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 presents a numerical attempt to apply Jamshidian’s trick to a European put on a coupon bond. It compares the bond option’s Black-76 value with the sum of Black-76 values for options on the bond’s individual cash flows. In the example, intrinsic…
The document investigates why a QuantLib overnight index swap does not reproduce the quoted rate used to build a curve through DatedOISRateHelper. Its example compares a swap starting on the evaluation date and ending on a date that falls after a weekend…
The document asks how modified duration relates to observed bond price and yield changes when time passes and a bond’s remaining maturity shrinks. It defines modified duration as the negative proportional sensitivity of price to yield, using a derivative…
The document considers whether a single-factor Linear Gaussian Model calibrated to coterminal swaptions can price both payer and receiver Bermudan swaptions. The question arises because the two option types have different exercise boundaries and may respond…
The document considers a cross-currency basis swap and an offsetting hedge booked with different counterparties under different collateral agreements (CSAs). Because one trade is collateralized in euros and the other in dollars, a move in cross-currency…
The document addresses how effective and maturity dates are set for forward-starting interest rate swaps when a forward-period date falls on a non-business day. It distinguishes a swap-dealer convention, which aligns the forward swap with the date schedule…
The document explains how Eurodollar futures can provide a strip of implied forward rates and how those rates can be used to construct a fixed-for-floating interest rate swap rate. For payment dates, the forward floating rates are weighted by discount…
The document clarifies two Moody’s rating-history symbols used for sovereign foreign-currency long-term debt. A “(P)” before a rating denotes a provisional rating. Moody’s may assign one when it expects the rating to become final after receiving…
The discussion considers quasi-random sampling for Monte Carlo valuation of path-dependent interest-rate options, where each simulated path may require many time steps. Its main recommendation is a dimension-ordering approach: use low-discrepancy…
The document considers what Treasury desks can monitor as a successor to the LIBOR–OIS spread for assessing stress in interbank lending. It distinguishes SOFR, a Treasury-collateralized benchmark with little direct bank credit exposure, from unsecured…
The document describes a simple linear interpolation for estimating an initial stub rate in a floating-rate note or swap. Given one-month and two-month reference rates, it weights the difference between them according to where the stub period falls between…
This document clarifies the difference between a floating-rate bond’s contractual coupon spread and its z-spread. The coupon spread is generally specified when the bond is issued and determines the payment added to the reference rate. The z-spread, by…
The document explains that long-term government yields combine expected future short rates with a term premium. Forward rates are derived from the yield curve through arbitrage relationships, so they also combine those components; a forward rate alone does…
The document gives an intuitive interpretation of the mean-reversion parameter in Vasicek- or CIR-style interest rate models. It relates the parameter to the time needed for a rate to close half the distance between its current level and its long-run…
The document distinguishes valuation of an existing interest rate swap from the pricing of a newly executed swap between coupon dates. For an existing swap, its contractual cash flows are valued in full when calculating the amount for termination or buyout.…
The document addresses how to learn what market moves may imply, using higher swap rates as an example. It argues that “market situations” span too many instruments and causes for one book to explain them comprehensively. A useful starting point is to study…
The document considers how much equity to short against a bond or credit default swap from the same issuer to reduce issuer-specific risk. It frames the hedge in terms of how equity changes relate to credit spreads, then connects spread movements to bond…
The document discusses how to represent the principal deflation floor on a Treasury Inflation-Protected Security (TIPS) when using QuantLib's CPIBond. The requested payoff protects redemption at maturity so it cannot fall below face value, while coupons…
The answer describes a historical approach to constructing a SOFR term structure while direct SOFR instruments were still developing. SOFR itself is an overnight rate, so curve construction relies on market instruments that reveal expectations or spreads…
The document considers whether a Vasicek process estimated from monthly data can be simulated with a daily time step. Its response emphasizes matching parameter units to the simulation frequency: estimates based on monthly observations should first be…
The document explains why bond sensitivities are commonly described with fixed-income measures such as duration rather than relying only on option-style Greeks. A bond’s value depends on a yield curve containing rates at multiple maturities, so its exposure…
The document raises a valuation question about a convertible bond: how to derive yield to maturity from a value calculated with an option valuation model. It considers treating the difference between the calculated value and the bond’s issue value as…
The document explains why the process defined as the exponential of the negative accumulated short rate is called a discount factor. For a cash flow paid at time t, multiplying by this factor converts the future amount into its present value at time zero.…
The document explains why two US Treasury bonds with the same maturity but different coupons developed a large yield spread during the 2008 crisis. The seasoned, high-coupon issue traded at a discount and consequently offered a higher yield than the more…