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 why a floating-rate bond does not necessarily trade at par on a coupon reset date. In a simplified single-curve setting, when the bond has no credit spread and its coupons reset to the same rates used for discounting, the cash flows and…
The document explains how to construct a curve for valuing a USD interest rate swap whose floating leg references three-month LIBOR. It organizes market inputs by maturity: LIBOR spot rates at the short end, futures or forward rate agreements in the middle,…
The document investigates a small accrued-interest discrepancy when valuing a Canadian floating-rate note linked to CORRA in QuantLib. It describes a setup with an overnight index, a forecast curve, historical CORRA fixings, a spread, and quarterly coupon…
The document explains how to represent equities, foreign exchange forwards, and options in a variance-covariance VaR framework. Its central recommendation is to map each instrument to the underlying risk factors that drive its value rather than treating…
The document works through zero-coupon bond pricing in the Ho-Lee short-rate model, where the short rate has constant drift and volatility. It asks for the pricing partial differential equation, a bond-price formula obtained from the conditional expectation…
The document asks how cheapest-to-deliver collateral methodology handles agreements that permit collateral in multiple currencies. Its motivating concern is that choosing the most favorable collateral rate could cause discontinuities when the preferred rate…
The document asks whether a fixing date changes the value or interest-rate sensitivity of fixed-for-floating interest rate swaps and cross-currency swaps. The response says that a fixing does not directly change the floating leg’s price under the stated…
The document explains how to interpret a Treasury bond futures quote when the delivery date, accrued interest, and specific bond to be delivered are not yet known. It says the quoted futures price is grounded in the cheapest-to-deliver principle: among…
The document explains how an irregular first coupon period can cause a programmatically generated bond schedule to disagree with vendor calculations of accrued interest, clean and dirty prices, or duration. A schedule built backward from maturity may insert…
This note distinguishes quarterly swaps on regular calendar rolls from quarterly swaps on IMM dates. For a regular quarterly schedule, fixing and accrual start dates align as closely as possible with the recurring roll date, subject to holiday adjustment.…
The discussion considers how Monte Carlo simulation can value mortgage-backed securities when borrower prepayments make cash flows uncertain. It explains that the mortgage’s value at a modeled date depends on future interest-rate paths and borrower…
The document works through a Riccati differential equation for the coefficient in a short-rate model and compares an attempted derivation with a proposed closed-form expression. The approach shifts the unknown by a constant particular solution, then takes…
The document explains why a swap whose floating-rate payment timing differs from the standard reset-and-payment convention may need a convexity adjustment. A vanilla swap can be viewed as a sequence of forward rate agreements: forward rates from the zero…
The document asks why a security’s price can be expressed both as a risk-neutral expectation of discounted terminal value and as a T-forward-measure expectation scaled by the price of a zero-coupon bond. It then asks how the forward-price martingale relation…
The document examines pricing a zero-recovery risky zero-coupon bond by taking the expected discounted payoff conditional on survival to maturity. It presents a survival probability expressed through the integrated default intensity, then uses iterated…
The document explains why longer-term Treasury yields can decline even when the Federal Reserve raises its overnight policy rate. It distinguishes the federal funds rate, which applies to overnight lending, from yields on longer-maturity government debt.…
This exchange explains a common mistake in risk-neutral bond valuation: treating the money market account, or its reciprocal, as a martingale under the risk-neutral measure. The bond price is expressed as the conditional expectation of the accumulated…
The discussion clarifies a common payoff convention for an nth-to-default basket credit default swap. Under the convention described by the respondent, earlier defaults determine when the contract reaches its trigger but do not contribute their recoveries to…
The document addresses whether simple LIBOR quotations must be converted to compounded rates before bootstrapping a yield curve. The answer depends on how the curve is represented internally: if the chosen representation uses compounded rates, conversion is…
The document explains why risky bonds are measured for both interest rate duration and spread duration. Interest rate duration captures price sensitivity to changes in the risk free curve, while spread duration captures sensitivity to changes in the bond’s…
The document outlines conventions needed to derive coupon dates, cash flows, and accrued interest for U.S. Treasury securities. Coupon schedules can be found by starting at maturity and stepping backward through the semiannual payment dates. The final…
The discussion considers how mathematical finance fits alongside econometrics, corporate finance, and machine learning in asset management. It argues that the value of the subject depends on the instruments and tasks involved. Cash equities may require…
The note describes how to calculate an option-adjusted spread (OAS) for a mortgage-backed security using simulated interest-rate paths. Rather than rerunning the simulations for every OAS trial, generate the paths and associated cash flows once. For each…
The note explains how to estimate a bond futures contract’s DV01 from the DV01 of its cheapest-to-deliver (CTD) bond. It gives a conversion-factor adjustment and a small repo-related adjustment: when the net basis is assumed to be zero, the futures DV01 is…