Re: Of pricing bonds whose IssueDate is in the future: is BondCleanPrice already discounted?

Posted by Lisa Ann on Oct 11, 2013; 3:40pm
URL: http://quantlib.414.s1.nabble.com/Of-pricing-bonds-whose-IssueDate-is-in-the-future-is-BondCleanPrice-already-discounted-tp14571p14580.html

Dear imachabeli and Dale Smith,

I tried to produce a suitable example to make you to figure out what such a situation (i.e. one in which a "forward" price is required) would be... and I've found the following simple case.

Let you have a Fixed-To-Floater bond whose coupon is currently fixed but that will pay a floating rate starting on October 2014.

Let someone asks you for the price of the floating part only: this is quite easy, due to the fact that the floating component is just a plain vanilla FRN and you can use QuantLib to get its clean price with little effort.

The only issue could be in the discounting: if the floating rate part is tradable just from 10th of October 2014, this means that the first floating coupon is discounted by the corresponding zero rate from the yield curve.

My question: if I set IssueDate = 10-Oct-2014, does the pricing engine takes the corresponding 1Y discount factor from the yield curve to discount the whole price of the bond?

Does the engine return me the discounted clean price assuming the first coupon to start the accrued interest from 10-Oct-2014 and not from today date?

After several trials it seems to me that the clean price obatined in such a way should be further discounted to get its present value.