#135 wrong discounting in BlackSwaptionEngine::calculate()

None
closed-fixed
nobody
None
5
2014-06-19
2011-09-12
No

In BlackSwapEngine::calculate() the variable atmForward is calculated by using the forwardingTermStructure as the DiscountingSwapEngine is initialized by it. But the discounting swap should be intialised by the discoutCurve_ so that the fair swap rate is calculated in the \"two curve world\".

More precisely, the block

// using the forecasting curve
swap.setPricingEngine(boost::shared_ptr<PricingEngine>(
new DiscountingSwapEngine(swap.iborIndex()->forwardingTermStructure(), false)));

should be changed with

// using the discounting curve
swap.setPricingEngine(boost::shared_ptr<PricingEngine>(
new DiscountingSwapEngine(discountCurve_, false)));
Regards,

Sarp Kaya

Discussion

  • Luigi Ballabio

    Luigi Ballabio - 2014-06-19
    • status: open --> closed-fixed
    • Group: -->
     

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