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 build a vanilla swap schedule with both a front stub and a back stub, each of which may be short or long. It explains that a single forward or backward date-generation rule does not need to encode both stub choices. Instead, the…
The document asks how to simulate the CIR++ short-rate model, in which the short rate is the sum of a CIR process and a deterministic time-dependent shift. It proposes advancing the CIR component with a truncated Euler step: the drift pulls the process…
The document frames valuation of a fixed schedule of quarterly cash flows that can be ended early in exchange for a spread-dependent lump sum. It asks how to value the exit feature for a single spread, whether a Vasicek model is suitable, and how to extend…
The document raises modeling questions about valuing mortgage-backed securities and estimating option-adjusted spreads. Its author is considering a two-factor short-rate model, such as G2++, to represent future interest-rate term structures without assuming…
The document considers the relationship between the prices of a digital put at strike K1 and a digital call at strike K2. Each pays one unit at expiry when the spot finishes on its designated side of the strike. Comparing their combined payoffs in different…
CME SOFR futures are quoted using an index equal to 100 minus the annualized compounded SOFR rate over the contract’s reference period. The document gives the dollar value of an index point as $2,500 for a three-month contract and about $4,167 for a…
The document presents a factor decomposition for approximating corporate bond returns and deriving their variance. It starts with the duration approximation, which relates a bond’s return to the negative product of duration and yield change. Yield changes…
The document compares FX swaps, cross-currency swaps, and cross-currency basis swaps, then applies those distinctions to a Malaysian company issuing a Singapore-dollar bond. It explains that an FX swap exchanges principal at the start and end, while…
The document explains how to recover a bond price from its instantaneous forward rate when the forward rate is defined as the negative maturity derivative of the log bond price. Integrating that relationship from the valuation date to maturity gives the…
The document outlines a bond carry and roll trade in which repo financing supports a long position in a longer-maturity bond while a short position in a shorter-maturity, negatively yielding bond can complete the relative trade. It explains that the short…
The document explains principal component analysis of changes in yields or forward rates across maturities. The covariance matrix captures how rate changes move together; its eigenvectors are factor loadings, while the corresponding eigenvalues describe the…
The document discusses choosing hedges for a vanilla bond portfolio, including bond futures. It suggests that matching a portfolio’s DV01 and maturity to a futures contract is a basic starting point, then points to key rate durations as a way to measure…
The document asks whether a curve built from three-month LIBOR swaps can price swaps with different floating-rate tenors or payment schedules. The response explains that post-crisis swap valuation generally separates projecting floating coupons from…
The document asks how a mandatory break clause changes counterparty credit risk (CCR) exposure for a five-year interest rate swap that can be terminated after one year. It compares the expected exposure profile during the first year with that of an otherwise…
The note explains how to infer an AUD funding basis from FX swap or forward prices by comparing the observed spot and forward exchange rates with the relevant AUD and USD interest rates. Using OIS rates yields a basis relative to those benchmarks; another…
The note clarifies the timing distinction between a Eurodollar futures contract and a separate three-month deposit used to interpret its rate. The futures contract is marked to market daily through its final settlement at maturity T; it does not make a later…
The document explains the link between an inverted yield curve and market expectations for future short term rates. Under a no arbitrage relationship, a longer maturity yield reflects the return from investing over a shorter period and then reinvesting at a…
The document explains why a bond model can be useful even when a market quote is available. A theoretical price links the bond’s value to inputs such as the yield curve, allowing an analyst to estimate how the price may respond when those inputs move. The…
The document compares two ways to model interest rate changes when rates may be positive or negative. A normal, or Bachelier, model treats changes as independent of the current rate level. A shifted lognormal model instead makes changes depend on the rate…
This question concerns whether borrower loans in a Lending Club dataset can be segmented into prime and subprime categories using the available grade and sub-grade fields. The dataset excerpt includes many borrower and loan characteristics, alongside the…
This note outlines a framework for attributing daily P&L in portfolios holding bonds, FX forwards, and deposits. For interest-rate moves, it pairs rate sensitivities such as PV01 with changes in curve rates, distributed across chosen tenor buckets.…
The document explains why a long-dated fixed-to-floating interest rate swap can show most of its index-curve sensitivity at its final tenor, even in a multi-curve setup. It frames a vanilla swap as a combination of a fixed-rate bond and a floating-rate note.…
The document examines which interest-rate curve to use when converting credit default swap conventional spreads into upfront payments. A user reports that Markit’s USD-denominated quotes for an entity with a EUR standard contract currency matched the quoted…
The document distinguishes a par swap curve, which plots market par swap rates by maturity, from the zero or discount curve used to value cash flows. It reviews how discount factors, forward rates, and par yields can be derived from one another when a single…