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 to distinguish a DV01 hedge ratio from a ratio based on quoted price ticks for Bobl and Euribor futures. DV01 measures the cash change in a contract’s value for a one-basis-point rate move, so dividing the contracts’ DV01s gives a…
The document explains why a fixed-maturity zero-coupon bond is not locally risk-free even when its promised cash flow is known. In a one-factor short-rate model, the money account earns the prevailing short rate through continuous rollover, while a term…
The accepted answer explains “flow” interest rate trading as trading in standardized, liquid products that are relatively easy to value and trade frequently. Examples span sovereign and corporate bonds, overnight index swaps, interest rate swaps, caps,…
The document asks how implied correlation is calculated for collateralized debt obligation tranches under a Gaussian copula framework. It proposes first calibrating a common default probability across the portfolio, then fitting a correlation parameter to…
The answer explains how a delayed swap payment should be handled when a payment date shifts because of the calendar. If the final floating accrual period is extended by two days, the floating rate and interest payment should reflect the added accrual under…
The document considers whether central bank intervention makes an inverted yield curve a weaker or stronger recession signal. The questioner reasons that keeping short-term rates low should make inversion harder to achieve, so an inversion might be more…
The document raises a corporate finance question about how to include a new debt issue in the weighted average cost of capital when a company already has debt and equity. It gives an example with two debt tranches carrying different pre-tax borrowing costs,…
The document discusses how to reproduce Excel's bond YIELD calculation with QuantLib. QuantLib's bond yield method takes a target price, day-count convention, compounding convention, and coupon frequency, while settlement, maturity, coupon schedule,…
The document explains how the choice of probability measure in interest-rate pricing follows from the chosen numéraire. Under the measure associated with a traded numéraire, asset prices expressed relative to it are martingales. This gives a practical way to…
The document poses a valuation problem for a forward-starting interest-rate swap in a binomial short-rate lattice. The swap begins after the valuation date, receives floating payments, pays a fixed rate, and makes payments in arrears. The questioner reports…
The document derives a zero-coupon bond price when the short rate starts at a fixed level and rises by a fixed increment at each jump of a Poisson process. The discount factor depends on the time integral of the jump count. By exchanging the order of…
The document considers whether varying the autocall level of an autocallable bond can reproduce the value of an issuer-callable bond priced with an optimal exercise policy. It explains that the issuer-callable bond is no more valuable than an autocallable…
The document explains why QuantLib’s swap rate helper divides the target net present value by the fixed-leg BPS, then scales by a basis point. The fixed-leg BPS measures how much the fixed leg’s value changes when its coupon rate moves by one basis point.…
The document explores why option-pricing ideas have not become a routine way to value risky corporate cash flows. It presents the structural analogy in which equity resembles a call option on firm assets and debt resembles a liability exposed to the firm's…
The document compares two ways to price a callable zero-coupon bond in the Ho-Lee short-rate model. One method values the bond as a straight zero-coupon bond minus a European call on that bond. The other represents the callable bond as a claim whose value…
The document clarifies a proposed volatility adjusted moving average crossover for fixed income momentum. A shorter moving average of an index represents a more recent price level, while a longer moving average represents a smoothed longer term level. Their…
The document explains why a Treasury yield-to-maturity curve cannot be used directly as a spot-rate curve. A yield to maturity summarizes the discount rate for an instrument with multiple cash flows, whereas a spot rate discounts a payment at a particular…
The document presents a savings drawdown problem: determine a level monthly withdrawal that exhausts an initial bank balance after a fixed number of months, with a stated monthly effective interest rate and no further deposits. The answer treats the…
The document explains why a calculation of a 3M SOFR futures final settlement can differ from values in a Bloomberg historical price table. It distinguishes the daily exchange settlement, which is quoted on a futures tick grid, from final settlement, which…
The document explains how a swap’s discounting can change when the collateral poster may choose between eligible currencies. This choice resembles a cheapest-to-deliver option: the poster prefers the collateral class with the most favorable return, and the…
The document investigates why a SABR calibration using Bloomberg cap volatility figures produces a poor match across strikes. The question provides an example with caplet-related strikes and volatilities, estimates a forward from interest-rate curve inputs,…
The document clarifies the distinction between a bond’s clean price and dirty price when the bond changes hands between coupon dates. A quoted market price is generally the clean price, which excludes accrued interest. At settlement, the buyer pays the clean…
The document discusses what a payer of fixed interest on a swap can do when market rates move, distinguishing the original purpose of a fixed-for-floating swap from a wish to exit or offset it. One answer frames the floating leg as a hedge for floating-rate…
This question asks how to estimate the chance that at least one borrower in a portfolio defaults when companies have different default probabilities. Under independence, the probability of no defaults is the product of the individual survival probabilities;…