Re: [Quantlib-users] Bond forward NPV

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

Hello Francois, may you open an issue on GitHub for this if you haven't
already? Thanks!

Luigi


On Sun, Jul 31, 2022 at 7:19 PM Francois Botha <ig...@gm...> wrote:

> Hi all,
>
> I'm doing some fixed rate bond forward calculations and I'm trying to
> understand the forward value.
>
> In forward.cpp, the code is:
>     Real Forward::forwardValue() const {
>         calculate();
>         return (underlyingSpotValue_ - underlyingIncome_ )/
>                discountCurve_->discount(maturityDate_);
>     }
>
> and in bondforward.cpp, the fields are set as:
>         underlyingSpotValue_ = spotValue();
>         underlyingIncome_    = spotIncome(incomeDiscountCurve_);
> and
>     Real BondForward::spotValue() const {
>         return bond_->dirtyPrice();
>     }
>
> So underlyingSpotValue_ is hence the bond dirty price (per 100 nominal)
> and underlyingIncome_ is the value of the bond coupons, but not per 100
> nominal, but rather per the actual nominal of the bond.
>
> This looks like an unintended discrepancy in notional amounts and would
> explain why the forward price and NPV for the bond forwards aren't close to
> what I expect.
>
> There are however unit tests (e.g. testFuturesPriceReplication()) that
> explicitly test this.
>
> Looking forward to an expert opinion here.
>
> thanks
> Francois Botha
>
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