QuantLib › quantlib-users

Questions on Inflation Index & ZCIIS

Classic

List

Threaded

1 message

Mirko Raso-2

Questions on Inflation Index & ZCIIS

Hi all,

I have few problems/doubts on the use of (Zero) Inflation Index & ZeroCoupon Inflation Index Swap (ZCIIS).

In order to be as clear as possible, let me give few numbers.
QuantLib version used is the 0.9.0 and I modified (as in the SVN version) the interpolatedzeroinflationcurve.hpp file to work properly.
The evaluation date is today April, 3rd 2008, the inflation index is Eur HICPxT, the base Month is January 2008 corresponding
to a base fixing index value of 105.67 .I set settlement days to zero.
The quoted rate and the index value (SWIL EU page on bloomberg) for a 5Y maturity ZCIIS,
starting on April 3rd, 2008 and with a maturity date April 3rd, 2033, are, respectively, 2.3525%
and 118.6982 ( given as 105.67*pow(1+2.3525%, t) with t = 5 ).
The bootstrapping procedure works well, in fact I get the corrected quoted zero rates, but...

(Zero) Inflation Index forecast fixing

          The forecast fixing method computes the t value as difference between a "truebasedate" (January,31th 2008 in the above example)
            and the fixing end date (January, 3rd 2013) obtaining a t value as 4.925 instead of 5 (and so an index value of 118.4913 = 105.67*pow(1+2.3525%, t) ).
            Due to the fact that Euro inflation index is based on monthly index level, according to me the use of the "truebasedate" should be extended also
            to fixing maturity date in order to agree with the market convention.
            The differences among different indexes on the interpolation method, probably suggest to move the forecast fixing method at the specific index level and not only at
            the zeroinflationondex level. Let me know your opinion about that.

NPV ZCIIS

            In the performCalculations() method, the NPV is corrected only for spot trade ( trades starting today). In addition to that, different indexes (Euro and US or French for example)
            have different interpolation method to compute future values and this is not properly taken into account by the present inflation term structure.
            Are you planning to use a pricingengine to correctly price the ZCIIS (including also seasonality) ? and what do you think on adding explicity the inflation index on the ZCIIS interface ?

Sorry for the long e-mail but I've tried to be as clear as possible, even if I don't know if it is so.
If I missed some major enanchments in QuantLib SVN, please, sorry and forget this email.

Thanks in advance,
Mirko

________________________________________________
Mirko Raso

Quantitative Analyst - Iccrea Holding S.p.A.
Direzione Risk Management di Gruppo
Servizio Rischi Finanziari - Modelli Analisi Quantitative
Via Lucrezia Romana 41/47 - 00178 Roma Phone: +39 06 7207 2061
Fax: +39 06 7207 2361
[hidden email]

__________________________________________________________________________________________________________________________________

Questo messaggio e gli eventuali allegati sono confidenziali e contengono informazioni riservate soltanto al destinatario espressamente indicato.
Qualsiasi utilizzo non autorizzato del presente messaggio e dei suoi eventuali allegati è vietato e potrebbe costituire reato.
Qualora abbiate ricevuto il presente messaggio per errore, Vi preghiamo di volerlo distruggere, insieme agli eventuali allegati, e di segnalarci l'errore via e-mail.
A meno che non sia espressamente indicato, le dichiarazioni contenute in questo messaggio, nonché nei suoi eventuali allegati, sono riconducibili
esclusivamente al mittente e non possono essere considerate come autorizzate da ICCREA HOLDING S.p.A.
Tali dichiarazioni pertanto non impegnano ICCREA HOLDING S.p.A. nei confronti del destinatario o di terzi. ICCREA HOLDING S.p.A. ritiene ma non garantisce
che questo messaggio, e i suoi eventuali allegati, siano immuni da virus.
ICCREA HOLDING S.p.A. si riserva il diritto di accedere e controllare tutte le comunicazioni trasmesse attraverso la propria rete aziendale.
__________________________________________________________________________________________________________________________________

-------------------------------------------------------------------------
Check out the new SourceForge.net Marketplace.
It's the best place to buy or sell services for
just about anything Open Source.
http://ad.doubleclick.net/clk;164216239;13503038;w?http://sf.net/marketplace
_______________________________________________
QuantLib-users mailing list
[hidden email]
https://lists.sourceforge.net/lists/listinfo/quantlib-users