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 presents a first-difference regression for studying how deposit rates respond to lagged changes in the Federal Funds Rate. Its interaction term switches on when the rate change is positive, allowing the estimated pass-through to differ between…
The document discusses building a short Treasury spot-rate curve when several securities mature on the same date. For bootstrapping, the answer recommends choosing one bond per maturity, with a newer issue offered as a practical selection rule. A fitted…
The document clarifies the cash flow a bondholder receives at maturity. For a zero-coupon bond, there are no periodic coupon payments; the bond is typically purchased below face value and pays its face value at maturity. For other fixed-income bonds, the…
The document frames a pricing question about mid-curve swaptions: options that expire before the underlying forward-starting swap begins. A common approximation constructs the forward swap's volatility from the volatilities of two spot-starting swaps and…
The document considers a fixed-income claim about coupon bonds: when yields to maturity increase with maturity, the maturity-matched spot rate is at least as high as the bond’s yield to maturity. It explains that a coupon bond’s price can be represented…
The document introduces a framework for understanding calendar spreads between bond futures maturities. It decomposes a bond futures price into the underlying spot bond price, carry, delivery option value, and relative richness or cheapness. A calendar…
The document explains how to distinguish a forward’s fixed delivery price from its changing market price and value. Once entered, the contract’s delivery price stays fixed; a later quoted forward price applies to a newly written contract. The value before…
The document presents a proposed multi-year study plan for someone preparing for quantitative finance. It groups resources into foundational probability and statistics, derivatives and mathematical finance, programming in C++, Python, and R, stochastic…
The document considers whether simulated instantaneous rates from a Vasicek or Hull–White model can be integrated to produce observed one- or three-month LIBOR. Its answers explain that a one-factor Hull–White setup is typically calibrated to one market…
The document raises a question about a bond-pricing argument in Duffie and Lando’s model. The model is described as specifying an asset that follows geometric Brownian motion and pricing a bond using a restricted information filtration, without an explicit…
The document compares several ways to describe interest-rate sensitivity in fixed-for-floating swaps. One explanation treats a swap as a long position in one leg and a short position in the other, illustrating how their sensitivities can have opposite signs.…
The note outlines two main decisions when building corporate bond yield curves: how to group securities into curve subsets and how to fit a curve to each subset. Grouping can reflect credit quality, sector, issuer, currency, coupon type, seniority, or other…
The note explains why the survival probability of a full 0–100% credit index tranche includes the recovery rate. It defines index loss from default indicators and recoveries, then shows that expected loss under a common recovery assumption is the loss given…
The document addresses why a Libor forward rate can have zero drift under its own forward measure yet acquire drift under a different measure, while caplets and floorlets are commonly priced with Black’s formula. The response identifies an error in the…
The document answers whether accrued interest should be added separately when valuing a swap between payment dates. Its guidance is to discount and sum the cash flows from both legs; that present value is already an inclusive, or dirty, value that accounts…
The document asks whether pricing a vanilla interest rate swap requires a model for the dynamics of rates, given that swap valuation is often described as reading from a yield curve. Its answer is conditional: the curve construction depends on the index,…
The document asks how to convert premiums for options on bond prices into premiums for options on bond yields, assuming normally distributed yields and Bachelier pricing. It describes a Taylor expansion of the yield as a function of bond price, expressing a…
The document considers when the LIBOR market model (LMM) can be represented as Markovian in its driving Brownian motions. It notes that state-dependent drifts prevent strict Markovianity in those motions. Predictor-corrector schemes can approximate the…
The document distinguishes spread-based bond valuation from explicit default modeling. A Z-spread discounts a bond’s promised cash flows at risk-free rates plus a constant spread, treating those cash flows as certain to arrive. The spread measures the extra…
The document derives the time integral of the Ho–Lee short rate, where the short rate has constant volatility and a deterministic drift adjustment under the risk-neutral measure. Rewriting the rate from its value at the start of the pricing interval…
The question concerns constructing a trinomial tree for the Hull–White interest-rate model in QuantLib, identifying the relevant API, and inspecting the tree used by a swaption pricing engine. The answer points to the model’s tree method as the route to…
The note explains why a one-year GBP swap quote cannot be directly checked against the quoted one-year LIBOR rate. A semiannual floating leg resets at six-month intervals, and six-month fixings at different future dates are distinct forward rates; they do…
The note addresses whether an 18-month SOFR overnight indexed swap should be modeled as a single payment when building a zero curve. It explains that OIS coupon timing depends on the contract’s payment convention: possible structures include annual payments…
The document derives how to interpolate a discount factor between two curve nodes when the continuously compounded forward rate is constant across the interval. Starting from the relationship between the endpoint discount factors, it expresses the forward…