Libor Forward Process

Posted by Fabio Ramponi on
URL: http://quantlib.414.s1.nabble.com/Libor-Forward-Process-tp4723.html

Hi all,

I was trying to calibrate the Libor Forward Model, and I have a few questions for you:

1) In the market cap volatility matrices, usually the first quoted cap is referred to the rate which fixes today and has accrual start date 2 business days after today, is it right? If so, in order to have a coherent structure for the forward rates to be used in LMM, the first fixing date should be today (or the term structure reference date) and the first accrual start date 2 business days after.

In lfmprocess.cpp (line 49 and following), on the contrary, it seems that today is the first accrual start date (the settlement) and the first fixing date is 2 days before.

2) in lfmprocess.cpp, lines 49-70, where the times vector are filled, the accrual start and accrual end times are evaluated starting from the settlement date, while the fixing times from the startDate, which is n days before settlement. Could you please explain why the reference date is not the same for all the vectors?

3) the day counter used to calculate the times vectors in lfmprocess.cpp seems to be the index day counter (see line 44), but, to remain coherent with all the other QuantLib instruments, it wouldn't be better to use the term structure day counter instead?

Thanks a lot,

Fabio

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