document resolves a terminology question about Japan’s overnight reference rate. The question contrasts the Bank of Japan’s use of TONA with the TONAR name found in another reference source, and asks whether they identify distinct rates. The accepted…
The document examines how to derive the variance of the short rate in the Cox–Ingersoll–Ross model, whose diffusion volatility depends on the square root of the rate. One proposed derivation transforms the rate, applies Itô’s lemma to its square, and then…
The document explains how to find the fixed coupon rate that makes a coupon bond's value at its starting date equal its face value. Under evenly spaced payment dates, each coupon is the rate multiplied by the accrual interval and face value. The bond price…
The document asks how to roughly estimate term premia at the long end of a bond curve, including for a market such as Brazil. It presents two approaches: regress the ACM ten-year term premium on several US yields, or use differences between distant forward…
The document explains why yield-curve construction often interpolates discount or forward rates rather than observed par swap rates. Its central point is that forward rates are more differentiated quantities: par rates aggregate information across periods,…
The document compares SOFR and three-month LIBOR as indicators of credit risk. SOFR is based on secured overnight borrowing, while LIBOR included unsecured bank credit and term liquidity premia. Futures on both rates offer exposure to expected future rates,…
The discussion considers default counts in a loan portfolio when each loan has a specified marginal default probability and defaults may share a common latent macro factor. One answer standardizes a shared-factor Gaussian construction to preserve the…
The document asks which securities offer options expirations more often than monthly, motivated by a strategy of buying near-the-money calls when little time value remains close to expiration. It notes that many U.S. stock options expire on the third Friday…
The document distinguishes conventional interest-rate policy from quantitative easing. A central bank typically sets a short-term policy or interbank rate, while QE involves buying assets such as government bonds. When short rates are already near zero,…
The document asks why a single-look CMS cap and a CMS floor with the same expiry and at-the-money strike can show different vega exposures. The observation comes from pricing a ten-year-expiry CMS30 cap and comparing it with the corresponding floor. The…
This discussion explains why two present-value calculations for a semiannual coupon bond can differ: the cash-flow dates and the rate's compounding convention must use consistent time units. It contrasts discounting each half-year payment by successive…
The document explains a first-pass way to approximate a payer swaption’s profit and loss for a move in the underlying swap rate: use a Taylor expansion. Delta represents sensitivity to a parallel shift in the swap curve, while gamma captures convexity. This…
The document asks whether a two-factor Hull–White short-rate model, also called G2++, can represent swaption volatility smiles or skews, and whether fitting it to out-of-the-money swaptions would help. The answer points to local- and stochastic-volatility…