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 asks which date convention to use when discounting bond cash flows whose interest accrual date and payment date differ, such as when a scheduled date falls on a holiday or payment is contractually delayed. It contrasts the date when an amount is…
The document asks how to infer a fair level for a 3s1s single-currency basis swap from one-month and three-month LIBOR and OIS levels, including how to hedge stub exposure when LIBOR is not directly tradable. The answer cautions that the 3s1s basis does not…
The document asks whether futures on the same bond or equity index have different risk profiles when they mature on different dates. The answer says maturity effects depend on the underlying and the length of the available futures curve. For equity index and…
The document explains how to interpret corporate bond prices when calculating periodic returns. Coupon bonds are commonly quoted at a clean price, which excludes accrued coupon interest. Adding accrued interest gives the dirty price paid at settlement or…
The document examines how to interpret a swap zero rate when comparing it with rates implied by a strip of short-term interest-rate futures. It cites a textbook example that compounds four quarterly futures-implied forward rates into a cumulative rate, then…
The document poses a fixed-rate payer’s question about valuing an interest rate swap position with one year of duration. It asks whether a fall in the quoted swap rate from 15% to 14% means the position earns a 1% return, and whether a cumulative return…
The document explains what a zero floor on interest paid on cash collateral means in a derivative collateral agreement. Such agreements specify a reference rate for the collateral currency; the answer gives Fed Funds for US dollar collateral and Eonia for…
The document asks how to obtain market quotes for CME-cleared SOFR swaps when available Bloomberg SOFR swap rates represent LCH-cleared swaps. The proposed construction is to combine the LCH swap rate with the LCH-CME basis, while the question asks whether…
The document describes an attempt to reproduce John Hussman’s recession warning criteria using public US economic and market data. The proposed signal combines widening credit spreads, a six-month decline in the S&P 500, weak or moderating ISM purchasing…
The answer explains how a zero-coupon bond discount factor relates to a sequence of forward rates. Its replication argument describes rolling an investment through consecutive periods, using each period's forward rate as the rate available today for that…
The document explains how to estimate a credit index’s market beta when the index’s spread sensitivity, expressed as CD01, varies over time. It starts from a linear relationship between spread returns and market returns. If index returns scale with spread…
The document asks how to price options on one-month and three-month SOFR futures when the futures themselves are settled daily. It reasons that daily settlement makes a futures price a martingale under the risk-neutral measure because gains and losses are…
The document derives a simplified fair spread for a credit default swap using a constant hazard rate, constant recovery, and constant discount rate. It approximates scheduled premium payments with a continuous premium leg and assumes protection is paid at…
The document examines whether the short rate derived in a Heath-Jarrow-Morton framework is Markovian. It gives an expression for the short rate in terms of the initial forward curve, a volatility-dependent drift integral, and a stochastic integral. It then…
The document explains how to obtain a LIBOR rate from a simulated short-rate model. Such models specify zero-coupon bond prices as functions of the current short rate; in an affine model, the bond price has an exponential form involving time-dependent…
The document addresses why the market price of risk in a short-rate model can be defined using bond dynamics yet remain independent of bond maturity. A bond price is treated as a function of the short rate; applying Itô’s lemma gives its drift and diffusion.…
The document derives how adjacent three-month forward rates can be compounded to calculate an implied rate spanning a six-month accrual period. It expresses each forward rate through zero-coupon bond prices, combines the discount-factor ratios, and…
The document asks how put-call parity applies to American options on assets that make no distributions, including options on Treasury note futures. It gives the standard inequality for the difference between American call and put prices: that difference is…
The note derives a simplified bond valuation under a flat risk-free rate and a constant default intensity. It links the credit spread to default intensity through the assumed recovery rate: intensity equals spread divided by one minus recovery. The dirty…
The note frames pension risk as uncertainty in capital, defined by the difference between assets and liabilities. A long-horizon VaR estimate must account for the fact that these sides evolve differently: assets are often fund investments that managers…
The note explains that a bondholder report’s “position” may describe the bond’s original face amount rather than its current market value or remaining principal. Its example distinguishes a bond’s stated face amount from principal left after amortization: a…
The document introduces specialised lending as corporate lending repaid primarily from income produced by a financed asset. Its example is a mall held through a special-purpose vehicle, where rental income services the debt. It asks whether these…
The document considers which overnight deposit rate to use at the short end when building a Japanese yen overnight indexed swap discount curve: an offshore JPY deposit rate or an onshore Bank of Japan deposit rate. Its central principle is to select the rate…
The document distinguishes conventional USD overnight index swaps from related basis swaps and compares swaps referencing the Effective Federal Funds Rate (EFFR) and SOFR. A classical OIS exchanges a fixed rate for a floating rate built from daily overnight…