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Different DayCounter for Coupon and Accrued Amount

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igitur

Different DayCounter for Coupon and Accrued Amount

Hi,

I'm fairly sure that fixed rate bonds here in South Africa follow the UK (or Europe) convention. I don't think we do things differently here. But I hope you can confirm that.

For me to reconcile the FixedRateBond calculations with our internal models, I have to use the ActualActual.Convention.Bond daycounter for calculating the coupons. As far as I can tell, that's the only way to get exactly t = 0.5 for half-yearly coupons (please correct me if I'm wrong).

However, for the accrued amount, we calculate the number of days elapsed since the last coupon date and express that as a fraction of 365. So I have to use Actual365.

So, firstly, is the standard convention for how fixed rate bonds operate in Europe / UK?

Secondly, is it possible to send the two different daycounters to FixedRateBondHelper or what other solution is there?

regards

Francois Botha

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Luigi Ballabio

Re: Different DayCounter for Coupon and Accrued Amount

Doesn't this make it possible that the accrued amount at the end of
the coupon does not equal the total coupon amount? I don't have an
example ready, but I'm pretty sure that there are some combinations of
dates and holidays for which the amount accrued the day before
maturity would be greater than the coupon...

Luigi

On Thu, May 8, 2014 at 5:19 PM, Francois Botha <[hidden email]> wrote:

> Hi,
>
> I'm fairly sure that fixed rate bonds here in South Africa follow the UK (or
> Europe) convention. I don't think we do things differently here. But I hope
> you can confirm that.
>
> For me to reconcile the FixedRateBond calculations with our internal models,
> I have to use the ActualActual.Convention.Bond daycounter for calculating
> the coupons. As far as I can tell, that's the only way to get exactly t =
> 0.5 for half-yearly coupons (please correct me if I'm wrong).
>
> However, for the accrued amount, we calculate the number of days elapsed
> since the last coupon date and express that as a fraction of 365. So I have
> to use Actual365.
>
> So, firstly, is the standard convention for how fixed rate bonds operate in
> Europe / UK?
>
> Secondly, is it possible to send the two different daycounters to
> FixedRateBondHelper or what other solution is there?
>
> regards
> Francois Botha
>
> ------------------------------------------------------------------------------
> Is your legacy SCM system holding you back? Join Perforce May 7 to find out:
>  3 signs your SCM is hindering your productivity
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>  Expert tips and advice for migrating your SCM now
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> QuantLib-users mailing list
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igitur

Re: Different DayCounter for Coupon and Accrued Amount

Yes, you're right. For instance if the last coupon was on 2014/03/15 and the next coupon is on 2014/09/15, the accrued interest on 2014/09/14 would be slightly more than the halfyearly coupon.

But our bonds go ex-coupon 10 days before the coupon date, so in practice that will never be an issue. In fact, the whole ex-coupon issue something I'll bring up in a separate email.

And thanks for everyone's help. I'll buy you all beers if you're ever in South Africa.

Francois Botha

On 8 May 2014 17:29, Luigi Ballabio <[hidden email]> wrote:

Doesn't this make it possible that the accrued amount at the end of
the coupon does not equal the total coupon amount? I don't have an
example ready, but I'm pretty sure that there are some combinations of
dates and holidays for which the amount accrued the day before
maturity would be greater than the coupon...

Luigi

On Thu, May 8, 2014 at 5:19 PM, Francois Botha <[hidden email]> wrote:
> Hi,
>
> I'm fairly sure that fixed rate bonds here in South Africa follow the UK (or
> Europe) convention. I don't think we do things differently here. But I hope
> you can confirm that.
>
> For me to reconcile the FixedRateBond calculations with our internal models,
> I have to use the ActualActual.Convention.Bond daycounter for calculating
> the coupons. As far as I can tell, that's the only way to get exactly t =
> 0.5 for half-yearly coupons (please correct me if I'm wrong).
>
> However, for the accrued amount, we calculate the number of days elapsed
> since the last coupon date and express that as a fraction of 365. So I have
> to use Actual365.
>
> So, firstly, is the standard convention for how fixed rate bonds operate in
> Europe / UK?
>
> Secondly, is it possible to send the two different daycounters to
> FixedRateBondHelper or what other solution is there?
>
> regards
> Francois Botha
>

> ------------------------------------------------------------------------------
> Is your legacy SCM system holding you back? Join Perforce May 7 to find out:
>  3 signs your SCM is hindering your productivity
>  Requirements for releasing software faster
>  Expert tips and advice for migrating your SCM now
> http://p.sf.net/sfu/perforce
> _______________________________________________
> QuantLib-users mailing list
> [hidden email]
> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>

--
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igitur

Re: Different DayCounter for Coupon and Accrued Amount

In reply to this post by Luigi Ballabio

Oh wait, if the bond goes ex-coupon, it just changes the ownership, so I think you're still right in that the accrued interest can be more than the halfyearly coupon. How do things work over there?

Francois Botha

On 8 May 2014 17:33, Francois Botha <[hidden email]> wrote:

Yes, you're right. For instance if the last coupon was on 2014/03/15 and the next coupon is on 2014/09/15, the accrued interest on 2014/09/14 would be slightly more than the halfyearly coupon.

But our bonds go ex-coupon 10 days before the coupon date, so in practice that will never be an issue. In fact, the whole ex-coupon issue something I'll bring up in a separate email.

And thanks for everyone's help. I'll buy you all beers if you're ever in South Africa.

F

Francois Botha

On 8 May 2014 17:29, Luigi Ballabio <[hidden email]> wrote:
Doesn't this make it possible that the accrued amount at the end of
the coupon does not equal the total coupon amount? I don't have an
example ready, but I'm pretty sure that there are some combinations of
dates and holidays for which the amount accrued the day before
maturity would be greater than the coupon...

Luigi

On Thu, May 8, 2014 at 5:19 PM, Francois Botha <[hidden email]> wrote:
> Hi,
>
> I'm fairly sure that fixed rate bonds here in South Africa follow the UK (or
> Europe) convention. I don't think we do things differently here. But I hope
> you can confirm that.
>
> For me to reconcile the FixedRateBond calculations with our internal models,
> I have to use the ActualActual.Convention.Bond daycounter for calculating
> the coupons. As far as I can tell, that's the only way to get exactly t =
> 0.5 for half-yearly coupons (please correct me if I'm wrong).
>
> However, for the accrued amount, we calculate the number of days elapsed
> since the last coupon date and express that as a fraction of 365. So I have
> to use Actual365.
>
> So, firstly, is the standard convention for how fixed rate bonds operate in
> Europe / UK?
>
> Secondly, is it possible to send the two different daycounters to
> FixedRateBondHelper or what other solution is there?
>
> regards
> Francois Botha
>

> ------------------------------------------------------------------------------
> Is your legacy SCM system holding you back? Join Perforce May 7 to find out:
>  3 signs your SCM is hindering your productivity
>  Requirements for releasing software faster
>  Expert tips and advice for migrating your SCM now
> http://p.sf.net/sfu/perforce
> _______________________________________________
> QuantLib-users mailing list
> [hidden email]
> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>

--
<https://implementingquantlib.blogspot.com>
<https://twitter.com/lballabio>

Luigi Ballabio

Re: Different DayCounter for Coupon and Accrued Amount

As far as I know, if the bond goes ex-coupon it also resets the
accrued amount (which is even negative in the few days before
payment).

On Thu, May 8, 2014 at 5:41 PM, Francois Botha <[hidden email]> wrote:

> Oh wait, if the bond goes ex-coupon, it just changes the ownership, so I
> think you're still right in that the accrued interest can be more than the
> halfyearly coupon. How do things work over there?
>
> Francois Botha
>
>
> On 8 May 2014 17:33, Francois Botha <[hidden email]> wrote:
>>
>> Yes, you're right. For instance if the last coupon was on 2014/03/15 and
>> the next coupon is on 2014/09/15, the accrued interest on 2014/09/14 would
>> be slightly more than the halfyearly coupon.
>>
>> But our bonds go ex-coupon 10 days before the coupon date, so in practice
>> that will never be an issue. In fact, the whole ex-coupon issue something
>> I'll bring up in a separate email.
>>
>> And thanks for everyone's help. I'll buy you all beers if you're ever in
>> South Africa.
>>
>> F
>>
>> Francois Botha
>>
>>
>> On 8 May 2014 17:29, Luigi Ballabio <[hidden email]> wrote:
>>>
>>> Doesn't this make it possible that the accrued amount at the end of
>>> the coupon does not equal the total coupon amount? I don't have an
>>> example ready, but I'm pretty sure that there are some combinations of
>>> dates and holidays for which the amount accrued the day before
>>> maturity would be greater than the coupon...
>>>
>>> Luigi
>>>
>>>
>>> On Thu, May 8, 2014 at 5:19 PM, Francois Botha <[hidden email]> wrote:
>>> > Hi,
>>> >
>>> > I'm fairly sure that fixed rate bonds here in South Africa follow the
>>> > UK (or
>>> > Europe) convention. I don't think we do things differently here. But I
>>> > hope
>>> > you can confirm that.
>>> >
>>> > For me to reconcile the FixedRateBond calculations with our internal
>>> > models,
>>> > I have to use the ActualActual.Convention.Bond daycounter for
>>> > calculating
>>> > the coupons. As far as I can tell, that's the only way to get exactly t
>>> > =
>>> > 0.5 for half-yearly coupons (please correct me if I'm wrong).
>>> >
>>> > However, for the accrued amount, we calculate the number of days
>>> > elapsed
>>> > since the last coupon date and express that as a fraction of 365. So I
>>> > have
>>> > to use Actual365.
>>> >
>>> > So, firstly, is the standard convention for how fixed rate bonds
>>> > operate in
>>> > Europe / UK?
>>> >
>>> > Secondly, is it possible to send the two different daycounters to
>>> > FixedRateBondHelper or what other solution is there?
>>> >
>>> > regards
>>> > Francois Botha
>>> >
>>> >
>>> > ------------------------------------------------------------------------------
>>> > Is your legacy SCM system holding you back? Join Perforce May 7 to find
>>> > out:
>>> >  3 signs your SCM is hindering your productivity
>>> >  Requirements for releasing software faster
>>> >  Expert tips and advice for migrating your SCM now
>>> > http://p.sf.net/sfu/perforce
>>> > _______________________________________________
>>> > QuantLib-users mailing list
>>> > [hidden email]
>>> > https://lists.sourceforge.net/lists/listinfo/quantlib-users
>>> >
>>>
>>>
>>>
>>> --
>>> <https://implementingquantlib.blogspot.com>
>>> <https://twitter.com/lballabio>
>>
>>
>