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 why the DV01 of a fixed income swap is not constant across interest rate levels. A simplified rule of thumb discounts each future annual payment using a single rate, then sums the discounted sensitivities. Under that approximation, a…
This discussion explains why a fixed rate bond’s net present value can differ from its dirty price in QuantLib. The key distinction is the discounting date: NPV uses the discount curve’s reference date, while dirty price is expressed at the bond’s settlement…
The document considers how to price term interest-rate exposure in Poland as contracts move away from WIBOR, asking whether WIRON can support forward-looking term rates. Its answer argues that a term rate generally depends on a sufficiently active…
The document distinguishes using a bootstrapped interest rate curve from using a stochastic model of rate dynamics. A market curve built from instruments such as forward rate agreements and swaps is sufficient to price simpler contracts through no-arbitrage…
The document addresses a Python QuantLib error encountered while pricing a European credit default swap option with a Black-style option engine. The reported constructor error indicates that the engine expects its volatility input as a quote handle rather…
The document explains how to compare spreads on fixed-coupon bonds and loans or floating-rate notes. Its answer says that the fixed bond’s additional interest-rate exposure need not justify a separate spread adjustment, since that exposure can be hedged at…
The document clarifies why repo and reverse repo can refer to opposite sides of the same collateralized transaction. A party that delivers a bond and receives cash is commonly said to repo out the bond; economically, that party is borrowing cash against the…
The document explains why a foreign exchange forward is not generally the conditional expectation of the future spot rate under the domestic risk-neutral measure when interest rates are stochastic. The forward price instead comes from discounting the payoff…
The document frames the rate sensitivity of a pay-fixed, receive-floating interest rate swap as three contributions: discounting floating coupons, discounting fixed coupons, and projecting floating cash flows. It asks how the magnitudes of those components…
This note examines when a floating rate note (FRN) prices at par and how its rate exposure depends on the relation between its coupon index and discount curve. With matching forecast and discount curves, the floating coupons telescope against the discounted…
The document answers whether a country-specific market risk premium and inflation rates belong in a currency forward-rate calculation. Under covered interest rate parity, the forward exchange rate is determined by the spot exchange rate and the two…
The document explains what a strip of Eurodollar futures can imply when its quarterly rates are compounded over a one-year period. The resulting rate represents a December-starting one-year compounded three-month LIBOR forward, and is closely related to a…
The document asks how to obtain a Green's function for zero-coupon bond pricing under the Vasicek short-rate model. It gives a pricing partial differential equation with a market price of risk adjustment and compares it with the forward Fokker–Planck and…
The document derives the dynamics of a short-rate process whose definition includes both a deterministic time integral and an Itô integral. The key step is to name the stochastic integral as a process, then express the rate as a function of time and that…
The document explains how to convert an annually compounded interest rate into the continuously compounded rate used in the Black–Scholes model. Equating the accumulated value under each convention over the same time horizon gives the conversion: take the…
This exchange challenges the claim that a Constant Maturity Swap keeps a company’s debt duration near the tenor of its CMS index throughout the life of the trade. CMS names the rate used to reset a leg, such as the prevailing five-year swap rate; it does not…
This exchange explains how to bootstrap an EONIA curve in QuantLib-Python with a reference date that stays fixed when the evaluation date changes. The proposed solution is to use the `PiecewiseLogCubicDiscount` constructor that accepts an explicit reference…
The document asks whether extensions to the SABR stochastic-volatility model, often motivated by rates that can become negative, offer benefits for options on non-negative underlyings such as equities and foreign exchange. The response argues against using…
The document describes a proposed forward-starting swap steepener: receive fixed on a five-year swap and pay fixed on a thirty-year swap, with both starting at a future date. It frames carry as the benefit that may arise if the spot five-to-thirty-year curve…
The document asks how to calibrate the one-factor Hull–White interest-rate model under a historical measure for counterparty credit risk calculations. It distinguishes this from risk-neutral calibration, which commonly fits market prices of swaptions or…
The document considers how to hedge a government bond portfolio using available short- and long-maturity futures. It cautions that a single quoted risk measure or maturity match is not enough to determine an effective blend: DV01 is nonlinear, and duration…
The document asks how UK banks can offer mortgage rates that appear lower than the rates paid on some deposits. Its answers challenge the idea that comparing those two rates alone reveals the economics of mortgage lending. One answer says large banks often…
Perpetual bonds have no contractual maturity date, so they provide a real-market example of instruments modeled with an infinite lifetime. The document explains that this legal feature does not necessarily mean investors should expect the bond to remain…
The document explains why an interest rate swap’s sensitivity to its forecast curve can change when its discount curve moves. Changing discounting alters the present value assigned to projected floating-leg cash flows; as those values change, the swap’s…