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 considers the limiting yield and price of a zero-coupon bond as maturity tends to infinity. For a flat, constant rate, the discount price tends to zero when the rate is positive, making the limiting yield itself less important to the price…
The document explains how to obtain strike-dependent volatility inputs for calibrating a SABR-LMM interest-rate model when at-the-money swaption volatilities are the only quotes a researcher has found. It points to Bloomberg and similar market-data services…
This document proposes calculating a Category C margin of conservatism for probability of default by iterating between the conservative PD and the CRR asset correlation. Because the regulatory correlation function decreases as PD rises, the author argues…
The document examines why a risk-aversion estimate in a simple Black–Litterman example does not reproduce the returns expected for each asset. It explains that the estimate derived from a chosen portfolio’s excess return and variance reflects that…
The document explains how a swap’s DV01 changes when interest rates move, focusing on gamma as the rate sensitivity of delta. One answer derives a rough approximation in a simplified single-curve setting: swap delta is about the negative of maturity, while…
The document asks whether a forward LIBOR market model can describe zero-coupon bond and yield-curve evolution. It starts from a simple-period forward-rate relation to adjacent bond prices, then expresses a longer-maturity bond price as a product of…
The document collects introductory questions about repo markets and Federal Reserve operations. It asks how open market activity and overnight or term operations affect funding, whether these actions amount to purchases of Treasury debt, how hedge funds…
The document asks whether yield to maturity minus borrowing cost is a reasonable estimate of return for a leveraged bond position that will be sold before maturity. The proposed quote uses the bond’s starting YTM and a fixed annualized funding rate, with the…
The document discusses terminology for higher-order terms in a Taylor approximation of bond price changes as interest rates move. It relates the first and second derivatives of price with respect to rates to delta and gamma, respectively, and gives “speed”…
For a bond denominated in US dollars, the document generally points to the USD yield curve, such as US Treasury yields, as the benchmark rather than Germany’s euro yield curve. The bond’s currency determines the relevant risk-free reference curve; a credit…
The document questions whether a bond’s carry, estimated from changes in dirty price and yield, can be used to infer its implied repo rate. The response instead defines implied repo through the cash-and-carry trade: buy the cheapest-to-deliver bond and sell…
The document raises a pricing question about USDINR swaps: Indian banks are described as using a Modified MIFOR curve, based on SOFR and forwards, both to project INR cashflows and to discount them. International banks are described as using separate curves…
The document studies the time-t price of a claim paying the ratio of a stock price at a later date to its price at an earlier date, with payment at the later date. The question applies the forward measure associated with the payment date and initially…
The document explains why valuation may require different zero curves within one currency market. Its central rule is to choose discount rates that match both the cash flow’s timing and the risks of the entity making the payment. It illustrates this with a…
The document asks how to build a spot yield curve for BBB corporate bonds from TRACE transaction data. It raises practical choices such as how many bonds and trading days to include, and whether fitting observed yields to maturity with Nelson–Siegel produces…
The document asks about positivity of the Cox–Ingersoll–Ross square-root diffusion and the parameter restriction often used to ensure the process stays strictly positive. It introduces a construction in which an Ornstein–Uhlenbeck process is squared,…
The document describes how to maintain a bond price or return index when eligible bonds mature, lose qualification, or are newly issued. It recommends a rule-based process that selects the eligible basket at each month end using stated criteria such as…
The document addresses where to obtain zero-coupon bond yield curves and whether they can be derived from coupon-bond yields. Its answer points to Federal Reserve yield curve data that includes par, zero, and forward curves. The curves are estimated using a…
The document asks how to represent a snowball coupon that accumulates a prior coupon plus a floor-based payoff in QuantLib. The response explains the state dependence implied by that formula: each period's coupon depends on the previous period's coupon, so…
The document considers how to represent transaction costs in a daily strategy that reallocates between a theoretical S&P 500 total-return ETF and a mutual fund earning the three-month Treasury bill rate. The strategy may also borrow at the risk-free rate to…
The document outlines practical ways to extend a corporate bond curve beyond its observed maturities. One approach is to compare the corporate curve with a sovereign curve, calculate the credit spread at each available tenor, extrapolate the spread across…
The document presents a coupon bond composed of deterministic cash flows, with each payment discounted using zero-coupon bond prices from the Vasicek short-rate model. For a European call on the coupon bond, the answer identifies the argument as Jamshidian’s…
The document discusses how to construct the short end of a six-month IBOR forward curve after a separate discount curve has been bootstrapped. Its central concern is consistency: ordinary deposits may not represent the same tenor as the six-month IBOR curve,…
The document asks whether a Markowitz-style portfolio risk calculation can use each bond’s PV01, or dollar value of a basis point, in place of return volatility. It also asks whether to use raw PV01 exposures or normalized PV01 weights, noting that weights…