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 how to create a QuantLib business calendar from a supplied list of holidays and weekends when standard country or currency calendars do not match the relevant market schedule. The answer shows the basic approach: start with a weekends-only…
The document explains how to construct curves for valuing cross-currency swaps in a multicurve framework. It starts with overnight-indexed swap discount curves and single-currency forward curves, then uses cross-currency swap quotes, spot FX, and the…
The discussion corrects a misunderstanding about the Heath–Jarrow–Morton framework. The familiar expression that determines the forward-rate drift from its volatility applies under the risk-neutral measure, where it is part of the no-arbitrage restriction.…
The note explains the notation used for CME 10-year Treasury note option strikes. A quoted strike of 1300 represents 130.0 in futures-price terms, while 1305 represents 130.5; the decimal is implicit. It also states that the minimum strike increment is 0.5.…
The document addresses how to interpret a convertible bond whose yield is negative and how to estimate its implied credit spread. The response attributes the negative yield primarily to the embedded conversion option, which has both conversion value and time…
The document compares two objective types for calibrating a one-factor Hull–White interest-rate model to caplet or similar market data. A price-based calibration minimizes differences between quoted instrument prices and prices produced by the model. A…
The document addresses an apparent conflict between the Black–Scholes relationship linking spot and forward prices and models that assign different volatility processes to forwards with different maturities. With a constant interest rate and a deterministic,…
The document considers whether principal component analysis of US Treasury rates should use cash yields or Treasury futures. It recommends constant-maturity par yields, which keep the maturity of each series stable as bonds and futures delivery baskets…
The document outlines a practical architecture for calculating value at risk when a trading system already generates simulated market scenarios, such as interest rate curves. In that setup, the main task is to reprice instruments under each scenario rather…
The document explains why a payer swap’s key rate sensitivities can appear unintuitive when the swap is decomposed into a long floating-rate bond and a short fixed-rate bond. The discussion recommends measuring exposure against standard market curve pillars,…
The document asks how to obtain a risk-neutral probability measure from a real-world model under a no-arbitrage assumption. It gives a geometric Brownian motion example in which an asset has drift and volatility under the real-world measure, while a…
The document examines how storage costs enter a commodity forward price and whether monthly costs should accrue interest. It presents the no-arbitrage principle: a forward should reflect the spot asset and the present value of carrying costs, financed to…
The document outlines a workflow for evaluating a portfolio under non-parallel interest rate shocks. Start with specified scenarios, apply the tenor-specific shifts to the relevant curves, reprice affected instruments, and measure the resulting price…
The note addresses whether negative risk-free rates invalidate the CAPM or the use of a risk-free rate when calculating market excess returns in the CAPM and Fama–French three-factor model. Its answer is that the CAPM does not require the risk-free rate to…
The note explains why UK RPI zero-coupon inflation swaps can trade at different levels when cleared through LCH versus bilaterally. It identifies two conditions behind such a basis: dealers face an imbalance in client demand across the two markets, and…
The document asks why an interest rate swap may use separate curves for projecting floating coupons and discounting future cash flows. It identifies the pricing curve with the curve used to infer rates for floating-leg accruals, then asks whether a different…
The document asks how to estimate a company’s pre-tax cost of debt when its borrowings include bonds with different coupon rates, maturities, and repayment schedules. The proposed method is to calculate the yield on each bond for the relevant fiscal year,…
The document discusses converting a quoted three-month Treasury bill rate into a weekly risk-free return and subtracting it from an asset’s weekly log return. It endorses scaling the log of one plus the quoted annual rate by the weekly fraction of a 360-day…
The document explains how to price a zero-coupon bond when yields differ across maturities. Its key distinction is between a bond’s maturity-specific zero-coupon spot rate and the sequence of one-year forward rates. Under annual compounding, discounting the…
The document explains how to select interpolation schemes when bootstrapping yield curves in QuantLib-Python. It shows a dual-curve setup using deposit, forward rate agreement, and swap helpers, then constructs curves with different interpolation choices,…
The note explains why a structural credit model’s implied spread may differ from the observed corporate bond spread. Observed spreads include compensation beyond expected default loss, such as liquidity effects, so a model focused on default risk can produce…
The document shows how a bond price process can define a change of probability measure under which a shifted Brownian motion is Brownian. Starting from the bond’s risk-neutral dynamics, it forms a density process from the discounted bond price divided by its…
The document explains how to infer a discount curve from fixed-rate bond prices using Rateslib. It contrasts sequential bootstrapping, which solves curve values in maturity order and relies on suitable instrument and curve conditions, with Rateslib’s global…
The document clarifies two different rate queries for a vanilla interest-rate swap built in QuantLib. The fixed rate is the coupon already assigned to the swap when it is created. The fair rate is calculated from the swap’s market value and represents the…