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 answer recommends calibrating interconnected interest-rate curves with a global solver instead of bootstrapping each curve in sequence. The workflow defines curves and calibration instruments, assigns each instrument its forecasting and discounting…
The document discusses where to obtain constant maturity swap (CMS) swap prices for comparing theoretical valuations with market quotes. One response points to swap-rate ticker conventions for different maturities, while another suggests looking for spread…
The document explains that weighted average cost of capital represents a company’s average financing cost, so a lower WACC is generally preferable from the company’s perspective. It then considers why investors may view a higher WACC differently depending on…
The document describes how a simulated short rate can be used to obtain bond prices and the term structure of interest rates. Under the risk-neutral measure, a zero-coupon bond price is the conditional expected value of discounting one unit of payment by the…
The document explains why Bloomberg’s FXFA and SWPM screens can show different rates and basis figures for a EUR/USD cross-currency swap. FXFA uses floating EUR and USD yields, while the example SWPM setup uses two fixed rates, so the coupon rates are not…
Ross recovery seeks to infer transition probabilities and risk preferences from state prices by removing a stochastic discount factor. The discussion distinguishes two questions: when a positive pricing measure can be transformed into a probability measure,…
The document explains why a floating-rate bond is commonly valued near par just after a coupon reset or payment. It starts with a loan whose interest rate sets both its coupon and its discount rate: the discounted repayment equals principal, leaving the loan…
The document describes how legacy defined-benefit pension funds can influence long-dated interest rates. These plans promise retirement benefits linked to employees’ salaries, creating long-term liabilities for the sponsoring fund. How the liabilities are…
The post asks how to build a yield curve from three-month interest-rate futures, using Euribor as an example, and whether cubic-spline interpolation is available in Python. It points to a reference on multi-curve bootstrapping and a worked Python…
The document explains how to infer a compounding frequency from a quoted nominal annual rate and an effective annual yield. It considers an account advertised at a nominal rate of 9.5% with an annual yield of 9.84%, then applies the quarterly compounding…
The answer proposes a game-theoretic explanation for possible inflation in bond credit ratings. It assumes that agencies compete for rating work, issuers pay for the service, and issuers prefer agencies that offer higher ratings because those ratings can…
The document describes a QuantLib calibration problem for the G2++ interest-rate model in a negative-rate environment. The reported error arises because the cap helper uses shifted lognormal volatility with zero displacement, which requires the strike plus…
The document distinguishes securities by the assets behind them and by how investors receive repayment. Asset-backed securities represent claims on pools of non-mortgage loans, such as auto or credit-card debt, while mortgage-backed securities represent…
The document asks whether a forward price for a financial product can be expressed as its current price divided by the price of a zero-coupon bond maturing at the settlement date. The proposed argument uses a conditional expectation under the…
The document relates Merton’s structural credit model to European option payoffs. It models company asset value as a geometric Brownian motion and treats equity at maturity as a call on firm value with debt face value as the strike. Risky debt is represented…
The answer demonstrates how a fixed-rate bond can be represented in QuantLib with an evaluation date, payment schedule, day-count convention, face amount, and coupon rates. The resulting cash-flow list contains coupon payments and the final principal…
The question concerns building an inflation-swap curve with QuantLib rate helpers and encountering an error because multiple instruments share a pillar date. The practical diagnostic is to inspect each helper’s pillar date, which is the date used as a curve…
The document describes a proposed product paying a notional amount times the change in the spread between 30-year and 10-year Treasury yields. The response frames the hedge as exposure to two future yields, corresponding to the 10-year and 30-year points on…
This exchange clarifies how QuantLib constructs a monthly schedule when end-of-month handling is enabled. The example starts and matures on month ends, uses forward date generation, and marks a date near the end of March as a holiday. Although the schedule…
The document asks why credit rating grades can span different widths of probability of default (PD). Its example mapping assigns relatively narrow PD intervals to stronger grades and wider intervals to weaker grades, and raises the possibility that a PD…
The document poses a fixed-income modeling question: whether a bond spread curve can be converted into a credit curve by applying the same bootstrapping function used for a CDS par-spread curve. The setup assumes a standard CDS framework with piecewise…
The document poses a fixed-income immunization question involving a mortgage asset with fixed payments, prepayment and option-adjusted spread models, and calculated price, duration, and convexity. The asset and a blend of liabilities are assumed to trade at…
The document explains what the ACT/360 day-count convention means when calculating interest. A year is treated as 360 units for the calculation, while elapsed time is counted in actual calendar days. As a result, a 365-day period accrues interest for 365/360…
The document asks which risk-free rate to use when constructing a maximum Sharpe ratio portfolio from a rolling estimation window of monthly returns. It frames the problem within mean-variance portfolio theory, where the Sharpe ratio measures expected…