Re: [Quantlib-users] OvernightIndexedCouponPricer::averageRate when "the last fixing is not used for its full period"

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

Quick question on this: I am looking at this code

                        // The last fixing is not used for its full
period (the date is between its
                        // start and end date).  We can use the
telescopic formula until the previous
                        // date, then we'll add the missing bit.
                        const DiscountFactor endDiscount =
curve->discount(valueDates[n-1]);
                        compoundFactor *= startDiscount / endDiscount;

                        Rate fixing = index->fixing(fixingDates[n-1]);
                        Time span =
index->dayCounter().yearFraction(valueDates[n-1], date);
                        compoundFactor *= (1.0 + fixing * span);

and I am wondering why we don't just do

                        const DiscountFactor endDiscount =
curve->discount(date);
                        compoundFactor *= startDiscount / endDiscount;

instead, i.e. what is the benefit of separating out the last fixing
and compute its contribution exactly while we use the telescopic
approximation for all previous fixings anyway?

Thanks
Peter



On Tue, 28 Mar 2023 at 16:11, Luigi Ballabio <lui...@gm...> wrote:
>
> Hello,
>     no, unfortunately rate cutoff is not implemented yet.  I think it's for coupons that end on a holiday, but I don't know if that's an ISDA rule.
>
> Luigi
>
> On Mon, Jan 30, 2023 at 1:16 PM Ioannis Rigopoulos <qua...@de...> wrote:
>>
>> Hi Tom,
>>
>> It is a financial feature part of the OIS term sheet and called "Rate
>> Cutoff". I have written about this at
>> https://www.deriscope.com/products/Key_OI_Term_Rate__Rate_Cutoff.html
>>
>> Regards,
>>
>> Ioannis
>>
>> On 1/30/2023 12:38 PM, Tom Anderson wrote:
>> > Hello,
>> >
>> > I have a rather basic question.
>> > OvernightIndexedCouponPricer::averageRate has a special case for when
>> > "the last fixing is not used for its full period":
>> >
>> > https://github.com/lballabio/QuantLib/blob/38bf3fa4a728d82a9975b2ae5fb86eee0433f3ce/ql/cashflows/overnightindexedcoupon.cpp#L107
>> >
>> >
>> > Is this for when the coupon ends on a day that is not a business day?
>> > Looking at how the list of dates is put together (in the telescopic
>> > case), that seems to be the only reason the last date would not be the
>> > end of the accrual period:
>> >
>> > https://github.com/lballabio/QuantLib/blob/38bf3fa4a728d82a9975b2ae5fb86eee0433f3ce/ql/cashflows/overnightindexedcoupon.cpp#L188
>> >
>> >
>> > If so, out of interest, does this ultimately flow from ISDA rules for
>> > OISs, or is this just financial common sense?
>> >
>> > Thanks,
>> > tom
>> >
>>
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