Posted by
David Palmer-2 on
URL: http://quantlib.414.s1.nabble.com/piecewise-flat-forward-algorithm-tp3876p3880.html
In the real world, negative rates occur when the spot rate is below the
inflation rate. This happens enough that it cannot be ignored. The
forward rates truly contain all market assumptions regarding the
inflation rate and the predicted response to reinvestment! Sorry for
this programmatically useless information.
Since I cannot get MSVC to compile QL due to it telling me it cannot
find the calendar libraries, I can be of no more help.
Dave
-----Original Message-----
From:
[hidden email]
[mailto:
[hidden email]] On Behalf Of Luigi
Ballabio
Sent: Monday, July 04, 2005 8:36 AM
To: Adjriou Belak
Cc:
[hidden email]
Subject: [Quantlib-users] Re: piecewise flat forward algorithm
On 06/28/2005 10:07:10 AM, Adjriou Belak wrote:
>
> In the algorithm fo find the zero coupon (with the brent solver 1D) ,
> there is a problem when the curve is downward !! There is an option
> QL_NEGATIVE_RATES that prevents the negative rates but it prevents
> also the downward curve. In the code :
>
> #if defined(QL_NEGATIVE_RATES)
> // discount are not required to be decreasing--all bets
> are off.
> // We choose as max a value very unlikely to be exceeded.
> DiscountFactor max = 3.0;
> #else
> DiscountFactor max = discounts_[i-1];
> #endif
> solver.solve(FFObjFunction(this,instrument,i),
> accuracy_,guess,min,max);
>
> The discount factor is set to the last one so the curve can't be
> downward. So a downaward curve doesn't mean negative rates !
I beg to differ. A downward curve might mot mean negative spot rates,
but it does mean negative forward rates.
Later,
Luigi
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