A well crafted notebook is a kind of living textbook and this is a great example. Professor Ashwin Rao of Stanford University has authored a fascinating Colab notebook explaining, at a high level, why Silicon Valley Bank (SVB) failed.

Due to the nature of it’s clientele (largely tech startups), SVB enjoyed a strong cash position and invested much of that portfolio in short and long term bonds. Unfortunately, with post-pandemic rising interest rates, bond prices plunged, drastically reducing the value of those investments while, at the same time, increasing interest rates the bank owed to consumers and institutions above the level they earned on their own investments.

There were other factors involved — Dr. Rao’s analysis is limited to the economic and pricing dynamics underlying this story. This notebook will teach you how bonds work and why, in the investment world, there’s no such thing as a sure thing.

Check out the notebook here.