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 addresses whether differentiating a Black-style swaption valuation while treating the swap annuity as independent of the swap rate gives meaningful Greeks. Its answer points to the swaption, or annuity, measure: pricing is expressed using a…
The document discusses fitting Nelson–Siegel and Nelson–Siegel–Svensson yield curves by minimizing squared differences between observed and fitted yields. It describes the decay parameters as positive, while the beta coefficients are generally unrestricted…
The document identifies Reuters’ one-year default probability and credit ratings as outputs of its proprietary StarMine Structural/SmartRatios Credit Risk model. It explains that the model combines financial ratios and other measures associated with credit…
The document shows how to obtain the fair fixed rate for a forward-starting interest rate swap using QuantLib. It begins with a valuation date, a flat yield curve, and a six-month Euribor index. Rather than manually constructing fixed and floating schedules…
The document addresses how to estimate a cross currency basis for EUR/USD and explains why comparing forward-rate differentials directly can produce implausible results at some tenors. One answer gives an illustrative one-year calculation: infer a yield from…
The note explains how the T forward measure arises when a zero coupon bond maturing at T replaces the risk free account as numeraire. It corrects a suspected expression in the question and identifies the density that changes probability measures: the bond…
The document explains how to obtain discount factors for cash flows in one currency collateralized in another. It gives a relationship linking the cross-currency collateral discount curve to FX spot and forward rates and the discount curve for the collateral…
The document describes how to revalue a coupon bond each week using a small set of zero-rate observations. It expresses present value as the sum of future coupon and principal cash flows, each multiplied by a discount factor. Under the stated assumption of…
The document explains why 30-year Treasury principal STRIPS and coupon STRIPS with the same maturity may have different prices. The main explanation is that supply and demand differ between the two cash flows, and their financing rates can differ. The…
The document defines bond DV01 as the negative derivative of price with respect to yield and derives it by differentiating the discounted-cash-flow formula. It compares this theoretical sensitivity with finite-difference bump-and-reprice calculations used in…
The document explains how to infer the interest rate on a loan from its principal, fixed monthly payments, and term. It models the repayments as an ordinary annuity: the loan amount equals the present value of all scheduled payments discounted at the monthly…
The document asks how to determine the fixing day associated with a February USD swap date near an IMM date when a US holiday falls on the preceding day but London is open. The question raises whether the calendar should be checked in London first and then…
The document describes a backtesting problem in which a model for loan non-performing-loan rates assumes observations have a stable mean, but the rates move through trends or cycles. In that setting, a large sample does not necessarily bring the observed…
The document compares a standard fixed-for-fixed cross-currency swap with front and back notional exchanges against a version that exchanges notionals only at the start. Its central pricing observation is that the standard swap minus the version without the…
The document explains how an option’s sensitivity to interest rates changes as it moves further in or out of the money. For calls, it separates the effect of rates on the risk-neutral drift of the underlying from the effect of discounting the payoff. The…
The document explains why a bond’s quoted price, notional amount, and par value should not be treated as interchangeable. A quoted price of 100 is generally expressed per 100 units of principal; institutional trade conventions can make a standard quote…
The document explains how to find the par fixed rate for an interest rate swap whose floating leg pays Libor plus a constant spread when discounting uses a separate risk-free curve. It sets the present value of fixed payments equal to the discounted value of…
The discussion outlines ways to reduce interest rate exposure on a long bond position while setting credit risk aside. A bondholder can enter an interest rate swap to pay fixed and receive floating; the swap’s cash flows can offset much of the bond’s fixed…
This explanation distinguishes the Federal Reserve’s administered interest rate on reserve balances (IORB) from the effective federal funds rate (EFFR), a rate observed in overnight lending markets. IORB is paid on reserve balances held by eligible…
This document addresses a Python interface issue encountered when calculating the z-spread of a fixed-rate corporate bond against a zero curve built from swap rates. The supplied example constructs a curve, bond schedule, and bond, then passes them to…
The document explains why a cross-currency basis, such as the cited euro–dollar spread, can persist even when interest rate parity suggests an arbitrage opportunity. One source is one-sided hedging demand: companies borrowing in one currency may swap their…
The document derives the horizon at which a bond’s future value is locally insensitive to a small yield change. It writes future value as the sum of each cash flow compounded or discounted to the investment horizon, then differentiates with respect to yield.…
The document asks how to estimate the change in interest expense when borrowing rates rise for a borrower with both fixed-rate and floating-rate liabilities. The proposed calculation isolates the floating-rate debt and multiplies its balance by a…
The yield difference between a nominal Treasury and a comparable TIPS is commonly called breakeven inflation, calculated as the nominal yield minus the TIPS yield. It approximates the inflation compensation embedded in nominal bonds: if realized inflation…