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 explains that conventional CDS spreads are quoted in basis points as an annual rate on the protected notional. It illustrates the quote with a five-year contract and a 75-basis-point spread, where protection on USD 10 million corresponds to USD…
The document asks how to infer discounted inflation and earnings growth by comparing nominal bond yields with inflation-linked bond yields or equity earnings yields. It identifies the nominal yield minus the inflation-linked yield as breakeven inflation, and…
The document describes a calculation mismatch when accumulating interest from a daily rate series. The example uses a constant rate of 2.557%, a 100-dollar principal, and a 31-day interval under continuous compounding with an ACT/360 convention. The direct…
The document distinguishes deliverable interest-rate swap futures from the swaps they may deliver into. The listed instrument is a futures contract, so it is not issued like a security and does not begin as a bilateral swap between the original buyer and…
The document clarifies how to classify a LIBOR market model extended with stochastic volatility. Adding a stochastic variance or volatility process to the dynamics of forward rates makes the resulting model a stochastic volatility model. The framework is…
The document explains why a square-root diffusion, also known as the Cox–Ingersoll–Ross process, has a transition distribution related to the noncentral chi-squared law. It gives a geometric argument: represent the process through the squared radius of…
The document addresses a practical interest rate swap carry calculation and clarifies the role of a six-month discount factor. It describes calculating upfront carry as the difference between the five-year swap rate and six-month Euribor, multiplied by the…
The document explains why a currency hedge can have an apparent annual cost even when a forward contract produces no profit or loss if the exchange rate at maturity matches the agreed forward rate. The key point is that the forward rate already reflects the…
The document considers how to estimate an event study of unconventional central bank measures using euro-zone government bond yields. It compares separate country-level ordinary least squares regressions with panel estimation, where observations across…
This discussion examines a claim that Citigroup, including predecessor institutions, faced insolvency three times: during the early 1980s emerging-market debt crisis, amid commercial real estate losses near the end of that decade, and during the 2008–2009…
The document describes a practitioner’s attempt to derive a money-market yield curve from observable interest rate swap rates whose floating coupons reference an average short-term forward rate. The author bootstraps the curve using linear interpolation…
The document examines how to model a fixed-rate loan when interest accrues using actual days and a 360- or 365-day year, while payments are monthly. A standard level-payment calculation assumes equal periods, so applying actual-day interest to that fixed…
The question distinguishes a market quotation for a swap spread from the customized fixed rate a company might negotiate when swapping its own borrowing costs. It asks whether a borrower’s credit margin over the floating benchmark changes the swap spread…
The document considers whether a bond future belongs in an interest-rate or credit-derivatives category. One response classifies it primarily by its contract mechanics: a bond future does not specify credit events that trigger a credit-derivative payoff, and…
The document clarifies how to interpret a quoted annual percentage rate when interest compounds monthly. For a nominal APR and twelve compounding periods per year, the monthly rate is the APR divided by twelve. Compounding that monthly rate over a full year…
The document outlines how to simulate multiple AR(1) series while preserving dependence between their innovations. Rather than generating each series independently, first construct joint error draws with the desired marginal distributions and a fitted…
The document presents a possible price inconsistency in a zero-coupon bond term structure: a four-year bond is priced above a three-year bond despite paying its face value later. It sketches a trade that shorts the four-year bond and buys the three-year…
The document troubleshoots finding Black implied volatility from a cap price using a numerical root solver. It identifies two issues: the supplied cap prices use percentage-style values while the pricing formula expects decimal values, and the implementation…
The discussion explains the market rationale for moving cleared US dollar swap discounting from the Effective Federal Funds Rate curve to SOFR. The accepted answer links the transition to the broader effort to replace LIBOR, whose survey-based construction…
The document considers why a swap exchanging one-month LIBOR for three-month LIBOR may carry a tenor basis spread. Its answer challenges the idea that the spread is simply compensation for differing credit risk. Shorter funding periods give the lender…
The document discusses whether a mark-to-market cross-currency swap with notional resets can serve as an effective hedge of foreign-exchange exposure under IFRS 9. It focuses on a hypothetical derivative used to represent the hedged item, noting a potential…
The document addresses why Excel’s US 30/360 day-count calculation can give different magnitudes when date order is reversed, using a leap-year February month-end and the following March date as its example. It reports that the result depends on the…
The document compares shorting an issuer’s bonds with buying credit default swap protection as ways to hedge long credit exposure. It begins by distinguishing the underlying position: someone short bonds may simply buy them back, while an investor who owns…
The document examines whether a fund’s reported NAV may be smoothed by comparing annualized volatility estimates from daily, weekly, and monthly returns. It explains that smoothing can make daily volatility look too low, while positive autocorrelation in…