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.
10,263 documents
The document considers how to calculate a mid implied volatility from bid and ask implied volatilities without choosing a pricing model. It concludes that averaging the two volatilities is the only model-free approach. The explanation maps volatility to a…
The document asks whether currency forwards that satisfy SABR dynamics individually will retain that form when combined through an FX triangle. Treating the cross rate as the product of two diffusion processes, the answer derives restrictions from matching…
The document asks how to interpret a return adjustment formula used to determine the market risk measure class for Category 3 PRIIP products under European regulation. The specific uncertainty concerns the risk-neutral and measured expected-return terms, as…
The document lists SOFR swap market tickers and their associated maturities, from short weekly and monthly tenors through long-dated swaps. It frames the list as a starting point for building a SOFR discounting curve comparable to those produced by Bloomberg…
The document maps common financial modeling tasks to Python's scientific and finance ecosystem for someone moving from Matlab. It groups tools by purpose: portfolio optimization and risk analytics, instrument pricing, time series analysis, technical…
For hard-currency credit default swaps, the response says the pricing calculations are the same across corporate, sovereign, agency, and municipal reference entities. Recovery assumptions should follow market conventions, which can vary by issuer type and…
The document distinguishes calculating an inflation-linked bond’s real yield from estimating its projected nominal yield. For real yield, use the bond’s real coupon and price in a standard bond-yield calculation, rather than adjusting a nominal bond’s coupon…
The document discusses estimating default probability with the Merton structural credit model from monthly equity returns, a risk-free rate, equity value, and debt face value. It outlines a workflow that converts prices to log returns, estimates return…
The document proposes a way to hedge the convexity of long-dated fixed cash flows, using a long-maturity swap as the example. The theoretical construction is to sell at-the-money payer and receiver swaptions with very short expiries, sized according to the…
The document explains why greater bond convexity is not automatically better when comparing portfolios with equal value and duration. Convexity contributes a positive second-order price effect for yield changes in either direction, but this comparison omits…
The document asks how interest rate caps and floors differ in purpose from forward rate agreements (FRAs). It notes that both can provide exposure to future interest rates, making their functions seem similar, and focuses on when their payments occur. The…
The document investigates why an American call’s market ask price cannot be reconciled with an implied volatility calculation using RQuantLib, while Yahoo Finance reports a volatility estimate. The author compares the market quote with model prices and…
The document explains swimming delta as an option’s total sensitivity to the underlying when implied volatility changes with the underlying price. Standard Black–Scholes delta is a partial derivative that holds volatility constant. Under a skew-aware view, a…
The document raises a question about measuring the cost of a currency hedge or short position using an FX forward. It compares the forward-to-spot percentage change for EUR/USD with a quoted estimate of the three-month cost of being long euros and short…
The explanation connects currency basis swap (CBS) rates to FX forward pricing in the Garman–Kohlhagen currency option model. A forward rate can be taken directly from the FX forward market or derived from spot and the two currencies’ interest rates using…
The document defines a European barrier call whose payoff depends on the asset finishing above the strike and staying above a lower barrier at specified observation times. It asks how to estimate its discounted risk-neutral value by Monte Carlo simulation…
The explanation describes how an imbalance in client demand can affect swap rates through the inventory of dealers and issuers. A dealer may temporarily absorb opposing trades, much as a market maker buffers buy and sell orders. If client positions offset…
The document explains why the accrual factor appears when normal swap rate volatility and correlation are mapped into a lognormal volatility parameter in a one-factor CMS model. Define the transformed rate as one plus the accrual factor times the swap rate.…
The document clarifies the meaning of the quanto factor in a discounted valuation expression for a forward payoff converted into another currency. The factor is a fixed exchange rate agreed in advance, rather than an exponential adjustment based on…
The document frames a question about whether VIX is a martingale when the S&P 500 follows a Gaussian diffusion. It defines squared VIX for a fixed tenor as the risk-neutral expectation of average integrated variance over the tenor. It then applies the…
The response offers an intuition for why at-the-money implied volatility can act like an average volatility, particularly when used in quanto option pricing. It describes a result in which squared implied volatility is represented as a time average of…
The document gives examples of negative interest rates and explains how they can appear in forward markets. A negatively sloped yield curve can imply a negative forward rate; the responses mention an inverted US term structure and Treasury bills trading at…
The document raises a conceptual question about Treasury bond futures basis net of carry and delivery optionality. It asks whether the value of choosing a different deliverable bond—potentially favored by conversion factor differences—would be reflected in…
The author compares a personal implementation of the Kou double-exponential jump-diffusion model with published European option prices. The code aims to price vanilla calls by combining Poisson-weighted jump contributions, normal distribution terms, and…