Re: [Quantlib-users] SOFR swaps with different fixed and floating leg frequencies

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

Hello Tom,
    I guess you can create the fixed leg and the floating leg manually with
the help of the FixedRateLeg and OvernightLeg classes and then pass them to
the constructor of the base Swap class.  It will be a bit more cumbersome
to calculate results such as the fair rate, but it will be possible based
on the NPV and the BPS of the two legs.

Unfortunately we don't have a clean solution for the libor fallback yet,
only workarounds.  I'm not sure how we could model the problem; it could be
a new FloatingCouponPricer for the IborCoupon, or some kind of
FallbackLibor index, so that the swap could remain a fixed-vs-libor one but
the calculation would follow the fallback methodology.  Any suggestions
are welcome.

Hope this helps,
    Luigi


On Tue, Apr 18, 2023 at 8:44 PM Tom Anderson <tw...@ur...> wrote:

> Evening all,
>
> The OvernightIndexedSwap class uses the same schedule for both fixed and
> floating legs:
>
>
> https://github.com/lballabio/QuantLib/blob/master/ql/instruments/overnightindexedswap.cpp#L77
>
> If you currently have a USD LIBOR swap at CME Clearing, then unless you
> act to avert this, on monday morning, you will find that you have a SOFR
> swap with mostly the same details instead:
>
>
> https://www.cmegroup.com/trading/interest-rates/files/cme-conversion-for-usd-libor-cleared-swaps.pdf
>
> (see page 22 onwards, and in particular the example on page 25)
>
> The details which are preserved include the payment frequencies on both
> the fixed and floating legs. I haven't been able to determine with any
> confidence whether the day count conventions are also preserved. Oh, and
> there's a spread added to the floating leg.
>
> If the LIBOR swap you have is a vanilla one, it probably has floating leg
> payments every three months, and fixed leg payments every six months. And
> so, on monday, you will have a SOFR swap which, it seems to me, QuantLib
> cannot represent.
>
> Has anyone else spent any time thinking about this? What is the best way
> to represent a swap like this?
>
> tom
>
> --
> Technology is anything that wasn't around when you were born. -- Alan Kay
>
>
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