Posted by
Ferdinando M. Ametrano-3 on
URL: http://quantlib.414.s1.nabble.com/Preliminary-0-9-0-tarballs-tp11440p11457.html
Hi Toyin
> I'm slightly confused as to how the spread is treated/used within this
> function. [...]
> But looking at it, it's more like a spread that is added onto every
> floating rate fixing within the underlying swap.
yes it it. The previous SwapRateHelper was able to deal with a fixed
rate versus flat floating rate swap, the new one is able to deal with
fixed rate vs floating rate + spread
> Also there is a comment of "weak implementation" stated within this
> method...
I kinda dislike the actual implementation, with the spread algebra
hardcoded in the SwaprateHelper, but since the spread is a Quote it
can dynamically change and could not be set in the swap at
construction time.
I couldn't come up with a cleaner implementation: probably having Rate
VanillaSwap::fairRate(Spread s = 0.0) would help
> This spread looks more like a basis swap spread.
> Am I correct in assuming this?
yes and no.
No: if you take my previous explanation at face value basis swaps are
not involved at all.
Yes: you can use it to transform a fixed rate vs 6M flat swap into an
equivalent fixed rate vs 3M plus spread swap. And the spread would be
the 3M/6M basis
Of curse SwapRateHelper is a bootstrapping ancillary class, so it can
be used to bootstrap yield curve, not for pricing (basis) swaps.
The rest of your post concern how to price a basis swap: I won't go
into details as your mileage might vary, but would appreciate if
anyone could share its expertise on the subject
ciao -- Nando
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