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 that a ratio of the swap bid–ask spread to the bond bid–ask spread is not a standard bond-versus-swap spread measure. Instead, the appropriate definition depends on the comparison being made and the desired treatment of the bond’s cash…
The document considers negative spreads produced by sector spread estimates or stressed credit curves, and whether they should be converted to zero default probability. It starts from a simple spread-to-default-probability approximation based on recovery,…
The discussion considers how a bond dealer who cannot sell short might adapt a market-making strategy designed for dealers with two-sided inventory flexibility. Its central argument is conditional: if a long-only dealer already holds enough inventory to…
The discussion addresses building a daily indicator for which Eurozone government bond is cheapest to deliver against a bond futures contract, for use in a repo-rate panel regression. It gives a Bloomberg Excel history query for the futures CTD identifier…
In QuantLib, the tenor passed to a Schedule specifies the spacing used to generate dates between the schedule’s start and end dates. The discussion applies this to a floating-rate bond that references quarterly EURIBOR but pays every two months: the index…
The document explains how an at-market overnight index swap fixed rate is chosen so the swap has zero value at inception. Its floating leg compounds daily overnight rates, while the fixed leg pays the agreed rate according to the contract schedule. Under the…
The document explains the rate-unit convention for fitting Nelson–Siegel–Svensson curves to spot, forward, or discount rates. Its answer states that rates should be entered as decimals, such as 0.05 for a quoted five percent, rather than as whole percentage…
The document clarifies a distributional result for the Cox–Ingersoll–Ross short-rate model. Conditional on the current rate, a scaled future rate has a noncentral chi-square distribution; the rate by itself is not generally described by that same…
The document derives the fixed rate that makes the present values of a swap’s fixed and floating legs equal under a single-curve framework. It first expresses each leg as a discounted sum of accrual-period cash flows, then solves for the fixed rate as the…
The document lays out a broad study checklist for financial risk management. Its product areas include fixed income, equities, currencies, commodities, exotics, and credit derivatives. The concepts span risk and return, hedging, risk neutrality, no-arbitrage…
The document distinguishes quantifiable risk, Knightian uncertainty, and Black Swan events using examples from option and credit pricing. One explanation treats ordinary risk as an event with a probability that can be estimated from market prices, Knightian…
The document explains how to fit Nelson–Siegel–Svensson (NSS) parameters to observed bond prices. Each bond is represented by its cash flows and their times to payment; each cash flow is discounted using the spot-rate curve implied by a candidate parameter…
The document outlines a multi-curve approach to building the euro three-month forward curve alongside the OIS discount curve. It identifies short-dated futures, swaps at longer maturities, and LIBOR–OIS basis swaps as market instruments used in the process.…
The document shows how to calculate a cohort-level single monthly mortality rate (SMM) from loan-level data. The cohort SMM is the total prepaid monthly balance divided by the total scheduled balance across the loans in that cohort. Equivalently, it is a…
The document explains the difference between credit default swaps and recovery swaps in the context of loan default risk. A CDS provides protection when a defined credit event occurs, such as a borrower’s failure to make a coupon payment. The protection…
The document distinguishes returns from cumulative returns and explains how the definition of the cumulative window affects stationarity. A cumulative return measured from a fixed starting date accumulates variation over time, so even when the underlying…
The discussion distinguishes a derivative’s contractual cash flows from the funding burden a dealer may face while holding and hedging an uncollateralized position. A forward entered at zero value can later become an asset or liability without requiring the…
The document connects the elliptic form of the Heston stochastic volatility operator to a boundary value problem with Dirichlet conditions. It explains that solutions to obstacle problems for this operator can represent value functions for perpetual…
The document collects suggested reading for an internship in model risk management focused on counterparty credit risk, especially exposure from derivatives. Its references cover modeling, pricing, and hedging counterparty exposure; credit valuation…
The document seeks practical examples of spreadsheet and database applications used on trading desks or in bank middle offices, particularly to prepare for interviews. Responses point to several kinds of learning material: QuantLib as a source of tested…
This discussion explains why changing QuantLib’s evaluation date does not necessarily move the reference date of a discount curve built directly from a fixed set of dates and rates. It outlines two ways to construct a curve when a different reference date is…
The document surveys possible sources for company credit ratings and related credit information. It distinguishes rating data from yield data associated with a rating: the cited FRED series is offered as a source for yields, while corporate ratings and…
The document explains an approximate way to relate the duration of a call option on a fixed-income instrument to the duration of the underlying bond. It scales the bond’s duration by the option’s elasticity, calculated from the option delta, underlying…
The document explains that an FX swap carries interest rate exposure because its cash flows can be viewed as borrowing in one currency and lending in another. Changes in rates in the two currencies can alter the value of the locked-in funding terms, so the…