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 raises a calibration problem for classical short-rate models, including Black-Karasinski and Hull-White, during the sharp rate increases of 2022–2023. The author is concerned that model parameters may struggle to fit current rate levels while…
The note addresses how to obtain zero rates for corporate bond cash flow mapping. It recommends building a yield curve by bootstrapping from liquid market instruments, such as deposits, swaps, or futures, and then using the resulting curve for discounting.…
The document clarifies how a bond futures conversion factor relates the futures price to the cheapest-to-deliver bond at delivery. When the delivery basis has converged, the futures price at delivery equals the CTD bond price divided by its conversion…
The document asks how to assess a company’s ability to repay long-term debt within roughly four years, using a book’s screening rule for financially strong businesses. It proposes dividing long-term debt by net income and gives Coca-Cola figures as an…
The document defines rolling for credit default swap contracts, distinguishing the creation of a new series from the maturity of an existing contract. For CDS indices, a new series is introduced on semiannual dates, and its basket of reference entities may…
The document explains two ways to create forward scenarios for a bond yield series. One approach resamples historical yield changes: repeatedly draw changes from the observed series, accumulate them from the latest yield, and use the resulting paths to…
The document distinguishes an analytic swap PV01 from a market risk measure calculated by shifting rates. Analytic PV01 measures the value change from moving the fixed coupon by one basis point while holding discount factors unchanged; it is useful for…
The document discusses estimating the volatility and mean-reversion parameters of a Hull–White short-rate model when the market has daily overnight rates and a swap-based zero-coupon curve but no actively traded options. It distinguishes estimation from…
The document derives probabilities for the first observation date on which a geometric Brownian motion underlier exceeds an autocall barrier. It writes the asset as an exponential of drift and Brownian motion, then converts the barrier condition at each…
The document addresses why interest rate swaps are often valued using forward rates derived from today’s yield curve instead of simulating each future floating payment. It explains that spot rates are bootstrapped from traded instruments and imply forward…
The note asks whether a government bond yield can be divided into an expectations component and a term premium within the Heath–Jarrow–Morton framework. It distinguishes a real-world view of yields, in which investors may describe yields as expectations plus…
The note addresses whether a rates Bermudan callable or swaption remains convex as its strike changes, even though possible exercise dates correspond to swaps with different remaining maturities. It represents the exercise payoff at a given date as the…
The document discusses how to express the Heston stochastic volatility pricing equation using a forward price, log-moneyness, time to expiry, and an undiscounted option value. It gives the spot and variance processes, their correlated Brownian shocks, and a…
The document discusses how to convert daily US Treasury volatility to an hourly measure and cautions against assuming that trading activity is evenly distributed across the full day. Treasury trading is described as over the counter, without official…
The document introduces Fischer Black’s idea that the nominal short rate can be viewed as an option: it is the greater of zero and the sum of a shadow real interest rate and inflation. The shadow rate is described as tied to the investment opportunity set,…
The document outlines practical approaches to estimating the value of a corporate bond in default. Distressed-debt analysis can consider possible bankruptcy or restructuring recoveries, including cash, replacement debt or equity, and other securities. Those…
The post asks how to transform one risk-neutral pricing expression for a derivative with funding and collateral rates into another expression using collateral-rate discounting and an adjustment based on the difference between funding and collateral rates.…
The document explains how market-implied probabilities for Federal Reserve rate hikes can be estimated from fed funds futures. Under a simplified assumption that only two outcomes are plausible, the expected rate increase embedded in futures prices can be…
To estimate the implied repo rate for a bond that has not yet been issued, the document recommends specifying its coupon and yield. Its issue date and maturity are treated as known; after the coupon and yield assumptions are set, the implied repo can be…
The document explains how bond weights shape a fitted government discount curve when the curve is calibrated by minimizing weighted price errors. Equal price weights give each bond the same influence. Weighting inversely by squared DV01 roughly shifts the…
The document explains how an unpublished floating-rate fixing creates P&L exposure for an interest rate swap, measured as the difference between the published fixing and the market forecast. Once the fixing is known, the associated cash flow is fixed; the…
The document is a short request for practical resources on modeling probability of default under IFRS 9, with an answer recommending two books on IFRS 9 and CECL credit risk modeling. It notes that the framework uses probability of default and loss given…
The document explains why a receiver swap's return is not naturally computed as a percentage change in its market value: the swap can begin at zero value and later have positive or negative value. It presents change in swap value divided by notional as one…
The document explains the relationship between the par fixed rate of a spot-starting fixed-for-floating interest rate swap and its DV01. It gives the par-rate expression as one minus the final discount factor divided by the swap DV01, and expresses DV01 as…