example please

[Nguyen Xuan Son]

Hi all,
I use the Bloomber swap curve to discount price (under 2 year I use the deposit rate?). Well, the problem is that I could not get the right actualised price! For example, Knowing the payment dates D_i, and today is D. The cashflow is C_i. Then I used the formule, (let's T the termstructure)

\sum_{i}  T->discount(D_i)*C_i  / T->discount(D)

Can someone show me the right way. I get crazy with such " problem".
XUan Son

[chiara.fornarola]

Hi Xuan

I believe the formula your looking for is this:

\sum_{i}  T->discount(D_i)*C_i  * T->discount(D)


where T->discont(D) is the discount factor which allow you to go from the value date of the instrument (e.g. EUDRC Index on Bloomberg for Eur deposit 3month has value date 08/09/04) to today.

Then what you mean for "the right actualized price"? you mean the one you see on Bloomberg. In this case if you want to replicate it you'd better use a libor curve bostrapped with 8 futures too instead of using only deposit and swaps. Bloomberg shows you benchmark boostrapped libor curve with deposit and futures only (I'm referring to IYC function) but in it's calculation for pricing purpose Bloomberg use the boostrapped libor curve with the 8 futures too (for the main currencies). To prove this consider a plain vanilla bond on BBG type ASW go then 3 go and you'll see the discounting curve Bloomberg is using.

I hope this will help.

Chiara




Chiara Fornarola

Risk Pricing e Valutazioni Finanziarie
Direzione Risk Management
Servizio Portfolio Management
Piazza P. Ferrari, 10 20121 Milano
Tel [phone] Fax [phone]

[hidden email] Inviato da: [hidden email] 04/08/2004 21.23

Per:        [hidden email], [hidden email]         Cc:        [hidden email]         Oggetto:        [Quantlib-users] example please

Hi all,
I use the Bloomber swap curve to discount price (under 2 year I use the deposit rate?). Well, the problem is that I could not get the right actualised price! For example, Knowing the payment dates D_i, and today is D. The cashflow is C_i. Then I used the formule, (let's T the termstructure)

\sum_{i}  T->discount(D_i)*C_i  / T->discount(D)

Can someone show me the right way. I get crazy with such " problem".
XUan Son



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