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

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

Hi Peter, I guess

     compoundFactor *= (1.0 + fixing * span);

is not the usual factor of the telescopic product because the span is not
the one underlying the fixing?  I'm not sure how much of a difference it
makes, though.

On Thu, Mar 30, 2023 at 10:51 AM Peter Caspers <pca...@gm...>
wrote:

> 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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