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 explains the roles of the two swap indices supplied to QuantLib’s swaption volatility cube. The base swap index defines the underlying swap conventions for the cube’s volatility layers, which span option expiries, swap tenors, and strike…
The explanation relates a simple forward rate for borrowing or lending over a finite accrual period to the ratio of two discount bond prices. For a period of length τ starting at maturity T, the rate is the bond-price ratio’s excess over one, divided by τ.…
The document clarifies the scaling and conventions behind a plain-vanilla interest rate swap’s sensitivity to its fixed rate. If the derivative of swap value is taken with respect to a rate expressed as a decimal, the value change for a one-basis-point move…
The document gives the time-dependent drift function used in the Hull–White short-rate model to fit an initial discount curve. It expresses the drift in terms of the curve’s instantaneous forward rate, its time derivative, and the model’s mean-reversion and…
The document describes a Libor Market Model calibration problem. Forward Libor rates are simulated under the spot measure with a maturity-dependent volatility function that combines a decaying exponential term and a constant component. Correlations between…
The document presents a converse result related to Cheyette’s approach to Markovian interest-rate models. It asks when forward-rate dynamics can be represented by a low-dimensional Markov process and gives a proof argument connecting that property to a…
The document considers what a continuously compounded rate represents and why it is used in finance. Its main explanation is practical and mathematical: representing growth with a continuous rate makes calculations easier when models use very many time…
The document asks whether a parallel change in spot rates changes a bond portfolio’s internal rate of return in the same direction and by the same amount. It illustrates the question with one-year and two-year zero-coupon bonds, computes their present…
This note explains why Good Friday treatment in the US Government Securities business calendar can affect SOFR fixings and interest-rate derivative schedules. The calendar follows SIFMA recommendations for trading in US government securities, so whether SOFR…
The document sets up a way to infer discount factors from the prices and cash flows of coupon-paying bonds when zero-coupon bonds are unavailable. Each bond price is expressed as the sum of its coupon and principal payments multiplied by discount factors for…
The document asks how to calculate the DV01 of one-year and ten-year zero-coupon bonds, each with one million in principal, when the entire interest-rate curve is zero. It reasons that the bond price equals principal at a zero discount rate and that duration…
The document asks how to apply a recovery rate when a coupon bond defaults before its first coupon payment. The answers describe a common developed-market convention: unpaid accrued coupon is generally lost, while the remaining principal becomes due…
The document explains that Nelson–Siegel curve fitting and stochastic short-rate models serve related but distinct purposes. Nelson–Siegel is a parsimonious way to fit the observed market term structure, expressing yields or instantaneous forward rates…
The document explains how to estimate a Treasury bond’s total return from yield changes. For a known bond, calculate return from its starting and ending prices, accrued interest, and any coupon payments. If bond details are unavailable, approximate return…
The document describes a yield curve steepening or flattening position built from two year and ten year Treasury futures. The proposed steepener buys two shorter maturity contracts and sells one longer maturity contract, with the reverse position used for…
The question concerns estimating a later floating-rate swap payment when the next reset payment is already known but a subsequent rate has not yet been set. The response points to modeling forward Libor rates with a Libor Market Model and simulating their…
The document explains how to derive the fair fixed coupon, or par rate, for a plain vanilla interest rate swap that begins at zero value. It separates the swap into fixed and floating legs, discounts each scheduled cash flow using discount factors, and…
The note interprets PRIIPs guidance on using principal component analysis to simulate interest rate curves. The key distinction is between observing one rate repeatedly over time and modeling rates at multiple points along the yield curve. PCA is intended to…
The document explains one way to create a yield curve in QuantLib when the desired curve is described by Nelson–Siegel parameters. Rather than supplying a time function directly, the example constructs fixed-rate bond helpers from market bond prices,…
The document asks how Bloomberg derives daily overnight index swap reset rates for a fixed-for-floating swap. Its answer points users to the curve detail screens in Bloomberg’s swap pricing workflow, where they can inspect the instruments used to build the…
The document discusses how a quantitative firm might estimate frequently updated reference prices for illiquid corporate bonds. One proposed input is dealers’ runs: messages sent to institutional clients that list bond markets. These messages can be…
The document asks how to estimate portfolio risk across correlated interest-rate tenors when the factor series can cross zero. The questioner uses absolute daily changes rather than percentage returns, forms a covariance matrix, and asks how to interpret…
The document asks how to translate a quoted effective federal funds rate into a daily return when estimating the growth of a cash deposit. It contrasts treating a 13% annual rate as an effective annual return, converted to an equivalent daily compound rate,…
The document compares two ways to value a foreign-currency corporate bond for a domestic investor: discount the bond’s local-currency cash flows and convert the value at spot, or convert each cash flow with FX forwards and discount in the domestic currency.…