fixedRate = 0.04;//dummy value

[Lars Schouw]

I found a comment in the SwaptionHelper.cpp source code file.

fixedRate = 0.04;//dummy value

Is there any reason this has to be hardcoded?
What is the meaning of this and where does it get used in the calibration?

Lars

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[Luigi Ballabio]

On 11/17/2005 09:12:26 AM, Lars Schouw wrote:
> I found a comment in the SwaptionHelper.cpp source code file.
>
> fixedRate = 0.04;//dummy value
> Is there any reason this has to be hardcoded?
> What is the meaning of this and where does it get used in the
> calibration?

Lars,
        it could be any value (0.0 might be less confusing, though.  
I'll change it for next release.)

The swap that is being istantiated with the above rate is used for  
extracting its fair fixed rate. This depends only on the floating leg  
and the payment schedule of the fixed leg---not on its rate.  
Unfortunately, we do have to pass a dummy number to the swap  
constructor anyway. After calculating the fair fixed rate, the swap is  
discarded and replaced with an at-the-money swap paying the fair rate;  
that is what we wanted to obtain in the first place.

Later,
        Luigi

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