Re: [Quantlib-users] Pricing swaps with short first accrual periods

[Mike D. <mik...@gm...>]

Tom,

This has been on my list to tackle for a while. Basically you need to build
schedules AND (assuming it’s a short front stub) override the first cash
flow of the swap object using the interpolated fixing from your two curves
(2m + 3m in this case). Given that 2m is getting the axe soon, I think I’ll
probably just go with the simpler version of interpolating off the 1m and
3m curves and assign the stub fixing that way.

Luigi gave me some starting pointers to look at several months ago, let me
see if I can dig them up and pass them along. I’d be happy to work with you
on this if you’d like.


Regards,
Mike



On Fri, Dec 11, 2020 at 15:22 Arkadiy Naumov <ark...@gm...>
wrote:

> Hi Tom,
>
> As far as I understand, this is all transparent in QL, in a sense that all
> you have to is to build a swap with appropriate payments schedule. Nothing
> special is required for the curve (unless you are really keen on very
> particular interpolation between very particular points) - a curve is  able
> to generate fixing values for any arbitrary tenor on its own.
>
> Sent from my iPhone
>
> > On Dec 11, 2020, at 3:32 PM, Tom Anderson <tw...@ur...> wrote:
> >
> > Hello,
> >
> > Certain difficult people might like to trade swaps whose tenors are not
> integer multiples of their index tenors. For example, a 26.5 month swap
> against 3-month LIBOR, which, assuming backward date generation, has a
> 2.5-month first accrual period. My understanding is that in this case, the
> cashflow for the first period is determined not by a fixing of 3-month
> LIBOR, but by linear interpolation between fixings of the closest tenors of
> LIBOR (2 and 3 month in this example).
> >
> > Can i model swaps like this with QuantLib?
> >
> > I'm assuming i'll have to build separate curves for the tenors i want to
> interpolate between, but how do i connect them to a swap?
> >
> > Thanks,
> > tom
> >
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