Re: [Quantlib-dev] IborIndex::forecastFixing

[Peter C. <pca...@gm...>]

Hi Francois,

let’s be a bit careful changing this ;-) … this computes a projected fixing of an Ibor Index which by definition is a simply (linearly) compounded rate r. The forward compound factor between d1 and d2 is therefore

1 + r * yearFraction(d1, d2)

The same compound factor in terms of discount factors (and therefore independent of any rate conventions) is given by disc1 / disc2, from which the return value formula follows.

Best Regards
Peter



> On 30 Jul 2018, at 13:02, Francois Botha <ig...@gm...> wrote:
> 
> Hi,
> 
> I notice this code:
> 
>     inline Rate IborIndex::forecastFixing(const Date& d1,
>                                           const Date& d2,
>                                           Time t) const {
>         QL_REQUIRE(!termStructure_.empty(),
>                    "null term structure set to this instance of " << name());
>         DiscountFactor disc1 = termStructure_->discount(d1);
>         DiscountFactor disc2 = termStructure_->discount(d2);
>         return (disc1/disc2 - 1.0) / t;
>     }
> 
> The last line looks odd to me. disc1/disc would return a non-continuously compounded return. Dividing by t is the approach to annualise continuous returns. So the 2 are not consistent.
> 
> I would have expected:
>     return std::pow(disc1 / disc2, 1 / t) - 1.0;
> 
> On the other hand, if I make that change, many tests fail, so I'm by no means confident about my assertion above.
> 
> regards
> Francois Botha
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