Re:Question on Caps/Floors pricing on InArrear cashflows.

Posted by Toyin Akin on Oct 04, 2005; 5:15am
URL: http://quantlib.414.s1.nabble.com/Re-Question-on-Caps-Floors-pricing-on-InArrear-cashflows-tp4076p4077.html

Enrico,

Thanks for the info.
I have a better understanding of this now.

However it should be noted that anyone passing an in-arrears leg into the
CapFloor class will
generate unadjusted premium values.

Best Regards,
Toyin Akin.

>From: "enrico.michelotti" <[hidden email]>
>To: "quantlib-users" <[hidden email]>
>Subject: Re:[Quantlib-users] Question on Caps/Floors pricing on InArrear
>cashflows.
>Date: Tue,  4 Oct 2005 08:22:58 +0200
>
>The CashFlow vector created with InArrearCoupon is corrected,
>since the InArrear cap/floor resets at the end of each accrual period when
>the payment is done (apart for the adjustment of a rolling date).
>The only problem is that you cannot anymore use the simple Black pricing,
>but you need an adjustmnet for the convexity effect.
>If I do remember well in Brigo-Mercurio you can find such adjustment.
>
>Enrico
>---------- Initial Header -----------
>
>From      : [hidden email]
>To          :
>[hidden email],[hidden email]
>Cc          :
>Date      : Tue, 04 Oct 2005 07:03:09 +0100
>Subject : [Quantlib-users] Question on Caps/Floors pricing on InArrear
>cashflows.
>
>
>
>
>
>
>
> >
> > Hi all,
> >
> > Within Quantlib you can create an array of cashflows which can then be
> > passed into the CapFloor constructor.
> >
> > My question is whether the pricing logic within the CapFloor class is
> > correct for InArrear cashflows?
> >
> > The CapFloor class takes as it's exercise date for all the
> > caplet's/floorlet's the fixing date of the coupon.
> >
> > Under a UpFrontIndexedCoupon this would be settleDays before the start
>date
> > of the period.
> > Under an Inarrearindexedcoupon this would be settleDays before the end
>date
> > of the period.
> >
> > Thus when pricing a caplet/floorlet which is based on an
> > Inarrearindexedcoupon, should the
> > exercise date still be settleDays before the start date of the period?
> >
> > My guess is that the exercise date should be settleDays before the start
> > date of the period.
> >
> > Best Regards,
> > Toyin Akin.
> >
> >
> >
> >
> > -------------------------------------------------------
> > This SF.Net email is sponsored by:
> > Power Architecture Resource Center: Free content, downloads,
>discussions,
> > and more. http://solutions.newsforge.com/ibmarch.tmpl
> > _______________________________________________
> > Quantlib-users mailing list
> > [hidden email]
> > https://lists.sourceforge.net/lists/listinfo/quantlib-users
> >
>
>
>
>-------------------------------------------------------
>This SF.Net email is sponsored by:
>Power Architecture Resource Center: Free content, downloads, discussions,
>and more. http://solutions.newsforge.com/ibmarch.tmpl
>_______________________________________________
>Quantlib-users mailing list
>[hidden email]
>https://lists.sourceforge.net/lists/listinfo/quantlib-users