Clik here to view.
Facts, rules of thumb, and intuition for swap spreads
The N-year swap spread is defined as: N-yr swap spread := N-yr swap rate – N-yr government bond yield. Since most quants spend much less time on the bond market than on the swaps market, they often...
View ArticleClik here to view.
How to calculate carry
Positive carry can be an obsession for fixed-income investors. For a simple explanation of carry for a bond position have a look at this well-written post: click here.
View ArticleClik here to view.
Everything you wanted to know about Repo but were afraid to ask
Well the title is a bit of an overstatement! This post is actually just a short note with a link to a document which covers the concept of specialness in the repo market, and which is actually a good...
View ArticleClik here to view.
The value of Good Explanations
I am a firm believer in the value of good explanations, and I’d say a lot of my time is spent on finding the right explanation or intuition for a process or event (this blog itself is an example)....
View ArticleClik here to view.
What is the risk-neutral measure?
Here is a short list of the most common ‘big-concept’ questions that I was asked throughout my years as a quant (whether coming from people on the trading floor, in control functions, or from newcomers...
View ArticleClik here to view.
Why does the yield curve slope upwards?
In this post I give a short, but I think rather usefully direct reason for why the yield curve should slope upwards. All it requires is for you to put yourself in the shoes of an investor that has to...
View ArticleClik here to view.
Fixed-income investment strategies in the age of the New Normal
I came across an interesting presentation given by one of the senior members of PIMCO UK, a chap called Mike Amey. Click here to see it (a PDF). What I especially like about this presentation is that...
View ArticleClik here to view.
Calculating option prices in your head
We all know that option prices are calculated with the Black-Scholes formula, using a volatility, time-to-maturity, strike and forward. Typically you just chuck them all into your computer and let it...
View ArticleClik here to view.
What does ‘reduce the balance sheet’ mean?
This post is a LeanPost: it will be developed further depending on feedback from my readers. See my note here on what a LeanPost is. Many companies are these days talking about reducing the balance...
View ArticleClik here to view.
Project finance funding: a simple Excel model
Financing of infrastructure projects is a hot topic at the moment. Penny Lynch has kindly made a simple cashflow Excel model available which shows the key components (equity vs debt) of project finance...
View ArticleThe easy route to risk-neutral measure pricing
The principle of pricing in the risk-neutral measure is the foundation of quantitative analysis. I have already written a post which gives an intuitive description of the concept of a risk premium and...
View Article