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 accrued interest in bond pricing is commonly calculated by prorating the coupon according to the elapsed fraction of the coupon period. It contrasts this clean-price convention with the treatment of coupon and principal cash flows in…
The document explains why QuantLib’s fixed-rate bond coupon amounts differ from calculations made using the issue date and nominal anniversary dates. The key is that the schedule is adjusted by the selected calendar and business-day convention before coupon…
The document examines a failed attempt to construct a US Treasury zero-coupon curve in QuantLib using deposit and fixed-rate bond helpers. The key diagnostic is to build the curve from deposit helpers alone: this isolates the source of the reported…
The note considers which bond to short when two bonds are otherwise comparable. For a purely speculative position, the answer favors the bond with lower convexity. Convexity describes how a bond’s price sensitivity changes as yields move, so it affects the…
The document clarifies how to calculate a one-year zero rate from the purchase price of a Treasury bill that pays its face value at maturity. The annual holding-period return is the difference between the maturity payment and the bill’s price, divided by the…
The document raises modeling questions about a convertible bond whose value depends on two assets. It asks how a pricing model should incorporate each asset’s volatility and their correlation, and whether a binomial framework commonly used for options can…
The document discusses whether a central bank literally prints money or creates electronic reserves through its balance sheet. The answer uses a simplified lending example: a central bank supplies newly created funds to a commercial bank, which lends to a…
The document addresses how to obtain market expectations for the federal funds rate around Federal Open Market Committee meetings. It recommends meeting-date overnight index swaps as a direct proxy for those expectations, describing them as the cleanest…
The document asks how to combine the durations of two funds held at specified portfolio weights. It states duration as the present-value-weighted average timing of cash flows and proposes taking the weighted average of the funds’ durations. The accepted…
The document discusses how SABR calibration relates to Black pricing conventions for swaptions. Its central point is that the parameters in the two approaches serve different roles: Black pricing uses an implied volatility, while SABR describes volatility…
The document explains why the SONIA overnight rate can be below the UK Bank Rate. The Bank Rate is the rate banks receive on deposits held at the Bank of England, while SONIA reflects actual overnight lending transactions among a broader set of institutions,…
The document explains how mortgage-backed security convexity depends on the sensitivity of prepayments to interest-rate incentives. In a typical pass-through, falling rates tend to accelerate prepayments and shorten duration, limiting price gains; rising…
The document considers a five-year coupon bond with annual payments, a specified recovery amount, and default possible in each year. It first corrects a probability-accounting error: the listed default-year outcomes are not exhaustive until the no-default…
The document describes a portfolio manager’s difficulty optimizing a fixed-income portfolio using yield to maturity, duration, and credit rating. The current score favors short-maturity, highly rated US bonds when the yield curve is flat, leaving the…
The document derives the duration of a perpetuity paying a constant annual coupon, whose price is the coupon divided by the yield. Differentiating price with respect to yield gives modified duration as the reciprocal of yield. It then uses Macaulay…
The document gives a brief, high-level comparison of market risk topics associated with a bank’s trading and banking books. It describes the trading book as capital markets and investment banking positions, such as swaps, stocks, and bonds, and the banking…
The document asks whether a Bloomberg feature can plot spread duration by tenor for an issuer or sector, including measures such as DTS and option-adjusted spread duration. The eventual response says no suitable term-structure plot was available in the…
The document considers how to represent the risk of a four-leg relative-value trade involving 10-year and 30-year swap spreads. Each spread combines a swap and a benchmark bond; the example takes opposing positions in the two maturities to express a view…
The document frames a modeling choice for yield curve spread options. One approach focuses on the payoff at expiry: model the marginal distributions of the two rates and connect them with a copula to represent dependence. The alternative considers the needs…
The document gives brief convention details for swaps linked to seven-day indexes. For the CNY seven-day swap example, it describes calculation and payment periods of three months, with weekly reset periods nested inside each calculation period. The fixing…
The document considers how to map calendar dates to model time when simulating forward interest rates, including rates with different market day count conventions. It distinguishes the time convention used inside a model from the convention used to quote or…
The document clarifies the meaning of a curve constructed with Rateslib from dated nodes and numeric values. The example supplies an initial node with value one, followed by later nodes with lower values. The accepted explanation identifies these node values…
This note explains why an actuarial projection of annuity reserves may proceed backward from the end of the projection horizon. At each time, the reserve represents the present value of expected future payments from that point onward. Starting at the final…
The note separates the definition of an instantaneous forward rate from the interest rate model used to describe rates. It derives the forward rate from zero coupon bond prices: when a sufficiently smooth continuum of such prices is available, the initial…