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 explains a market comment that short-dated, front-end swaption volatility has traded more lognormally than longer-tenor tails. It describes a practical interpretation based on regressing changes in implied volatility against changes in interest…
The discussion explains how to estimate a fair value for a Treasury bond when its maturity is not represented by the nearest on-the-run issues. It notes that 20-year Treasuries are issued and reopened regularly, and distinguishes the newest issue from older…
The example values a one-year payoff that rewards either a low or a high average short-term interest rate. The rate has four stated possible outcomes with assigned probabilities, so the direct method is to calculate the payoff in each case, weight each…
The document addresses how to calculate returns for an active interest rate futures contract when the underlying contract changes at expiry. It recommends constructing a synthetic adjusted price history, commonly by shifting older contract prices so they…
The document asks whether a stochastic interest rate model for foreign exchange satisfies uncovered interest parity. Its answer distinguishes the forward exchange rate from the expected future spot rate, showing that equality depends on which probability…
The document explains the link between a downward-sloping Treasury yield curve and negative carry on a vanilla Treasury bond. Carry is framed as coupon income less financing costs, with repo as the financing rate. The answer argues that repo rates should…
The document explains why investors may hold fixed rate mortgage securities despite their negative convexity. When rates fall, borrowers can refinance, limiting the investor’s benefit from higher bond prices; when rates rise, borrowers are more likely to…
The document asks why financial software commonly uses bootstrap methods to build multicurve interest-rate frameworks despite the appeal of best-fit optimization. The response lists operational advantages of bootstrapping: its behavior under input shifts is…
The document questions a proposal for estimating EWMA volatility in fixed income when yields can be negative. The proposed procedure regresses absolute yield changes on yield levels, uses the regression residuals in place of returns, and then applies the…
The document outlines practical measures for assessing interest rate exposure beyond duration and convexity. It frames risk in terms of how prescribed rate shocks affect fair value, economic value of equity, or net interest income, and describes reverse…
The document surveys practical ways to measure interest rate risk beyond duration and convexity, emphasizing that the right measure depends on the portfolio and use case. It describes scenario impacts on fair value, economic value of equity, or net interest…
The document examines whether using expected cash flows in an NPV numerator and a risk-adjusted discount rate in the denominator counts risk twice. One response derives an expected return relation from price defined as expected cash flow divided by a rate…
The document solves for an account value when interest accrues at a time-varying rate and continuous deposits stop once the balance reaches a specified threshold. It divides the problem into two intervals: before the threshold, the balance follows a linear…
The document compares short-rate models, the Heath–Jarrow–Morton (HJM) framework, and the LIBOR Market Model (LMM) for interest-rate derivatives. It clarifies that these are not three strictly separate categories: HJM is a framework that includes models such…
This note raises a curve-calibration problem in a multi-curve framework: how to calibrate a forecast curve and an OIS discount curve together when swap equations appear to introduce more unknown discount factors and forward rates than equations. It gives a…
This exchange distinguishes a swap’s par rate from a curve’s forward rate. The example builds a deposit and swap curve in QuantLib, then compares the market quote used for a ten-year swap with a swap fair rate and a rate returned by the curve’s forwardRate…
This note explains how to interpret the gearing, spread, curve, and index inputs when valuing a floating-rate bond with RQuantLib. Gearing multiplies the reference-rate fixing, while spread is added to it. For a bond paying EURIBOR 3M plus 140 basis points,…
The document explains how risk-neutral probabilities relate to the stochastic discount factor (SDF). In a finite state model, an SDF prices a cashflow by weighting each state’s payoff by its physical probability and state-specific discount factor. The…
A repo is a secured borrowing from the perspective of the party selling a security and agreeing to repurchase it; the other party calls the same transaction a reverse repo. The difference between the sale price and repurchase price represents the borrowing…
The document explains how to obtain discount factors from a zero-rate curve in QuantLib. The key point is that a zero curve can already serve as a discount curve: calling its discount method for a date or year fraction performs the conversion. The accepted…
The document distinguishes exposure measured as a currency amount from exposure expressed relative to assets under management. In common long–short fund reporting, gross or net market exposure generally counts the risky positions, such as stock longs and…
The document explains why a bond yield calculated in QuantLib may differ from a spreadsheet result when the settlement date is omitted. In that case, the calculation uses QuantLib’s global evaluation date, which defaults to the system date. The proposed fix…
The document asks whether quantitative easing (QE) measurably changes large firms’ financing costs and whether eligible firms compete for central bank purchases. Its answer identifies this effect as the capital structure transmission channel of monetary…
The document discusses how to account for a position that disappears from a portfolio at maturity, using a bond as an example. On the maturity date, accounting derecognizes the bond and records the expected cash payment. Operational settlement may arrive…