Thanks, Bernd. To reinforce the assumed convention I can say that on
> Hi Peter,
>
> i try to rephrase it in my words. I am not really an expert. Just worked
> across some things here!
>
> Lets stick to the EUHICP Index. Because it is not interpolated (in swaps).
> Which makes it simpler.
>
> If you are in march (as you are in your example) you trade december
> inflation. That is dec-14 -> dec-15. This will be as long as you are in
> march. This is expressed (a little more complicated i think) in the wilmott
> thread by the "extension" of the inflation lag to 4 month if the settlement
> crosses a month barrier.
>
> Concerning the settlement date: In interest rate swaps it plays definitly a
> role. It determines the interest rate period. And thus via daycount and
> buisiness day conventions it determins the actual cash that is exchanged at
> the payment date.
>
> With inflation: What is the interest period? You want to pay Nominal *
> (Index_final/Index_initial - 1). Where is the daycount here? With an
> interest rate swap you have Cash = Notional * rate * year-fraction (period).
> So you have to know all of this to get to your cash.
>
> Thinks of course get more complicated if the index is interpolated.
>
> Bernd
>
>
> 2015-03-31 14:05 GMT+02:00 Peter Caspers <
[hidden email]>:
>>
>> 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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