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 addresses how to model short-term interest rates that can fall below zero. The Cox–Ingersoll–Ross model keeps its short rate nonnegative, which can conflict with observed conditions in markets where negative rates occur. One suggested extension,…
The document explains why a forward rate agreement cannot be priced by treating an interest rate like a tradable stock. For a forward on an asset, the current asset price and the discount bond price can determine the forward value through replication. An…
The document sets out a conventional decomposition of credit default swap position profit and loss into carry, roll down, and curve shift. It gives formulas for carry and roll down using the horizon, notional, quoted spread, maturity-specific spread change,…
The post investigates differences between QuantLib and Bloomberg YAS bond analytics for a fixed-rate bond. Although the author’s cash flows and clean price align, the calculated yield, duration, convexity, and Z-spread differ. The accepted answer identifies…
The document asks how credit derivatives are quoted and modeled across single-name CDS, CDS indexes, index tranches, CDOs, and options on index tranches. It notes that single-name CDS quotes may appear as upfront payment plus coupon, spread, or price, and…
The document describes an attempt to bootstrap discount factors from US government bond coupon, face value, and closing price data. The proposed approach builds a cash flow matrix for securities of different maturities, then solves a linear system by…
The document asks whether a company can issue additional debt while retaining senior status, and whether senior debt issuance is limited by the company’s assets or existing obligations. Its brief answer identifies covenants in earlier debt agreements as a…
The document raises a fixed-income modeling question about how to infer the market price of risk in a Cox–Ingersoll–Ross short-rate framework. It describes a workflow in which historical short-rate data are used to estimate model parameters, after which the…
The document gives a way to derive a simple Libor forward rate from spot rates by equating accumulation across consecutive periods with accumulation over the full term. Each rate is multiplied by its accrual fraction, and the forward rate is isolated using…
The document explains the meaning of par sensitivity for interest rate risk under ISDA SIMM. A par sensitivity measures how a portfolio's value changes when the market quotes of the instruments used to build a curve are shifted, rather than when the derived…
Interest rates may be quoted using annual, periodic, or continuous compounding. These conventions express growth over time with different formulas, so the quoted rate alone is not enough to compare instruments: the compounding basis must also be known.…
The note addresses the sign of delta for payer and receiver swaptions. It states that receiving the fixed leg corresponds to negative delta, while paying fixed corresponds to positive delta. The document gives this conclusion without explaining the delta…
The document addresses why standard yield calculations can produce implausible results for a seasoned Treasury bond near maturity. Its example is in the final coupon period, where accrued interest must be added to the clean market price to obtain the…
The document presents a credit-tranche position described as long mezzanine and short equity, and asks how a decline in mezzanine tranche correlation could lead to losses for hedge funds. It also asks what spread means and how spread changes affect the value…
The document asks whether a company’s corporate bond price has a formula-based relationship with its stock price. The response points to structural credit models, such as the Merton model, as frameworks that connect a firm’s equity and debt through the value…
The document identifies a proposed long-short Treasury swap position as a 5s–30s curve steepener. The position is long five-year exposure and short thirty-year exposure, with sizing intended to make the legs duration neutral. Its stated rationale is positive…
The document explains how principal component analysis can break observed yield curve changes into contributions from a small set of curve factors. It constructs principal component time series from yield changes and the eigenvectors of their covariance…
In standard financial usage, a yield curve plots yields against the maturities of interest rate instruments. The yields are derived from instrument prices, but the curve’s horizontal dimension is time to maturity, not price. The note distinguishes this usage…
The document asks how to carry a swaption sensitivity ratio from a short-rate model into a model driven by the forward swap rate. The answer defines the underlying swap’s annuity and uses the relationship between swap value and swap rate: the swap’s…
The document asks how to create QuantLib overnight indexed swap rate helpers from explicit maturity dates in a rates dataset, rather than from tenors. The accepted answer points to the DatedOISRateHelper class, which accepts explicit start and end dates. It…
The document outlines market instruments used to extend a USD LIBOR curve beyond the one-year limit of cash instruments. It suggests using exchange-traded futures tied to three-month LIBOR for maturities up to five years, then using USD swap rates for longer…
The document asks whether a rate written as F(a,a,c) is a forward rate or a spot rate. The question arises while interpreting a formula for pricing constant-maturity-swap par rates, where the formula uses forward rates observed at times that coincide with…
The response moves beyond formal measures such as risk premium and absolute or relative risk aversion to discuss how risk appetite is handled in practice. It describes risk frameworks as top-down systems that set limits and evolve as market conditions…
The document distinguishes a repo used to borrow cash against a bond from borrowing a bond to sell it short. In a repo, the seller transfers the bond and agrees to repurchase it at a set price; the price difference is the financing cost or interest. That…