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 whether Moody’s seasoned corporate bond yield series, published by the Federal Reserve, represents only long-term debt. It cites a secondary source describing minimum and average maturities of twenty and twenty-eight years,…
The document derives the domestic-currency value of an FX forward that pays the difference between the spot exchange rate at maturity and a contracted strike. It starts with the domestic risk-neutral discounted expected payoff, then changes to the domestic…
The document outlines a practitioner approach to estimating credit value adjustment for an uncollateralized swap with a special purpose vehicle. When the SPV’s only asset is a corporate loan, the answer suggests using the borrower’s credit default swap…
The document distinguishes the overnight federal funds rate from the yield on a ten-year Treasury and explains that their spread is calculated as the long-term yield minus the short-term rate. The spread is not a fixed mathematical function of the policy…
The discussion considers why dual range accrual notes may reference a long-minus-short swap-rate spread, such as the 30-year minus 2-year rate, alongside a separate swap rate. It distinguishes risk-neutral pricing probabilities from historical frequencies:…
The document compares pricing equations for a zero-coupon bond, a fixed-rate swap, a caplet, and a floorlet under a one-factor short-rate model. The bond equation is homogeneous, while the other three equations contain an additional term representing cash…
The document is a request for introductory resources on constructing multiple interest rate curves. The topics of interest include simultaneous curve bootstrapping, how a swap’s risk is distributed across curves, and how curve frameworks account for…
The document presents an interview prompt about constructing a risk-neutral trade based on the difference between the two-year-to-ten-year interest-rate spreads in Germany and the United States. It asks what “risk neutral” should mean in a trading interview,…
The document asks why interest-rate models often describe changes in the short rate rather than percentage changes in bond yields, as commonly done for stock prices. The answers clarify that many classic models concern the instantaneous short rate, which is…
The document explains how to revalue an existing SOFR overnight index swap using a curve built from market quotes on a later valuation date. Rebuilding a curve and pricing engine alone does not update the index and cash flows already embedded in the swap. A…
The document raises a parameter-estimation question for the Cox-Ingersoll-Ross process, whose diffusion scale depends on the square root of the state. The author describes fitting the model with an Euler discretization that can be rearranged into a linear…
The document explains why a credit default swap can have interest-rate exposure even though its main market risk is credit. In a simplified reduced-form model with flat, deterministic interest and hazard rates, CDS value is framed as the difference between…
The document explains how to estimate the change in delta as rates move for a curve trade that offsets the DV01 of 20-year and 30-year swaps. It gives a rule of thumb that relates convexity to swap tenor and PV01, then offers a shape-sensitive approximation…
The document compares the analytical mean of the Vasicek short-rate model with a Monte Carlo estimate built by stepping rates forward over a time grid. Its initial update formula includes the mean-reversion drift and a Gaussian shock scaled by volatility and…
The question considers simulating an interest rate curve from historical key rate changes, using a covariance matrix and a normal copula, then interpolating the simulated rates and repricing assets. It also asks whether historical curves can be interpolated…
The discussion asks whether a historical VaR can legitimately be positive when a bond portfolio’s total return index rises throughout the observed sample. One response says the main weakness is likely the calibration window: a short history may contain no…
The document explains how to combine the Macaulay durations of two bonds into a portfolio duration. Its key concept is that the portfolio duration is the market-value-weighted average of the individual bond durations. Each bond’s duration is multiplied by…
The document discusses credit risk estimation when a portfolio has few or no observed defaults, making ordinary regression approaches difficult to fit. It points readers to texts on credit risk parameters, rating-based probability of default (PD) estimation,…
The document raises questions about three proposed relationships: lower-coupon bonds tend to have higher duration, higher coupons tend to have lower convexity, and portfolios with payments spread over time may have more convexity than portfolios whose…
The document compares the conditional default probability in the Basel IRB capital formula with the conditional probability expression in the Vasicek model. The apparent sign difference comes from the probability threshold used: the IRB expression uses the…
This discussion seeks free research on current fixed-income topics, including interest rates, credit fundamentals, and new issuance. The requester prefers analysis of present economic and financial events over work focused mainly on stochastic models or…
The note clarifies how the daily correction factor for Brazilian DI futures is applied to settlement prices. It addresses whether the factor uses the prior day’s DI rate or the current day’s rate, and how public holidays affect the calculation. The answer…
The discussion distinguishes par CDS spreads, which are bootstrapped together to infer a piecewise hazard curve, from quoted spreads, which are interpreted using a flat hazard curve for an individual tenor. It also defines quoted upfront as the value…
The document compares computational approaches for long-dated American options. One answer recommends implicit or Crank–Nicolson finite-difference methods: these can use larger time steps on a given price grid than a binomial tree and can restrict the…