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From: Toyin A. <toy...@ho...> - 2007-12-03 08:22:08
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Hi all, =20 I'm slightly confused as to how the spread is treated/used within this func= tion. =20 I first thought it was a swap spread, thus this spread would be simply adde= d onto the inputted swap rate and the stripper would do it's stuff. =20 But looking at it, it's more like a spread that is added onto every floatin= g rate fixing within the underlying swap. This spread looks more like a bas= is swap spread. =20 Am I correct in assuming this? =20 If this is the case how does one price a basis swap from the construction o= f two floating legs back to back via this spreaded curve? I'm not really co= ncerned about the actual QuantLib classes involved, just where does one pas= s in the yieldcurve handles. =20 To be a little clearer, we would now have two yieldcurves, (one without bas= is spreads and one with) and two different yieldcurve inputs for each float= ing leg. =20 Leg1 will have a discounting curve (probably embedded in a discounting engi= ne) and a fixing curve (embedded in the index). =20 The same is true for leg2 =20 Thus if one wanted to recreate the basis swap value entered into the yieldc= urve stripper (lets say the 10Y point), what are the input yieldcurve combi= nations (discounting/refixing) and (spreaded/non spreaded) for each leg? =20 Also there is a comment of "weak implementation" stated within this method.= .. =20 Thanks in advance, Toy out... =20 =20 _________________________________________________________________ The next generation of MSN Hotmail has arrived - Windows Live Hotmail http://www.newhotmail.co.uk= |
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From: Ferdinando A. <na...@am...> - 2007-12-03 10:09:03
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Hi Toyin > I'm slightly confused as to how the spread is treated/used within this > function. [...] > But looking at it, it's more like a spread that is added onto every > floating rate fixing within the underlying swap. yes it it. The previous SwapRateHelper was able to deal with a fixed rate versus flat floating rate swap, the new one is able to deal with fixed rate vs floating rate + spread > Also there is a comment of "weak implementation" stated within this > method... I kinda dislike the actual implementation, with the spread algebra hardcoded in the SwaprateHelper, but since the spread is a Quote it can dynamically change and could not be set in the swap at construction time. I couldn't come up with a cleaner implementation: probably having Rate VanillaSwap::fairRate(Spread s = 0.0) would help > This spread looks more like a basis swap spread. > Am I correct in assuming this? yes and no. No: if you take my previous explanation at face value basis swaps are not involved at all. Yes: you can use it to transform a fixed rate vs 6M flat swap into an equivalent fixed rate vs 3M plus spread swap. And the spread would be the 3M/6M basis Of curse SwapRateHelper is a bootstrapping ancillary class, so it can be used to bootstrap yield curve, not for pricing (basis) swaps. The rest of your post concern how to price a basis swap: I won't go into details as your mileage might vary, but would appreciate if anyone could share its expertise on the subject ciao -- Nando |
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From: Luigi B. <lui...@gm...> - 2007-12-03 10:19:26
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On Mon, 2007-12-03 at 11:09 +0100, Ferdinando Ametrano wrote: > yes it it. The previous SwapRateHelper was able to deal with a fixed > rate versus flat floating rate swap, the new one is able to deal with > fixed rate vs floating rate + spread Are these actually quoted? Just curious... Luigi -- There is no likelihood man can ever tap the power of the atom. -- Robert Millikan, Nobel Prize in Physics, 1923 |
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From: Ferdinando A. <na...@am...> - 2007-12-03 11:51:44
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On Dec 3, 2007 11:21 AM, Luigi Ballabio <lui...@gm...> wrote: > > On Mon, 2007-12-03 at 11:09 +0100, Ferdinando Ametrano wrote: > > yes it it. The previous SwapRateHelper was able to deal with a fixed > > rate versus flat floating rate swap, the new one is able to deal with > > fixed rate vs floating rate + spread > > Are these actually quoted? Just curious... they are increasingly available as alternative to quote standard and non-standard basis swaps. A lot of pages are popping up with these swaps, and the trend is strong as these quotes are often used to bootstrap different forecasting yield curves in software systems which are not ready to deal with basis swaps ciao -- Nando |
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From: Toyin A. <toy...@ho...> - 2007-12-03 12:49:39
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Interesting... =20 Do these spreads have an official name or are these spreads also named basi= s swaps? =20 Toy out... =20 > Date: Mon, 3 Dec 2007 12:51:35 +0100> From: na...@am...> To: luigi= .bal...@gm...> CC: toy...@ho...; qua...@li...= orge.net> Subject: Re: [Quantlib-dev] Preliminary 0.9.0 tarballs - SwapRate= Helper::ImpliedQuote> > On Dec 3, 2007 11:21 AM, Luigi Ballabio <luigi.ball= ab...@gm...> wrote:> >> > On Mon, 2007-12-03 at 11:09 +0100, Ferdinando = Ametrano wrote:> > > yes it it. The previous SwapRateHelper was able to dea= l with a fixed> > > rate versus flat floating rate swap, the new one is abl= e to deal with> > > fixed rate vs floating rate + spread> >> > Are these ac= tually quoted? Just curious...> > they are increasingly available as altern= ative to quote standard and> non-standard basis swaps.> A lot of pages are = popping up with these swaps, and the trend is> strong as these quotes are o= ften used to bootstrap different> forecasting yield curves in software syst= ems which are not ready to> deal with basis swaps> > ciao -- Nando> > -----= --------------------------------------------------------------------> SF.Ne= t email is sponsored by: The Future of Linux Business White Paper> from Nov= ell. From the desktop to the data center, Linux is going> mainstream. Let i= t simplify your IT future.> http://altfarm.mediaplex.com/ad/ck/8857-50307-1= 8918-4> _______________________________________________> QuantLib-dev maili= ng list> Qua...@li...> https://lists.sourceforge.net/= lists/listinfo/quantlib-dev _________________________________________________________________ Celeb spotting =96 Play CelebMashup and win cool prizes https://www.celebmashup.com= |
