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 clarifies the relationship between a bond’s price and its yield to maturity. Yield to maturity is defined as the rate that discounts the bond’s cash flows to its observed price, so a quoted price can be used to calculate the corresponding yield.…
The document asks how a bond carry approximation based on the difference between yield to maturity and the repo rate is derived. It considers whether yield to maturity can stand in for running yield, defined as coupon income relative to price, and suggests…
The document discusses how Federal Reserve facilities and administered rates affect overnight money markets and the yield curve. It distinguishes the reverse repo facility, described as supporting a floor, from interest on reserve balances, which can act as…
The document asks how to decompose the one-day mark-to-market PnL of a position receiving a forward six-month interest rate into changes in rates and carry. It gives initial and next-day quotes for a six-month rate and a six-month rate starting six months…
The question asks whether spot rates bootstrapped from a par swap curve can discount a fixed-rate corporate bond. The response says that, in general, swap-derived rates alone are not enough to value the bond. Swap and bond cash flows differ in important…
This discussion examines how a bond’s par coupon relates to the zero rate at the same maturity when the zero curve slopes upward or downward. A par yield is the fixed coupon rate that makes a coupon bond trade at par; a zero rate is the rate associated with…
The document asks how Federal Reserve policy tools relate to different parts of the interest-rate curve. It distinguishes the federal funds rate, an overnight interbank rate, from Treasury yields, whose shortest listed maturity in the question is one month.…
The document examines a numerical root-finding failure when calculating yield from a clean bond price close to maturity. Its explanation is that a price well above the redemption value, with only a short time remaining, can imply an extreme negative yield. A…
The document considers whether a U.S. retiree can hedge a personal spending basket whose inflation runs above CPI-U, using consumer-accessible investments over a long horizon. It concludes that no single individual instrument is identified that directly…
The document raises a curve interpolation question: how to estimate a two-month point when the available term structure contains three-month Libor zero rates at three-month intervals. The response clarifies that these are points on a term structure of…
The document explains how to represent an interest rate swap with individually specified coupon dates, rates, and notionals in QuantLib. One approach constructs fixed rate coupons one at a time, which lets each period carry its own accrual dates, rate, and…
The document asks how to determine the initial delta for two linear products linked to an index made from a constant cash component and a credit default swap position. One product pays the index’s percentage performance at maturity; the other returns…
The document clarifies what it can mean to derive a term projection curve, such as a three-month curve, given an overnight indexed swap curve. The questioner understands that bootstrapping OIS swap rates produces implied forward rates and asks whether this…
The document considers how to estimate daily risk-free rates when Treasury bill yields are available only monthly or weekly, a data limitation the author says can arise in developing economies. The proposed method converts a period yield into an equivalent…
The document explains a way for a domestic investor to hold a foreign currency security without taking direct foreign exchange exposure. It compares three economically equivalent approaches: combine spot and forward FX transactions around the security…
The document sketches why a constant-maturity swap (CMS) payment differs from a swap rate’s value under the swaption annuity measure. A swaption payoff is naturally valued under that measure, while a CMS coupon paid at a later date is expressed under the…
The document asks whether diffusion or heat-equation methods can price a derivative whose payoff has a nonzero lower bound. The answer rewrites the proposed payoff as a standard call payoff plus a constant, then values the pieces separately under the…
The document questions the practice of using sovereign credit risk as an input to a country's equity risk premium. It notes that estimates may draw on ratings, bond default spreads, or credit default swap spreads, with an adjustment factor applied to…
The document frames an optimization problem: selecting asset allocations across successive decades over a century, using a restricted set of choices among equities, cash, and bonds. Each period permits either a full allocation to one asset or an equal split…
The document explains why par instruments are commonly used to represent a yield curve and how a par curve relates to zero-coupon and forward curves. A zero curve, obtained through bootstrapping, represents discount rates for individual future cash flows.…
The document investigates why cubic interpolation of discount factors in QuantLib might produce zero or irregular forward rates near a curve endpoint, in contrast with log-linear interpolation. It describes a curve built from dated discount factors and…
The document asks how to build a consistent historical swaption volatility series when market conventions change. It distinguishes normal from Black volatility and quotes referencing IBOR or OIS discount curves, and asks whether backtests should use only…
The note describes using meeting-date overnight index swaps to infer market expectations for central bank rate decisions. The proposed comparison is between the current effective overnight rate and the OIS rate spanning the period around a policy meeting.…
The note clarifies what a two-year spot rate represents when valuing fixed-income cash flows. It is the rate used to discount cash flows occurring at the two-year horizon, such as the second annual coupon payment on a coupon-bearing bond. The same…