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4

Assume you have a consumption $c$ and an asset with the payoff $x$. Cochrane states that if you add "a little bit of this asset" in your portfolio first you care about the correlation between the payoff of the asset and consumption and ONLY then you care about variance. How you can see this? Let's assume that you slighlty change your portfolio by $\xi$ (i.e....


4

That's the best question that nearly no one asks. I'm with you on Quantlib and Strata, haven't really seen a very good design around but I've seen quite a few bad ones. It is definitely doable and has big advantages in terms of testing, maintenance, scalability. The golden rule is that your objects must correspond to concepts. The core problem (in bad ...


3

That simply means that a bond pays one unit of the currency in any state (regardless what happens in the future, i.e. there is no default risk about the payoff of a bond). So you will receive 1 in the next period (regardless what you paid for it). Of course, today you probably pay less than 1 due to time value of money...


2

A bond repays its notional face value (plus interest sometimes), not the original purchase price. Do not assume the the price you pay for a bond is its face value. Sometimes a law or a regulation (pretty useless, in my humble opinion:) does require that a bond newly issued in primary market be sold at exactly 100% par price (face value). Then the coupon ...


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