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 considers how to hedge an 11-year off-the-run Treasury bond when direct access is limited to on-the-run securities. Its practical suggestion is to use the Treasury futures contract with duration closest to the bond and determine an appropriate…
The document raises practical questions about the reinvestment assumption behind yield to maturity (YTM): coupon payments may be too small to buy another bond, and newly issued Treasury maturities may not match the investor’s remaining holding period. It…
The document distinguishes avoiding a risk from transferring it. Avoidance means choosing not to take on the exposure, such as declining an investment; transfer means accepting the exposure while using a hedge or insurance-like instrument to offset its…
The document compares Brigo and Mercurio’s interest rate modeling text with Andersen and Piterbarg’s multi-volume treatment. It presents contrasting reader assessments: one favors Brigo and Mercurio for clear explanations, practical techniques, and a direct…
The note explains a futures-based method for separating an unexpected policy-rate change from the expected component. The cited approach uses the change in the rate implied by a current-month federal funds futures contract around the policy event, scaled to…
The note explains how the risk-free rate enters the standard CAPM as the intercept and as the benchmark subtracted from expected market return. In the standard setup, these roles use one rate; lending and borrowing at different rates can appear in a capital…
The document explains why a bond’s best quoted bid can equal its clean price. Clean prices exclude accrued interest, while dirty prices include it; most bonds are quoted using the clean-price convention. This makes equality between a quoted bid and a clean…
The note clarifies how to interpret year labels and short-rate nodes in a Black-Derman-Toy bond tree. It explains that the initial rate, r₀, discounts the bond over the period from now to one year, while the up and down rates at the next tree level apply…
The document explains why a vanilla bond’s duration and DV01 can move in opposite directions as its coupon changes. Duration describes price sensitivity relative to the bond’s value, while DV01 measures the approximate dollar price change for a one basis…
The document shows how to solve for the continuously compounded yield of a two-year coupon bond when its price is expressed as the discounted value of the coupon payments and principal. The suggested substitution sets the exponential discount factor equal to…
The document proposes estimating a Treasury bond futures price from a selected Treasury bond’s cash price and the conversion factor for the cheapest-to-deliver bond. It suggests dividing the bond price by that factor, then comparing the estimate with the…
The document explains why a forward contract with zero value at inception generally has a delivery price different from today’s spot price. It uses replication: hold the underlying asset and finance the delivery payment with a riskless bond position.…
This discussion addresses whether SABR should be calibrated directly to cap quotes or to the individual caplets that compose those caps. Its proposed workflow is to first strip market cap quotes into a caplet volatility surface, then calibrate SABR…
This exchange explains how to represent an FRA whose start date does not fall an integer number of months after the valuation date when constructing a yield curve with QuantLib. The suggested approach is to calculate the interval from the valuation date to…
The document describes a simulation question for a SABR-LMM model under a selected numeraire. Forward LIBOR rates have shifted SABR dynamics, stochastic lognormal volatilities, and correlated Brownian drivers. The author already uses Euler discretization…
The document explains why repricing a live swap at a later evaluation date can fail when an earlier floating-rate coupon needs a fixing that has become historical. QuantLib can forecast fixings from a yield curve for current or future dates, but a curve does…
The document asks where to obtain historical daily term repo rates, particularly rates tied to specific on-the-run US Treasury securities. It contrasts this data need with the availability of historical overnight repo data from DTCC, which the questioner…
The document considers whether a portfolio can be constructed to have a payoff of the form a plus b times a stochastic discount factor. The questioner proposes expressing the discount factor as a linear combination of asset returns, using a regression whose…
The discussion explains how cross-currency swaps and local overnight-indexed swap markets can help construct discount curves for cash flows collateralized in another currency. In a two-currency setup, the response describes fitting a foreign-currency curve…
For European interest rate options, the document distinguishes pricing from hedging. Vanilla prices across strikes can be represented by an implied volatility surface or interpolated total variance, so stochastic volatility is not required to price each…
The document sets up a small Treasury futures example to investigate whether parallel yield curve shifts can change which bond is cheapest to deliver. It uses two hypothetical deliverable bonds, prices them from a shifted curve, applies conversion factors,…
The answer distinguishes standard interest rate swap valuation from non-deliverable swaps, explaining that a library supporting ordinary swaps may not directly handle the latter. It outlines the fixed and floating leg present values for a standard swap,…
The answer explains why published deep learning results in trading are relatively scarce and why performance depends on the market and available data. It argues that rich equity data, including news and company information, may support more complex models,…
The document lists several basic ways to offset the interest rate exposure of a long bond position. Besides selling the same bond or a different bond, it names paying a swap and buying a payer swaption as possible hedges. Bond futures are also included in…