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 outlines two approaches to translating a funding spread from one currency and floating-rate basis into another. One approach builds a curve-based pricing framework: collect cross-currency swap terms, determine collateralization and whether the…
The document examines whether bond duration is convex as interest rates change and shows that the answer depends on which quantity is called duration. For the unnormalized measure equal to the negative first derivative of bond present value, the discussion…
The document compares two ways to interpret the effective annual interest rate on a loan repaid through equal monthly payments. The questioner allocates each payment between principal and interest, divides the estimated monthly interest by the original loan…
The document evaluates a proposed objection to the Rational Expectations Hypothesis (REH), which treats implied forward rates as unbiased forecasts of future spot rates. The argument claims that forwards above spot rates on an upward-sloping curve, and below…
The document explains how risk-neutral pricing uses the bank account as numeraire: traded asset prices discounted by that account are martingales under the corresponding measure. A defaultable zero-coupon bond can therefore be valued by discounting its…
The document asks whether investors can obtain a company’s exact future debt payments, including both principal and interest. The response says public information can include issued debt and liabilities reported in the latest financial statements, but these…
The document asks how to estimate a company’s asset volatility from its observed equity value and stock volatility using the Merton structural credit model. In this framework, equity is treated as a call option on the firm’s assets, with promised debt…
This note explains how fixing dates relate to accrual periods in a vanilla interest rate swap. Under the EUR convention described, a fixing is observed two business days before the accrual period begins. Consequently, a swap starting at the standard spot…
The document examines how the sign convention for Credit Value Adjustment affects the relationship between a trade’s risk-free value and its credit-adjusted value. It presents a convention in which CVA is negative, calculated as an expected loss, and…
The document examines a stochastic volatility Libor Market Model and asks how the volatility factor’s Brownian motion is represented when changing from the spot measure to a forward measure. The key step decomposes a scalar Brownian motion into its…
The document distinguishes evaluated bond prices from prices at which market participants can actually trade. A service such as CBBT provides a valuation, often informed by dealer knowledge, bid-side levels, or comparable bonds; it is not itself a live…
This document raises a question about why the cheapest-to-deliver Treasury bond shown for a futures contract can change when selecting the first versus last delivery date. The author is comparing implied repo rate with the market repo rate and asks whether…
The document distinguishes corporate actions that change equity share counts from the claims represented by ordinary bonds. Stock splits, reverse splits, and stock dividends can alter share quantities while leaving an investor’s economic claim unchanged, so…
The note explains the transactions underlying the Secured Overnight Financing Rate, a benchmark derived from overnight Treasury repo activity. A repo is economically a collateralized loan structured as an initial securities sale followed by an agreed…
The note compares inflation swaps with inflation-linked government bonds as instruments for gauging market inflation expectations. Its answer suggests that in Japan, where inflation-linked securities have historically been scarce or thinly traded,…
The document outlines how structured mortgage or asset-backed securities may be analyzed from the sell side, where loan-level pool data is available, and from the buy side, where investors often rely on summarized prospectus information. Its main method is…
The document explains an approximation for the forward rate between two dates when spot rates are compounded discretely. It starts from the exact expression, which compares the accumulated growth factors at the two maturities and converts their ratio into a…
The document clarifies how duration measures approximate a bond’s price response to a yield change. Modified duration is the appropriate first-order estimate for an infinitesimal yield move and works well for small changes. For a larger move, such as one…
The discussion addresses why a yield curve built from three-month Eurodollar futures can shift downward even while the Federal Reserve is reducing asset purchases. Its central point is that futures-implied rates do not represent expectations of future policy…
The document explains a two-stage use of a two-factor Vasicek term-structure model for assessing relative value along a swap curve. First, estimate the model’s fixed parameters, including mean-reversion and volatility-related quantities, from historical…
The post outlines a textbook route from a risky asset’s stochastic differential equation to risk-neutral pricing. It describes choosing a numeraire, forming the risky asset’s value relative to it, applying stochastic calculus, changing probability measure…
The example shows how to infer a two-year spot rate from prices of two government coupon bonds with different maturities. The one-year bond first provides a one-year spot rate by discounting its coupon and principal. That rate is then used to discount the…
The document seeks introductory resources on systematic strategies in fixed income, with particular interest in corporate bonds, options, and foreign exchange. The replies point to a research paper on systematic credit investing that covers investment-grade…
The document examines why a root finder cannot match a quoted price when treating a zero-coupon inflation floor as a standard European put. It maps the payoff to a put with strike equal to the compounded inflation strike and underlying equal to the future…