Re: [Quantlib-users] blackvariancecurve question - used by the LMM code...

Posted by Klaus Spanderen on Mar 09, 2006; 1:05pm
URL: http://quantlib.414.s1.nabble.com/Re-Quantlib-users-blackvariancecurve-question-used-by-the-LMM-code-tp11020p11021.html

Hi Toyin,

On Thursday 09 March 2006 10:29 am, you wrote:
> One final point, the Schedule object used within the cashflows() function
> of the LMMProcess class... I think that you probably need a
> businessdayconvention of UnAdjusted. Otherwise your first cashflow could be
> slightly too long. This is because if the end date falls on a weekend, it
> will be move onto the newt good business day and thus within the generation
> of the coupon dates, the dates will be attached to this modified date.

The libor forward process inherits the cashflow schedule from the given index
to allow exact pricing of cap(lets) using the lfm process. (see test case
LiborMarketModelTest::testCapletPricing() ) and the cashflow schedule for a
normal cap/floor is generated in the same way (see test-suite/capfloor.cpp).
IMO the cash flow should be rolled over if the end date falls on a weekend
but may be I miss the point here.

cheers
 Klaus