Posted by
Ferdinando M. Ametrano-2 on
Jun 19, 2002; 11:08am
URL: http://quantlib.414.s1.nabble.com/swaps-tp2084p2085.html
Hi Jens
you wrote:
>I take the swapvaluation example and assume:
>
>- termstructure with constant 4% rates
>- 2 year swap, 4% fixed rate, spread 0.0
>
>and get the following results:
>
> *** 2Y swap at 4.00%
> *** using constant 4% structure:
> 2Y 4.00% NPV: 2346.70
> 2Y 4.00% fair spread: 0.1228%
> 2Y fair fixed rate: 3.8760%
>
>Can somebody explain that to me?
I'm sorry I cannot double check your example right now, but you might be
paying too little attention to the daycount and compounding conventions.
The 4% rate of a QuantLib term structure is continuos compounding:
discount(t)=QL_EXP(0.04*t)
and the time is measured with the daycount you provided as input (usually
something smooth as act/365, not 30/360)
The 4% fixed rate of a 2 year swap is simple compounding:
cashflow=0.04*Nominal*t, and the time is measured with the daycount you
provided as input (usually 30/360)
This could easily account for the numerical results you provided.
It would be different if you bootstrapped a term structure with a 2 year
swap, 4% fixed rate and then the bootstrapped yield curve wouldn't re-price
the same swap at 4%.
This would be a real problem.
Hope this helps. If not, please let me know and I'll go into the actual
calculations
ciao -- Nando