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 note explains why an inflation-linked bond can show positive carry as its reference index rises. Linker cash flows are tied to index ratios, so an increase in the index raises the value of the indexed component; the realized holding return also reflects…
The note considers how an NPV function should handle cash flows when the valuation date falls during an instrument’s life. For basic instruments, the accepted answer recommends valuing only future cash flows. For products whose future payoff depends on past…
The note identifies CME 30-day Federal Funds futures as a market instrument for interpreting expectations about Federal Reserve rate decisions. It responds to a question about a reported shift in expected hike timing after China devalued the yuan, pointing…
The document asks which scheduled economic releases can cause substantial price moves in tradable assets and points readers toward an economic calendar as a source of release dates. It relays a historical ranking from a 2007 bank analysis of German Bund…
The document clarifies a basis swap pricing question about why a six-month forward rate can differ from the rate implied by two consecutive three-month periods. The key distinction is between the underlying reference index and the loan exposure: a…
The question examines why a sinking fund example might assume that the fund earns a higher rate than the interest charged on a loan. The proposed setup keeps making interest payments to the lender while accumulating money separately to repay principal, which…
The document explains duration times spread (DTS) as a way to express a bond’s sensitivity to relative spread changes. It decomposes each bond’s relative spread movement into a shared sector or market component and an idiosyncratic component. Multiplying…
The document examines how credit risk and contract terms affect the Black-76 valuation of options on corporate bonds. It highlights that the forward bond price must reflect the bond’s risky market value and financing or discounting assumptions; treating a…
The document asks how to distinguish interest and principal payments in cash-flow schedules generated for amortizing floating-rate bonds with QuantLib’s Python interface. The example shows multiple payments on shared dates across a series of dates, and notes…
The document describes a Texas Instruments BA II Plus calculation of an effective annual rate from a nominal rate compounded daily. The user rounds the intermediate value shown on the calculator to five decimal places, then raises that displayed value to the…
The note explains the convexity adjustment between forward rate agreements and interest-rate futures. It rejects the common explanation that daily futures margining alone creates the difference: collateralized FRA cash flows have a comparable reinvestment…
The note explains why a CDS premium leg includes an accrual-on-default term alongside scheduled spread payments. Because default can occur between coupon dates, the protection seller is owed premium for the portion of the period elapsed since the last…
The document outlines a first-order way to estimate the mark-to-market PnL of a CDS as its maturity shortens and its market spread changes. From the protection buyer’s perspective, it expresses value using the difference between the market spread and the…
The document discusses how to improve a bank’s estimate of the maturity of non-maturing chequing deposits for funds transfer pricing. The starting method assigns active accounts the historical average time until full withdrawal, split by customer…
The document explains a practical simplification for applying the Merton structural credit model across companies with varied debt schedules. In the basic model, equity is treated as a call option on firm value, with total debt represented by a face value…
The document distinguishes valuing a floating-rate note from estimating its expected coupon cash flows. For valuation under a single-curve framework, one can derive forward rates from the yield curve, use them to estimate future coupons, and discount those…
The document addresses how to construct a zero-coupon Treasury curve when a cash-flow matrix has more coupon-date columns than bond-price rows. One proposed approach is to select a maturity-spaced set of securities, then create hypothetical bonds from nearby…
The document explains how to estimate EUR/USD forward rates from spot and interest rates using covered interest rate parity (CIP). Rates must match the forward’s maturity: an overnight rate is not a substitute for a one-year rate, and the calculation needs…
The document asks whether monthly returns on a ten-year government bond can stand in for a monthly risk-free return, assuming sovereign default risk is ignored. The answers largely reject that proxy, emphasizing the mismatch between a long-maturity bond…
The document introduces a reduced-form credit bond model in which default is represented as the first jump of a Poisson process and the hazard rate is stochastic. It writes a differential expansion for bond price as a function of time, hazard rate, and the…
The document derives covered interest rate parity by equating the present value of a foreign currency cash flow when converted at today’s spot rate with its value when converted at the forward rate and discounted in the other currency. It then explains why a…
The document asks how the survival probability of a default time relates to its hazard rate, and why a conditional survival probability has a shifted hazard integral. It presents the standard unconditional relation as an exponential of the negative…
The document explains why rates and discount factors derived from a QuantLib zero-coupon curve may differ from input deposit yields. The example builds a curve from deposit rate helpers and compares calculated forward rates and discount factors with quoted…
The document asks how an issuer can value a callable bond before knowing its option-adjusted spread. It explains the market practice described in the answer: construct a credit curve from noncallable bonds when possible, then use an interest-rate lattice or…