Re: [Quantlib-users] How to handle stubs

[Ben W. <ben...@ma...>]

There are 2 ways – interpolating the fixing curve. Or you use the use the full fixing and have an accrued component.

This issue comes up with asset swaps as they typically have some kind of stub. Typically I would just interpolate the fixing curve, but I went through the process of reconciling BBG and they used the full fixing and adjusted the value with an accrued component. If you look at SWPM for an asset swap and on the floating leg you will see an accrued component – that is what that number is about. 

 

 

 

From: Giuseppe Trapani <tr...@gm...> 
Sent: Thursday, October 26, 2023 4:07 AM
To: Trent Maetzold <tr...@ma...>
Cc: QuantLib users <qua...@li...>
Subject: Re: [Quantlib-users] How to handle stubs

 

Hi Trent,

 

 

The fixing for the stub is left as a "pricing choice" since it's typically a contractual feature. 

 

For the Front stub you can use the the actual fixing of your index, or you can use a weighted one with a year-fraction based allocation (for example if you have a 5 months stub on a Euribor6M indexed contract you can do 1/3 of the Euribor3M + 2/3 of the Euribor6M).

 

For the Back stub I know of no direct way for weighted fixings, I assume you can do the same with with the forward rates from both curves and create an extra cashflow with that. 

 

Il Mer 25 Ott 2023, 15:16 Trent Maetzold <tr...@ma... <mailto:tr...@ma...> > ha scritto:

Seems I need a way to pass the fixing for the stub. I’m not seeing a way to do that directly. I’m using MakeVanillaSwap if it matters. Any help would be appreciated.

 

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On Tue, Oct 24, 2023 at 10:04, Trent Maetzold <tr...@ma... <mailto:On+Tue,+Oct+24,+2023+at+10:04,+Trent+Maetzold+%3C%3Ca+href=> > wrote:

Hi all,

 

I've been looking at CZK and market practice for the Ibors there seems to be to switch to one of the shorter dated Ibor Indexes when there is a stub (believe they are actually just interpolated and put into a quote in Bloomberg). The QuantLib model is spot on at pricing swaps except when there is a stub, since QuantLib is using my 3m or 6m index interpolation for the stub. What is the recommended way of handling this? It seems that a brute force way would be to build all the various indexes and then write a index chooser function to pick which one to use to forecast the fixings, but I'm wondering if there's a more straightforward way.

 

Thanks in advance,

Trent Maetzold

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