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 note clarifies two measures used in mortgage-backed security prepayment modeling. SMM, or single-month mortality, represents a monthly voluntary prepayment rate, while CPR, or conditional prepayment rate, expresses an annualized rate. Their relationship…
The discussion explains why net issuance of Ginnie Mae mortgage-backed securities weakened relative to government-sponsored-enterprise issuance during the 2020–2021 refinancing wave. It argues that pandemic-related economic stress affected Ginnie Mae…
The discussion distinguishes Australian interbank borrowing rates from benchmarks used more broadly in bond and interest-rate markets. It identifies Australian-dollar LIBOR as a rate cited for interbank lending in the answers, while naming the Bank Bill Swap…
The document asks how to estimate the carry from holding a long-duration bond denominated in a foreign currency. The proposed calculation combines the cost of borrowing cash, the forward points on exchanging dollars for local currency, and an adjustment for…
The document explains that a yield curve bootstrapped from overnight indexed swap quotes can provide discount factors and zero rates, so it can be used by a bond pricing engine. Converting forward rates to zero rates is not the central issue: QuantLib’s term…
The document presents a cash-flow valuation problem for a loan with an initial grace period, a period of fixed payments, and then an unknown regular payment. Monthly interest rates rise across the three years of the term. The task is to find the payment that…
The document discusses allocating a hypothetical interest rate swap portfolio’s profit and loss across principal components of curve movements. For a linear estimate, portfolio sensitivities are paired with rate changes; when changing basis, the sensitivity…
The discussion distinguishes IRR from a compound annual growth rate. IRR is the discount rate that makes the present value of a set of cash flows equal to the initial investment; it does not by itself describe the investor’s realized wealth growth. Treating…
The document explains how market-implied overnight rates around central-bank meetings can be inferred from federal funds futures or overnight index swaps. A futures contract reflects an average rate over its delivery month. If a meeting splits that month,…
The document describes a one-factor Hull–White calibration workflow based on a yield curve. Zero-coupon bond prices are derived from the curve, their logarithms are interpolated with cubic splines, and the instantaneous forward curve is computed from the…
The document contrasts bond portfolio immunization with cash-flow matching and speculative positions on large interest-rate moves. Cash-flow matching aims to align asset inflows with liability dates, while immunization relies on matching present values and…
The document shows how to estimate a three year Treasury note’s price per 100 of face value from its yield and assumed coupon. It treats the note as six semiannual coupon payments plus repayment of principal at maturity. Each cash flow is discounted at the…
The document addresses why a Chinese zero-coupon bond's quoted price may not rise toward face value as maturity approaches, and why a conventional compounded-yield calculation produces unusual results. The answer says this instrument uses a different…
The document challenges a perpetuity valuation that discounts equity cash flow using the levered cost of equity implied by the current market capitalization. It proposes recalculating the cost of equity using an unlevered rate and the debt-to-equity ratio…
The document addresses why standard vanilla swap valuation uses current forward rates for future floating coupons, even though a forward rate is not generally the expected future spot rate under every probability measure. It presents two explanations. One…
The document explains how to model a floating-rate swap when the rate reset or calculation frequency differs from the payment frequency, a setup that the standard VanillaSwap interface does not directly support. Its example is a leg that pays semiannually…
The document explains the carry on a long cash bond and short futures position through the relationship between implied repo and the bond’s actual repo financing cost. If the bond is cheapest to deliver and the net basis is zero, delivery leaves the investor…
The document explains two ways to aggregate default rates across a group of issuers. An issuer-weighted rate counts each issuer equally: the share of issuers that default. A debt-volume-weighted rate gives more influence to issuers with more debt…
The document explains why a rolling bond formed from successive zero-coupon bond investments can be used as a numéraire. It describes a self-financing strategy: invest wealth in a bond maturing at the next tenor date, reinvest the proceeds at maturity, and…
The document explains an error encountered when valuing a swap after a floating-rate coupon’s fixing date has passed. In the example, the valuation date follows the required Euribor three-month fixing date, so the coupon rate is historical and cannot be…
The discussion distinguishes the traditional LIBOR-based swap curve from the overnight indexed swap (OIS) curve. The accepted answer says the LIBOR-based curve is not risk-free, citing the financial crisis and the subsequent shift toward OIS discounting. OIS…
The document outlines a two-step approximation for reporting yield across a bond portfolio denominated in multiple currencies. First, to express a bond’s yield in another currency, it proposes matching the bond’s cash flows with one leg of a cross-currency…
The document explains how to calibrate a time-varying volatility term structure in the Hull–White interest-rate model to caplet prices. It proposes piecewise-constant volatility, with a time interval ending at each caplet expiry. Since each caplet’s…
The document explains ways to assess the cheapest-to-deliver bond in a Treasury futures contract, the chance that it changes, and the relative richness or cheapness of calendar spreads. One suggested CTD indicator is the deliverable with the largest gap…