Posted by
Peter Caspers-4 on
Mar 31, 2015; 11:53am
URL: http://quantlib.414.s1.nabble.com/Inflation-Question-tp16424p16425.html
someone on Wilmott says
"However, some people are saying that there is a convention in the market that:
1. If the index is monthly interpolated, such as EU and UK; and
2. If the trade date and settlement (ie effective) date cross a month-end;
then the lag of the swap is increased by a month. So the swap starts 1
or 2 April, but the lag is now 4 months, and so references the
December index of the previous year. So as to be able to offset the
floating legs of swaps traded earlier on in the month."
which would explain the issue. Someone knows more details about this
convention ?
Thanks
Peter
On 31 March 2015 at 13:41, Peter Caspers <
[hidden email]> wrote:
> Inflation Experts,
>
> the CPI Fixings für EUHICPXT for Dec 14 and Jan 15 are 117.01 and
> 115.13 respectively.
>
> Looking at market quotes for a 1y zero coupon swap I see
>
> 27-03-2015 0.443
> 30-03-2015 0.433
>
> so no bigger movements. However, evaluating the 1y swap as of these dates,
>
> 27-03-2015 + 2bd = 31-03-2015 minus 3m lag => 31-12-14 => Base Fixing
> = Dec Fixing = 117.01
> 30-03-2015 + 2bd = 01-04-2015 minus 3m lag => 01-01-2015 => Base
> Fixing = Jan Fixing = 115.01
>
> which would mean that the CPI projection changes drastically.
>
> I have the feeling that I am getting a convention wrong here. Can someone help ?
>
> Thanks
> Peter
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