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 how financial schedules handle a tenor addition when the target month lacks the same numbered day. Its example, adding six months to August 30, leads to February’s last day rather than carrying the excess days into March. It identifies…
The note outlines how a CDS upfront settlement value can be related to the par traded spread. It gives a simplified valuation relationship in which the difference between the contractual coupon and par spread is multiplied by the risky present value of one…
The note explains that delta 10 or delta 30 implied volatility quotes identify points on an options volatility surface, rather than a different definition of option delta. Each delta quote maps to a particular strike or moneyness under the relevant market…
This exercise asks whether a market with two assets and three states admits arbitrage, and how to bound the price of a risk-free asset. State prices assign a price to receiving a unit payoff in each state; multiplying the payoff matrix by the state-price…
This note reconciles three explanations for the inverse relationship between bond prices and yields: the return implied by paying a price for a fixed payoff, the opportunity cost of holding a bond when other interest rates rise, and the discounting of future…
This note explains why conversion factors affect hedge ratios during the trading life of a deliverable Treasury futures contract but do not change the physical delivery quantity. Because the futures price does not move one-for-one with a particular bond, the…
The document explains how the bond price dynamics in the Vasicek short-rate model follow from the model’s closed-form bond price. That price is written as a time-dependent factor multiplied by an exponential involving the current short rate and the function…
The document discusses how to choose a risk-free rate when valuing bonds issued by Ecuador, which uses the US dollar and may not have a readily available local government yield curve in common financial databases. One answer recommends using the US dollar…
The document describes a calibration problem for a one-factor Hull–White interest rate model with constant mean reversion and volatility. The author reports that Monte Carlo prices match market prices for three swaptions in a set of four, while the first,…
The document explains the direction of a USD FRA-OIS swap position. The answer states that a trader expecting the Libor-OIS spread to widen would pay on the swap, paying OIS plus the spread and receiving Libor. This clarifies the cash-flow direction behind…
The document compares a normal model for a forward swap rate, where volatility measures absolute rate changes, with a lognormal model, where volatility measures proportional changes or log returns. It derives the relationship by considering the lognormal…
The document outlines prudential valuation adjustments (AVAs), which bridge fair value and a more conservative estimate of realizable value under orderly exit conditions. It places these adjustments in a regulatory and accounting context, noting that…
The document explains how to use QuantLib’s FixedRateBondHelper to bootstrap a discount curve from bond market data. It distinguishes the bond’s coupon, which defines its scheduled cash flows, from its quoted price, which calibrates the curve. Short-maturity…
The note addresses whether factors in an asset-pricing model must be returns on traded portfolios. It describes a macroeconomic factor model that includes measures such as industrial production growth and inflation surprises alongside bond return spreads.…
The note derives bond price sensitivity to yield for a bond with semiannual coupons and corrects a missing chain-rule factor. Differentiating the discounted cash-flow formula with respect to yield introduces a factor of one half in the first derivative and…
The note explains why a floating-rate bond is generally valued near its face value when issued and immediately after a coupon resets. For the first accrual period, the forward coupon rate is already known and matches the discount rate used for that period,…
The discussion examines how to value an investment described as $50,000 growing at 6% annually over ten years when the discount rate is 4%. Its central lesson is that present value depends on what the stated growth represents and when cash flows occur. If…
The document concerns retrieving historical interest-rate curve values through Bloomberg’s TIA Python wrapper. The curve field shown in the question returns a current value, and the accepted response says that the relevant ICVS curves are not available…
The document addresses whether CME options on one-month SOFR futures continue trading during the month when the underlying SOFR rate is measured. This matters for implied volatility modeling: if trading overlaps the averaging period, remaining uncertainty…
The question asks whether equity prices and corporate credit spreads should move in opposite directions, especially for riskier firms, and whether that relationship carries over to stock returns and spread changes. The response invokes Merton’s structural…
The document explains why a floating-rate bond’s forecast coupons decline when its QuantLib curve is constructed with simple compounding. The proposed fix is to build the FlatForward curve with compounded or continuous compounding so the quoted rate is…
The document addresses how to calculate swap DV01 under shifts to both a discount curve and a three month USD LIBOR projection curve. The key issue is that the USD LIBOR index used by a vanilla swap takes a yield curve handle, so creating a separate index…
The document explains why reduced-form credit models distinguish a market filtration, containing variables such as rates and asset prices, from a default filtration that records whether and when default occurs. Their join forms the full information set used…
The document outlines the usual discrete-time Black–Scholes delta hedge for a European call on a stock. It sells the option, offsets its delta with a stock position, and places the residual value in a risk-free account. At each step, the stock price is…