Re: [Quantlib-users] Arguments for ql.ConstNotionalCrossCurrencyBasisSwapRateHelper()

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Hi Marcin,

It worked, thanks. I did make two proxy Ibor indices which I then used in
my bootstrapping process as shown below:

sofr_3m = ql.IborIndex('SOFR', ql.Period('3m'), 0, ql.USDCurrency(),

ql.UnitedStates(ql.UnitedStates.FederalReserve), ql.Following, False,
ql.Actual360(),
                       sofr_ts)

sonia_3m = ql.IborIndex('SONIA', ql.Period('3m'), 0, ql.GBPCurrency(),
ql.UnitedKingdom(),
                        ql.Following, False, ql.Actual365Fixed(), sonia_ts)

ccbs_helpers = [
    ql.ConstNotionalCrossCurrencyBasisSwapRateHelper(ql.QuoteHandle(ql.SimpleQuote(basis
/ 10000)), ql.Period(*tenor),
                                                     2, calendar,
ql.Following, False,
                                                     sofr_3m,
sonia_3m, sofr_ts, True,
                                                     False)
    for basis, tenor in [(-5.375, (3, ql.Months)), (-6.875, (6, ql.Months)),
                         (-13.375, (9, ql.Months)), (-12.75, (1, ql.Years)),
                         (-14.875, (2, ql.Years)), (-17.25, (3, ql.Years)),
                         (-19.25, (4, ql.Years)), (-20.25, (5, ql.Years)),
                         (-20.625, (6, ql.Years)), (-20.75, (7, ql.Years)),
                         (-20.75, (8, ql.Years)), (-20.875, (9, ql.Years)),
                         (-21, (10, ql.Years)), (-21.75, (12, ql.Years)),
                         (-24.625, (15, ql.Years)), (-30, (20, ql.Years)),
                         (-36.25, (30, ql.Years)), (-38.75, (40, ql.Years)),
                         (-37.75, (50, ql.Years))]]

basis_adj_sonia_curve = ql.YieldTermStructureHandle(
    ql.PiecewiseLogCubicDiscount(0, calendar, ccbs_helpers, day_counter))

basis_adj_sonia_curve.enableExtrapolation()

Thanks all for the help and contribution. I do agree that we need to
consider improving the helpers
ql.ConstNotionalCrossCurrencyBasisSwapRateHelper and
ql.MtMCrossCurrencyBasisSwapRateHelper

Cheers,
Nk

On Sat, May 18, 2024 at 9:39 PM Marcin Rybacki <mry...@gm...> wrote:

> Hi everyone,
>
> As already pointed out by Peter and Ioannis, the helper utilizes the fact
> that, for a par instrument, the ratio of foreign vs domestic notionals is
> equal to the market spot rate. Hence, they cancel each other out and the FX
> spot rate is not really needed.
>
> Nk, to make your example work for a SOFR-SONIA swap you will have to
> create two proxy Ibor indices (instead of using overnight ones) with 3m
> period each for SOFR and SONIA, respectively. Given that both SOFR and
> SONIA legs use compounded rate averaging, they collapse to Ibor-type
> coupons anyway - this property will apply to coupons that have not started
> accruing yet, which for a par instrument applies to all. This should result
> in a GBP curve under USD collateralization you’re looking for.
>
> We might consider improving the helper by adding a constructor that takes
> an overnight index and payment frequency as parameters.
>
> Hope this helps.
>
> Regards,
> Marcin
>
> On Sat, 18 May 2024 at 21:08, Ioannis Rigopoulos <qua...@de...>
> wrote:
>
>> The baseCurrencyIndex and quoteCurrencyIndex imply the frequency per each
>> floating leg.
>> On 5/18/2024 8:53 PM, Quant wrote:
>>
>> Thanks loannis, what about the payment frequency is it not required in
>> ql.ConstNotionalCrossCurrencyBasisSwapRateHelper() for bootstrapping?
>>
>> Thanks,
>> Nk
>>
>> On Sat, 18 May 2024 at 20:25, Ioannis Rigopoulos <qua...@de...>
>> wrote:
>>
>>> Hi Peter and NK
>>>
>>> For some reason, the email I sent quite some time ago did not go
>>> through. Perhaps because of the link insertion. I repeat it below:
>>>
>>> The spot rate is not needed. Explanation at
>>> https://www.deriscope.com/products/Key_Yield_Curve_Fxb__Spot.html that
>>> describes the spot rate input in the construction of a curve out of xccy
>>> basis spreads.
>>> In effect, any assumed spot rate cancels out due to for any given two
>>> currencies SRC and TGT, the corresponding legs in a currency swap have
>>> differing notionals Nˢʳᶜ and Nᵗᵍᵗ that satisfy:
>>>
>>> Nˢʳᶜ/Nᵗᵍᵗ = s := spot fx rate TGT/SRC
>>>
>>> Ioannis
>>> On 5/18/2024 8:12 PM, Quant wrote:
>>>
>>> Hi Peter,
>>>
>>> So do you agree that we need to have the following additional arguments
>>> in
>>> ql.ConstNotionalCrossCurrencyBasisSwapRateHelper();
>>>
>>> 1. quote FX rate - so that 1 is used as the notional of one leg and the
>>> quote FX rate is used as notional on the other leg
>>>
>>> 2. payment frequency - so that the number of payment frequency is known
>>> for each leg during the bootstrapping process.
>>>
>>> Happy to get your opinion on this.
>>>
>>> Thanks & regards,
>>> Nk
>>>
>>> On Sat, 18 May 2024 at 19:57, Peter Caspers <pca...@gm...>
>>> wrote:
>>>
>>>> It does make sense, I was confused as well.
>>>>
>>>> I think both the domestic and foreign leg are set up with the same
>>>> notional 1.0. I.e. the conversion of the foreign leg’s npv to domestic
>>>> currency is done implicitly by using identical nationals. I.e. we exploit
>>>> the fact that the fx spot rate is the same as the ratio of nationals of the
>>>> two legs. Therefore the fx spot is not needed to set up the helper. Smart.
>>>>
>>>> On 18. May 2024, at 18:41, Quant <qua...@gm...> wrote:
>>>>
>>>> Hi Peter,
>>>>
>>>> No, the spot fx is not declared anywhere in the bootstrapping hence my
>>>> first question was why we don’t have an argument for the quote FX rate
>>>> which would be used as the implied notional. Not sure if it’s making sense.
>>>>
>>>> Thanks & regards,
>>>> Nk
>>>>
>>>> On Sat, 18 May 2024 at 18:28, Peter Caspers <pca...@gm...>
>>>> wrote:
>>>>
>>>>> I guess spot fx is somewhat implicit in the (initial) notionals of the
>>>>> two legs?
>>>>> Peter
>>>>>
>>>>> On Fri, 17 May 2024 at 03:34, Ben Watson <
>>>>> ben...@ma...> wrote:
>>>>> >
>>>>> > cross currency basis is a spread over a floating index. We use this
>>>>> to bootstrap curves. It is a direct quote, and no need for a spot FX rate.
>>>>> >
>>>>> > The contrast is when we imply a basis over a floating index from
>>>>> forward fx pips. In this case we need spot fx.
>>>>> >
>>>>> > Ben
>>>>> >
>>>>> > On Fri, 17 May 2024, 6:16 am Quant, <qua...@gm...>
>>>>> wrote:
>>>>> >>
>>>>> >> Hi Quantlib users,
>>>>> >>
>>>>> >> When using ql.ConstNotionalCrossCurrencySwapRateHelper() shown
>>>>> below, are we not supposed to have an argument for the quote FX rate? If
>>>>> not how do we adjust for the spot FX rate when bootstrapping the basis
>>>>> adjusted discount curve? Not sure if my question makes sense
>>>>> >>
>>>>> >>
>>>>> https://rkapl123.github.io/QLAnnotatedSource/d6/d3d/class_quant_lib_1_1_const_notional_cross_currency_basis_swap_rate_helper.html
>>>>> >>
>>>>> >> Thanks & regards,
>>>>> >> Nk
>>>>> >> _______________________________________________
>>>>> >> QuantLib-users mailing list
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