Posted by
Toyin Akin on
URL: http://quantlib.414.s1.nabble.com/Java-wrapper-test-program-using-Eclipse-3-1-1-tp4555p4584.html
Hi,
Good question, I would have thought so though as if one has a floating rate
leg with a spread, you would certainly want to cap this structure.
I don't think it's a good idea to throw an error because if I wanted to
price a fix/float swap where the float leg has a spread, passing these legs
to the swap class works, but I would have to define the float leg again
without the spread just for the capfloor class to work.
For swaps you have the same case, however the spread is processed correctly
(moved onto the fix leg) before being processed by the swaption engine
classes.
I would have though that the same could be done for caps (spread moved onto
the strike)
See :
http://www.fincad.com/support/developerfunc/mathref/Callable%20Capped%20Floaters.htmfor the treatment of spreads (Equation #3).
Thanks for looking at this...
Toy out.
>From: Luigi Ballabio <
[hidden email]>
>To: Toyin Akin <
[hidden email]>
>CC:
[hidden email]
>Subject: [Quantlib-users] Re: spread not used within some of the capfloor
>engine classes
>Date: Tue, 04 Apr 2006 11:44:10 +0200
>
>
>On 03/22/2006 06:27:48 AM, Toyin Akin wrote:
>>Apart from the blackcapfloorengine class, I do not believe that any of
>>the other capfloor engine classes use the spread value stored with the
>>cashflow coupons.
>
>Toyin,
> you're right. I'm puzzled though---do caps and floors allow a spread?
>Maybe we should just check that no spread is provided?
>
>Later,
> Luigi
>
>
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