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 why a floating payment set and paid at the beginning of its accrual period needs a convexity adjustment, since the rate is not yet known before reset. The main answer derives the value of a single Libor payment under a forward measure, then…
The discussion derives a pathwise solution for a bond process that grows at an adapted short rate between jumps and changes multiplicatively when jumps occur. For a compound Poisson jump process with jump sizes Z, each jump multiplies the pre-jump bond value…
The discussion questions whether the Libor Market Model’s link between a Libor rate and a zero-coupon bond price is realistic, given perceived differences between Libor and Treasury bill movements. The response distinguishes short-term co-movement from daily…
The document asks how to report the value of each caplet or floorlet inside a QuantLib cap or floor, including intrinsic and time value at each fixing date. The example code prices the whole instrument, then attempts to reconstruct per-period values from leg…
The document addresses a discrepancy in a calculation of accrued interest on semiannual Treasury bonds. The original approach approximates each coupon period as 180 days and computes accrual from a count of months. The accepted response identifies the key…
The document asks how the risk-neutral measure differs in practice from the T-forward measure. It identifies their numeraires: the risk-free asset for risk-neutral pricing and a zero-coupon bond maturing at time T for T-forward pricing. Its central question…
The document poses a question about why banks may use Monte Carlo simulation to implement a bottom-up covariance model for credit portfolios instead of relying on an analytical approach. It identifies loss correlation as an input that must be estimated and…
The document outlines a way to test a cross-sectional momentum strategy on monthly bond data. At each rebalancing month, use each eligible bond’s return over the defined lookback period to rank the universe and assign bonds to ten portfolios, from past…
The document examines a mismatch between a QuantLib valuation and a Bloomberg valuation for a CZK swap. Most payment dates match, but a reset date associated with an interpolated forward rate differs. The questioner suspects FRA setup, while the response…
The document discusses ways to obtain a long history of returns for the Bloomberg US Long Treasury index when direct access to Bloomberg data is unavailable. One suggested proxy is the Goyal and Welch dataset, which draws long-term government bond yields and…
The document explains how pooling loans and dividing their cash flows into senior and junior tranches can make senior claims less exposed to losses than the underlying loans. Its illustrative example assumes two mortgages with independent default risks: the…
The discussion explains why zero-coupon Libor swaps can create convexity and hedging costs when their compounded payments are valued using a Libor curve but discounted using an overnight reference curve. The answer focuses on dealer risk management: a dealer…
This overview compares several stochastic processes used in quantitative finance and explains how their dynamics suit different modeling tasks. Geometric Brownian motion has continuous positive paths and lognormal marginals, making it the basis of…
The document asks for a complete derivation of the transition distribution of the Cox–Ingersoll–Ross process. It notes the commonly stated result that the distribution is noncentral chi-squared and identifies the Kolmogorov forward, or Fokker–Planck,…
The document addresses how to interpret the three-month Treasury bill yield series obtained through quantmod from FRED. The response identifies the quoted rate as an annualized bank discount yield, calculated on a 360-day year and a discount basis, rather…
The document explains how yield relative to the 6% conversion-factor benchmark can change which bond is cheapest to deliver in a futures contract. A conversion factor is the bond’s clean price at a 6% yield. To compare delivery candidates at a market yield,…
The document explains how to estimate 10-day historical-simulation VaR for a fixed-for-floating interest rate swap when only a history of swap rates is available. Under a single-curve assumption, bootstrap the swap rates into historical zero curves; the…
The document explains how to estimate a forward-starting swap rate from annual par swap rates. One response offers a rough linear interpolation-style calculation from the two-year and five-year par rates, while acknowledging that it is approximate. A more…
The document discusses limiting turnover when optimizing a bond portfolio for option-adjusted spread (OAS) subject to duration and other constraints. Given current weights, the accepted approach expresses a turnover cap as a bound on the sum of absolute…
The document presents a proposed way to compare bundles of peer-to-peer consumer loans that have not matured. The available data include borrower characteristics recorded at origination and payment histories observed to date. The questioner seeks a valuation…
A mid-curve swaption expires before its underlying swap begins, so its implied volatility cannot be read directly from the ordinary swaption volatility surface. The document describes a way market makers can estimate it by treating the forward-starting swap…
Non-TBA mortgage-backed securities are over-the-counter instruments, so buyers and sellers can agree to settle on dates of their choosing. Accrued interest and the timing of payments from the underlying mortgage collateral can make some dates operationally…
The answer shows how to construct a government-bond yield curve in QuantLib Python using bond helpers and several piecewise interpolation choices. It prepares Portuguese government bond data with maturities, coupons, and prices, sets a valuation date and…
The discussion examines whether outstanding credit default swaps create an accumulating liability for protection sellers when a reference company defaults. It distinguishes the number of contracts from the underlying credit risk: CDS positions transfer risk…