CPI Time Series Interpolation
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CPI Time Series Interpolation
 
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Hi
I am digging into the pricing of a CPIBond. I have this index CPI index time series: DATE 2016-08-31 123.0 2016-09-30 123.2 2016-10-31 123.8 2016-11-30 124.2 2016-12-31 124.7 If I interpolate for 10 February 2017 I get: (10.0-1)/28.0*(124.2-123.8)+123.8 >123.92857142857143 Deriving the values as calculated by QuantLib using the last cash flow I get: principal*baseCPI/notional >123.92000000000002 So it appears to be rounded down. The inflation index is simply created by passing in a vector of dates(month-end date plus 1 day) and values. inflationIndex.addFixings(dte_fixings[:len(fixData)], fixData) So is there a way to get the full interpolated value? Thanks Charles |
Re: CPI Time Series Interpolation
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Hi,
it’s not rounding, QuantLib calculates 123.92 = 123.8 + (124.2-123.8) x (10-1) / 30, i.e. takes November instead of February as the basis for the interpolation. This is due to a bug described here There is an attempt to solve that, but this is not yet merged Looking at that I think we also need to fix the interpolation in CPICoupon, the code for this starts here What do you think, Francois, Luigi? Kind Regards Peter
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Re: CPI Time Series Interpolation
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Hi Peter Thanks for clearing that up. If I created an interpolated daily series and passed that in would this workaround work? Thanks Charles On Thu, Feb 9, 2017 at 1:57 PM, Peter Caspers <[hidden email]> wrote:
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Re: CPI Time Series Interpolation
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Hi Charles,
I don’t think so, because InflationIndex::addFixing(d,v) writes v to each day of the applicable inflation period (in your case the whole month) containing d. Kind Regards Peter
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In reply to this post by Peter Caspers-4
Hi, Charles, you might remember we had a chat about this about a year back. Sadly, this illustrates my laziness and I have to do some more work on that PR before it is ready for merging. PR50 is necessary if bonds are valued at the real curve, and the inflation curve in the future is assume to be a flat 0. Past inflation fixings (since issue date) allows for the rolling up until effective date. This is the method that BESA prescribes in the ZA inflation linked bond valuation. The alternative way is to value the bond at the nominal curve, but then you have to deduce the inflation curve yourself (difference between nominal and real yield curves) and add the fixings as in the first method. I still wanted to thoroughly investigate whether the 2nd approach isn't a better approach that wouldn't require PR50 before I cleaned up the PR. The above doesn't solve your issue, but I just wanted to explain why PR50 is still in limbo. Francois Botha On 9 February 2017 at 13:57, Peter Caspers <[hidden email]> wrote:
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Re: CPI Time Series Interpolation
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Hi Francois I remember the discussion but we did not delve into the interpolation base issue then I think. Is the interpolation issue then the only issue? If I understand you correctly, I think I like the first method as it allows the user the option of passing in an inflation curve and the valuing off nominal should he so wish. Thanks Charles On Thu, Feb 9, 2017 at 2:57 PM, Francois Botha <[hidden email]> wrote:
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Re: CPI Time Series Interpolation
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Hi Francois,
to be honest I don't understand why this is so complicated to fix? Isn't it enough to go forward from the original inflation period by what the observation lag says to get the correct number of days for the denominator in the interpolation formula? And this needs to be corrected in any case, independent of the other stuff with the real curve you are talking about? Best Regards Peter On 9 February 2017 at 14:24, Charles Allderman <[hidden email]> wrote: > Hi Francois > > I remember the discussion but we did not delve into the interpolation base > issue then I think. Is the interpolation issue then the only issue? If I > understand you correctly, I think I like the first method as it allows the > user the option of passing in an inflation curve and the valuing off nominal > should he so wish. > > Thanks > Charles > > On Thu, Feb 9, 2017 at 2:57 PM, Francois Botha <[hidden email]> wrote: >> >> Hi, >> >> Charles, you might remember we had a chat about this about a year back. >> Sadly, this illustrates my laziness and I have to do some more work on that >> PR before it is ready for merging. >> >> PR50 is necessary if bonds are valued at the real curve, and the inflation >> curve in the future is assume to be a flat 0. Past inflation fixings (since >> issue date) allows for the rolling up until effective date. This is the >> method that BESA prescribes in the ZA inflation linked bond valuation. >> >> The alternative way is to value the bond at the nominal curve, but then >> you have to deduce the inflation curve yourself (difference between nominal >> and real yield curves) and add the fixings as in the first method. >> >> I still wanted to thoroughly investigate whether the 2nd approach isn't a >> better approach that wouldn't require PR50 before I cleaned up the PR. >> >> The above doesn't solve your issue, but I just wanted to explain why PR50 >> is still in limbo. >> >> >> >> Francois Botha >> >> On 9 February 2017 at 13:57, Peter Caspers <[hidden email]> wrote: >>> >>> Hi, >>> >>> it’s not rounding, QuantLib calculates 123.92 = 123.8 + (124.2-123.8) x >>> (10-1) / 30, i.e. takes November instead of February as the basis for the >>> interpolation. This is due to a bug described here >>> >>> >>> http://quantlib.10058.n7.nabble.com/Interpolated-ZeroInflationIndexes-td15507.html >>> >>> There is an attempt to solve that, but this is not yet merged >>> >>> https://github.com/lballabio/QuantLib/pull/50 >>> >>> Looking at that I think we also need to fix the interpolation in >>> CPICoupon, the code for this starts here >>> >>> >>> https://github.com/lballabio/QuantLib/blob/master/ql/cashflows/cpicoupon.cpp#L88 >>> >>> What do you think, Francois, Luigi? >>> >>> Kind Regards >>> Peter >>> >>> >>> On 08 Feb 2017, at 13:08, Charles Allderman <[hidden email]> >>> wrote: >>> >>> Hi >>> >>> I am digging into the pricing of a CPIBond. I have this index CPI index >>> time >>> series: >>> >>> DATE >>> 2016-08-31 123.0 >>> 2016-09-30 123.2 >>> 2016-10-31 123.8 >>> 2016-11-30 124.2 >>> 2016-12-31 124.7 >>> >>> If I interpolate for 10 February 2017 I get: >>> (10.0-1)/28.0*(124.2-123.8)+123.8 >>> >>> 123.92857142857143 >>> >>> >>> Deriving the values as calculated by QuantLib using the last cash flow I >>> get: >>> principal*baseCPI/notional >>> >>> 123.92000000000002 >>> >>> >>> So it appears to be rounded down. >>> >>> The inflation index is simply created by passing in a vector of >>> dates(month-end date plus 1 day) and values. >>> inflationIndex.addFixings(dte_fixings[:len(fixData)], fixData) >>> >>> So is there a way to get the full interpolated value? >>> >>> Thanks >>> Charles >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> -- >>> View this message in context: >>> http://quantlib.10058.n7.nabble.com/CPI-Time-Series-Interpolation-tp18062.html >>> Sent from the quantlib-users mailing list archive at Nabble.com. >>> >>> >>> ------------------------------------------------------------------------------ >>> Check out the vibrant tech community on one of the world's most >>> engaging tech sites, SlashDot.org! http://sdm.link/slashdot >>> _______________________________________________ >>> QuantLib-users mailing list >>> [hidden email] >>> https://lists.sourceforge.net/lists/listinfo/quantlib-users >>> >>> >> > ------------------------------------------------------------------------------ Check out the vibrant tech community on one of the world's most engaging tech sites, SlashDot.org! http://sdm.link/slashdot _______________________________________________ QuantLib-users mailing list [hidden email] https://lists.sourceforge.net/lists/listinfo/quantlib-users |
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Yes, you're right. I'll sort it out by the end of the week. On 11 Feb 2017 19:34, "Peter Caspers" <[hidden email]> wrote: Hi Francois, ------------------------------------------------------------------------------ Check out the vibrant tech community on one of the world's most engaging tech sites, SlashDot.org! http://sdm.link/slashdot _______________________________________________ QuantLib-users mailing list [hidden email] https://lists.sourceforge.net/lists/listinfo/quantlib-users |
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