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 discusses the Bloomberg EUR implied three-month forward rate and asks how it is derived and which instruments support the underlying curves. The replies explain that the quote is connected to foreign exchange interest rate parity: the FX forward…
The document explains why an open repurchase agreement cannot be assigned one universal price without specifying its renewal and termination terms. An overnight repo that renews by tacit agreement is treated as a one-day repo: use the prevailing one-day rate…
The document asks why an expiring Eurodollar futures contract is quoted and settled as 100 minus LIBOR rather than as the discounted present value of a three-month deposit. The reply frames settlement through convergence and market indifference: at expiry,…
The document compares two ways to accommodate negative short rates in Cox–Ingersoll–Ross models. A displaced CIR shifts the rate by a constant so the shifted process follows the standard square-root model. CIR++ instead adds a deterministic time-dependent…
The document gives the usual daily settlement procedure and publication timing for Eurex bond futures, including Bund and Buxl contracts. On ordinary trading days, the settlement is based on the volume-weighted average of transactions during the final minute…
The discussion considers how to turn sparse USD LIBOR forward or projection rates into a curve for forecasting floating coupons in an interest rate swap, with a separate curve used for discounting. It cautions that a set of rates at selected maturities does…
The question considers how to estimate the duration of a ten-year, 12% bond that refinances at par after five years and has 20% amortization. The proposed approach discounts the first four coupon payments, treats the fifth-year payment as coupon plus…
The document explains why market curve calibration and trade valuation can use different collateral assumptions. Its example is a EUR/USD cross-currency swap with basis: the collateral currency affects which discount curves apply to each currency’s cash…
The document describes a least squares approach to infer discount factors from a set of benchmark bond prices. It represents each bond price as the sum of its cash flows multiplied by discount factors, then models each discount factor as a polynomial in time…
The document asks how to obtain discount factors for payment dates that do not align with standard swap payment schedules, using a forward starting long-dated interest rate swap as an example. Such cash flows may fall between dates supported by a…
The note explains how to select the call date when calculating yield to call for an American-style callable bond, which may be called any day after its call date. It recommends using the call-notice period: if a data source provides the required notice days,…
The note explains why EURIBOR remains widely used in European swaps and floating-rate notes despite the shift toward overnight risk-free rates such as €STR. It distinguishes EURIBOR from Euro LIBOR: Euro LIBOR was little used and ceased following regulatory…
The document asks how the floating leg of an interest rate swap referencing a risk-free rate is determined over a multi-month accrual period. It contrasts using a forward-looking rate known at the start of the period with compounding daily observed overnight…
The note considers a zero-coupon curve built with different interpolation methods on either side of a shared pillar: linear interpolation in one region and a quartic forward-rate spline in another. The central issue is the behavior at the junction.…
This explanation examines whether an account compounded annually at rate r can be valued after a fractional number of years using the power formula for compound growth. It first clarifies that compound interest is not linear in time: each period’s interest…
This explanation distinguishes three bond return measures: redemption yield, interest yield, and total return. Redemption yield is equated with yield to maturity: the return implied by holding a bond until maturity, assuming the relevant cash flows and…
The document explains why a corporation’s expected future cash flows are not generally valued like a certain payment discounted at the risk-free rate. If payment is uncertain, the chance of receiving nothing reduces its present value even when the risk-free…
The document describes a trade that starts with dollar funding, converts it to yen through a one-year FX forward arrangement, invests in a Japanese government bond, and later uses the bond proceeds to settle the currency exchange. It examines whether the…
The document outlines single-curve construction from market quotes for instruments such as deposits, forward rate agreements, futures, and swaps. A parameterized discount curve is fitted by repricing those instruments, typically through optimization over…
The document presents a short-rate calibration question based on simulating paths from a Vasicek-style process and estimating parameters with ordinary least squares. The questioner discretizes the rate change, regresses it on the lagged rate, and rescales…
The document considers how bond spreads should evolve in asset-liability management and economic scenario generation models. A spread is first calibrated at the valuation date so the model price matches the bond’s market value. The question is whether to…
The document explains the market phrase “risk proxies” in the context of currencies and other asset classes. It uses the term for assets that tend to be treated as risky: emerging-market currencies are described as vulnerable during economic trouble, while…
The document investigates why a two-month euro short-term rate OIS quote differs from a rate queried from a curve bootstrapped with dated overnight indexed swaps. The accepted explanation is that the floating leg compounds the overnight rate daily, while the…
The document asks how forward LIBOR rates evolve under the risk-neutral measure, starting from their martingale dynamics under a forward measure. The questioner attempts a change-of-numeraire derivation using a bond as numeraire, applies Girsanov’s theorem,…