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 how to convert a U.S. Treasury quote written in thirty-seconds into a decimal price. For a quote with a whole-number price followed by a dash and a fractional component, divide that component by 32 and add the result to the whole-number…
The document explains an approach to valuing Australian dollar floating-rate notes whose coupons combine a fixed margin with three-month BBSW. To estimate future coupon cash flows, it proposes using forward rates inferred from the Australian government bond…
The document asks how many time levels to use when valuing a European call on a zero-coupon bond in a Black-Derman-Toy interest-rate lattice. It frames the choice as a balance: a coarse lattice may lack precision, while a fine lattice increases computational…
The document asks whether a two-year market-linked certificate of deposit offers an arbitrage opportunity. Its payoff combines a guaranteed principal with a stated interest rate and a fraction of the gain in a non-dividend-paying stock. The question supplies…
The document discusses accrued interest and floating-rate fixings in Monte Carlo CVA/DVA calculations for interest rate derivatives under a one-factor Hull–White short-rate model. One response addresses a fixing date that falls between adjacent simulation…
The document explains why a tenor basis swap spread may be negative when comparing a shorter rate tenor with a three-month reference, and positive when comparing a longer tenor. One explanation frames the spread as an adjustment to the three-month leg:…
The document explains the sponsor’s role in a collateralized debt obligation and why a CDO needs an equity tranche. A sponsor or collateral manager acquires and manages the loans or other assets that generate the cash flows used to pay investors. In a CDO…
The document illustrates why buy-side firms and corporate issuers may use complex derivatives for both investment views and risk management. One example is a structured note whose coupon depends on the relative performance of two indices, purchased because…
The document explains why a survival curve does not make CDS market quotes redundant. Survival probabilities and hazard rates are not directly observable, while market-standard CDS quotes are. A curve is therefore calibrated by deriving risk-neutral default…
The document presents an argument that Basel III can weaken credit-market price discovery by making bank balance-sheet capacity more costly and increasing the capital burden of private credit risk. Banks may therefore be less willing to hold and trade credit…
The document examines how to reconcile zero-coupon bond prices from the Vasicek model under the risk-neutral measure with prices computed using a state price deflator under the real-world measure. It sets out separate short-rate dynamics under the two…
The document distinguishes a locally known risk-free return from uncertainty about future short rates. If the rate is constant, it is still a random variable in a formal model, with all probability concentrated at that fixed value. If it changes over time,…
The document explains how to calculate duration and convexity for irregular cash flows in QuantLib, either by constructing a bond or by calling the CashFlows functions directly. The key syntax is to pass an InterestRate object and an…
The document asks why an asset price divided by a reference asset, or numeraire, is a martingale under the probability measure associated with that numeraire. It gives the example of a forward price divided by a zero-coupon bond price under the bond measure.…
The document explains how modified duration can fail to increase monotonically with maturity for a discount bond. In the table discussed, duration for the lowest coupon rises through the shorter maturities but is lower at the longest maturity than at the…
The author describes a rates-pricing problem in which a multi-factor short-rate model for SOFR or ESTR, calibrated to swaption volatility, must also price exotic instruments linked to EURIBOR. The products include callable bonds, range accruals, CMS spread…
The document clarifies the meaning of G-spread for a callable bond as displayed on Bloomberg’s Yield and Spread screen. The quoted G-spread is based on the bond’s yield to the selected workout date, which may be a call date. Users can instead view yield to…
The document poses a fixed-income question about applying Itô’s lemma to a bond price defined as the integral of discounted cash flows under a yield. It first evaluates the integral as the reciprocal of the yield, then assumes the yield follows a stochastic…
The document asks why a forward rate agreement settlement is discounted at the start of its underlying interest period, while a Eurodollar futures payment is described without that discount. The question frames the issue from a borrower’s perspective and…
The document explains how to calculate level monthly payments on a mortgage when the interest rate changes over time. For a constant periodic rate, the payment can be found from the standard amortization formula or by setting up period-by-period interest and…
The document describes troubleshooting a Chilean swap curve built in QuantLib from deposit and swap quotes. The accepted explanation attributes much of the difference from Bloomberg zero rates to the output-rate convention: the code requests simple…
Yield to maturity is the internal rate of return on the bond’s purchase outlay and its future coupon and principal payments. For bonds quoted clean, the cash paid at settlement includes both the quoted price and accrued interest, so the yield calculation…
This note distinguishes a five-year breakeven inflation measure from a five-year inflation forward rate that starts five years in the future. Breakeven inflation is described as the difference between nominal Treasury and inflation-protected Treasury yields…
This document describes a question about valuing a dated leg of cash flows using a zero-coupon yield curve in QuantLib. The curve is built from supplied dates and rates with linear interpolation, annual compounding, and an Actual/Actual ISDA day-count…