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
This discussion considers how to measure a bond portfolio's sensitivity to a yield shift in one currency when the holdings are denominated in several currencies. A weighted average of bond modified durations describes sensitivity to a simultaneous parallel…
The note explains why a discount rate in discounted cash flow analysis can be viewed as a minimum acceptable return. It frames the rate as a risk-free benchmark: an investor can generally earn that return without taking risk, so a cash flow discounted at a…
The document compares two ways to value a fixed-for-fixed FX swap under multiple curves. One approach discounts the foreign-currency leg using a curve adjusted for cross-currency basis, then converts its present value at spot. The other converts each foreign…
The document addresses how to construct a hedge across two-, five-, and ten-year Treasury futures that is neutral to parallel shifts and changes in yield-curve slope. It describes running principal component analysis on a returns matrix and interpreting the…
The document poses a relative valuation problem: comparing callable bonds from the same issuer when their call schedules differ. It asks whether option-adjusted spread can be compared directly across those bonds, given that OAS accounts for embedded option…
The document compares SOFR curve construction and cash-flow projection with legacy IBOR approaches. One answer says curve building still depends on the available liquid market inputs and chosen interpolation, while projecting cash flows follows the rate’s…
The document derives the value and duration of a semiannual floating-rate note with coupons reset to the prevailing six-month rate. Working backward from maturity, the answer shows that each reset-date value equals par: the principal and next coupon…
The document asks where historical or current intraday prices for government bonds can be obtained. The response identifies Interactive Brokers as a source of historical intraday bond data and gives a T-bill as an example of a security checked. It also…
The document discusses approaches to modeling concentration risk in credit portfolios within the Basel IRB context. One approach starts from the Asymptotic Single Risk Factor model and modifies it to align with Basel II, then compares sector concentration…
The document asks how to compare credit risk for the same business partners across two periods. The described data include customer identifiers, ratings, rating-based default probabilities, loss given default, exposures, exposure at default, risk-weighted…
The answer describes a model-based way to relate default probabilities to credit spreads. It distinguishes physical default probabilities, estimated from real-world outcomes, from risk-neutral probabilities used in pricing. Within a Merton-style framework,…
The discussion asks how to assess the effect of rising LIBOR on companies with foreign currency debt when available balance-sheet data does not identify the debt’s currency or whether its rate is fixed or floating. The answer explains that those details…
The document explains the sign of convexity for payer and receiver swaptions by starting with the underlying interest rate swap. A payer swap pays fixed and receives floating, so it benefits when rates rise. However, the gains from higher rates are…
The document raises foundational questions about how yield relates to duration and discounting. It distinguishes Macaulay duration, the present-value-weighted average timing of a bond’s cash flows, from the bond’s final maturity. A bond with duration shorter…
The document clarifies the interpretation of a calibration described for the one-factor Hull–White interest-rate model. The question asks whether the optimization produces a mean-reversion rate and diffusion parameter shared across all curve tenors, rather…
The document considers why bump-and-reprice calculations can assign substantial duration to an interest rate swap’s floating leg, even though a common bond-style approximation treats that leg as having near-zero duration. Shifting the forward curve changes…
The document works through building discount and projection curves in QuantLib to price a five-year EUR receiver interest rate swap. The setup uses an ESTR-linked overnight curve for discounting, a six-month Euribor curve for forecasting, and Bloomberg swap…
The document discusses how to measure and hedge repo rate exposure embedded in a bond derivative. It notes that repo rates can move with overnight indexed swap rates while still diverging enough for the repo versus OIS spread to create material risk. This…
The document addresses converting a day count to maturity into a standard tenor label, such as mapping a short period to one month or a longer period to two years. The answer argues that no universal automatic convention is appropriate because users may want…
The discussion asks whether simulated issuer equity returns or bond returns are a better basis for estimating joint rating-change and default events across a bond portfolio. It distinguishes bond-return simulations, which reflect interest-rate, swap-spread,…
The document asks how unexpected loss is treated under Basel II and presents the advanced internal ratings-based framework’s expected-loss expression, correlation and maturity adjustments, capital requirement, and risk-weighted asset calculation. Its…
The discussion compares at-the-money payer swaptions with different expiry and underlying swap terms: one-year expiry on a ten-year swap and ten-year expiry on a one-year swap. It explains that expiry affects option value through volatility accumulated over…
The document frames a valuation question about the equity component of a convertible bond under the Tsiveriotis–Fernandes approach. It distinguishes the cash component, which represents coupons and principal and is discounted at a risky rate, from the equity…
The document poses a comparison between two ways of hedging the financing and rate exposure of an investment-grade bond in an inverted curve environment. The investor buys a bond yielding less than three-month Euribor and wants to lock in a spread over…