Re: [Quantlib-users] IndexedCoupon and possible convexity adjustment

[Luigi B. <lui...@fa...>]

On 2004.08.31 10:52, e.m...@ti... wrote:
> Hi all,
> I think that a convexity adjustment should be introduced.
> In my opinion- but it is just my opinion-
> it would be better to be inserted in the fixing,
> since it is a proper correction to the rate's value.

Ok, one vote for adding it to fixing().

> My question is: should it be the case to insert it directly into the
> Xibor?

No, I think it should be inserted (as a virtual method) into  
IndexedCoupon. After all, the convexity is due to the fixing being  
accrued over a period which is not its natural one--i.e., is due to the  
fixing being used in a coupon. The fixing() method of IndexedCoupon  
would adjust the value returned from Xibor::fixing() instead of just  
proxying it. Also, the calculation of the adjustment might require  
other dates besides the fixing date which are available to the coupon  
but not to the Xibor.

> This could be usefull when constructing other classes
> (suppose a floating rate note) which require Xibor and convexity
> adjustment.

The floating rate note would delegate the calculation to the coupon,  
instead of using the Xibor directly.

> Another idea since we are talking about convexity adjustment:
> It would be great to insert a CMS index as well. It is widely used
> and in this case the adjustment is really significant.

Yes, it could be done--the CMS index would return the forward swap  
rate, and the CMS coupon (deriving from IndexedCoupon) would adjust it.

Later,
	Luigi