yes, understand. So you use the CPI classes only to compute this fixed
adjustment factor ? I would have thought that this can easily computed
out of the historic fixings (using the index, but without attached
curve necessary) and then used to adjust the rate and nominal in a
usual fixed rate bond.
anyway, main thing is that is works. interesting case, thanks
Peter
On 3 June 2014 23:46, Francois Botha <[hidden email]> wrote:
> Thanks.
>
> Yes, Piter explains it correctly.
>
> Peter, the standard fixed rate bond pricing calculation is almost correct,
> but an inflation factor has to be applied. I think of it as an 'accumulated
> inflation' factor that represents the growth in coupons from issue date to
> valuation date. See page 4 and 5 of
> http://www.riskworx.co.za/resources/Inflation-linked%20Instruments.pdf for
> the full methodology.
>
> regards
>
> Francois Botha
>
>
> On 3 June 2014 20:10, Piter Dias <[hidden email]> wrote:
>>
>> I think he wants to use a "spot inflation index" (kind a dummy currency)
>> and evaluates using real interest rates. It is a procedure usual in
>> Brazilian inflation market, for example.
>>
>> This procedure doesn't requires a inflation forecast curve, as long as the
>> real rates are observable.
>>
>> Just as an example, all NTNB (Brazilian inflation bond) rates at the
>> following like a real YTM:
>> http://www3.tesouro.gov.br/tesouro_direto/consulta_titulos_novosite/consultatitulos.asp
>>
>> Regards,
>>
>>
>> _____________________
>> Piter Dias
>> [hidden email]
>> www.piterdias.com
>>
>>
>>
>> > Date: Tue, 3 Jun 2014 20:02:12 +0200
>> > From: [hidden email]
>> > To: [hidden email]
>> > CC: [hidden email]
>> > Subject: Re: [Quantlib-users] Valuing CPI Bond at real yield curve
>>
>> >
>> > Hi Francois,
>> > if I get you right, your idea is to directly work in the real
>> > currency (which indeed may work for zero inflation coupons and
>> > nominal, I think ...). But why do you need to refer to CPI instruments
>> > at all then and not just work with usual fix rate bonds and a yield
>> > term structure for the real curve ?
>> > best
>> > Peter
>> >
>> > On 3 June 2014 15:37, Luigi Ballabio <[hidden email]> wrote:
>> > > I think you should be able to manage with
>> > > InterpolatedZeroInflationCurve.
>> > >
>> > > Luigi
>> > >
>> > > On Tue, Jun 3, 2014 at 3:04 PM, Francois Botha <[hidden email]>
>> > > wrote:
>> > >> Hi,
>> > >>
>> > >> I want to value a CPI Bond using a real, not nominal, yield curve. As
>> > >> I
>> > >> understand it, the current CPI Bond methodology requires some CPI
>> > >> indices, a
>> > >> zero inflation curve and a nominal yield curve. I don't have all
>> > >> those
>> > >> available, but I should be able to input a real curve instead of
>> > >> nominal
>> > >> curve (used in discounting) and a flat zero inflation curve
>> > >> consisting of
>> > >> rates = 0.
>> > >>
>> > >> It should give the same value. Conceptually, this method is also the
>> > >> same as
>> > >> valuing a fixed rate bond, but with an added inflation ratio
>> > >> adjustment,
>> > >> based on the CPI indices.
>> > >>
>> > >> But I'm struggling to create a zero inflation curve which is
>> > >> basically flat
>> > >> and all 0s. I've tried using PiecewiseZeroInflationCurve and with
>> > >> some
>> > >> instruments yielding 0s, but I end up with a curve that is not
>> > >> exactly flat
>> > >> or zero. I suspect it's a consequence of the historic CPI indices and
>> > >> the
>> > >> fact that they're interpolated.
>> > >>
>> > >> Are there any other ways, besides PiecewiseZeroInflationCurve to
>> > >> construct a
>> > >> ZeroInflationCurve?
>> > >>
>> > >> thanks
>> > >> Francois Botha
>> > >>
>> > >>
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