Posted by
Mirko Raso-2 on
Apr 03, 2008; 11:45am
URL: http://quantlib.414.s1.nabble.com/Questions-on-Inflation-Index-ZCIIS-tp5773.html
Hi all,
I have few problems/doubts on the use of (Zero) Inflation Index &
ZeroCoupon Inflation Index Swap (ZCIIS).
In order to be as clear as possible, let me give few numbers.
QuantLib version used is the 0.9.0 and I modified (as in the SVN
version) the interpolatedzeroinflationcurve.hpp file to work properly.
The evaluation date is today April, 3rd 2008, the inflation index is
Eur HICPxT, the base Month is January 2008 corresponding
to a base fixing index value of 105.67 .I set settlement days to zero.
The quoted rate and the index value (SWIL EU page on bloomberg) for a
5Y maturity ZCIIS,
starting on April 3rd, 2008 and with a maturity date April 3rd, 2033,
are, respectively, 2.3525%
and 118.6982 ( given as 105.67*pow(1+2.3525%,
t) with
t
= 5 ).
The bootstrapping procedure works well, in fact I get the corrected
quoted zero rates, but...
- (Zero) Inflation Index forecast fixing
The forecast fixing method computes the
t value as
difference between a "truebasedate" (January,31th 2008 in the above
example)
and the fixing end date (January, 3rd 2013) obtaining a
t
value as 4.925 instead of 5 (and so an index value of 118.4913 =
105.67*pow(1+2.3525%,
t) ).
Due to the fact that Euro inflation index is based on
monthly index level, according to me the use of the "truebasedate"
should be extended also
to fixing maturity date in order to agree with the market
convention.
The differences among different indexes on the
interpolation method, probably suggest to move the forecast fixing
method at the specific index level and not only at
the zeroinflationondex level. Let me know your opinion
about that.
In the performCalculations() method, the NPV is corrected
only for spot trade ( trades starting today). In addition to that,
different indexes (Euro and US or French for example)
have different interpolation method to compute future
values and this is not properly taken into account by the present
inflation term structure.
Are you planning to use a pricingengine to correctly price
the ZCIIS (including also seasonality) ? and what do you think on
adding explicity the inflation index on the ZCIIS interface ?
Sorry for the long e-mail but I've tried to be as clear as possible,
even if I don't know if it is so.
If I missed some major enanchments in QuantLib SVN, please, sorry and
forget this email.
Thanks in advance,
Mirko
-
________________________________________________
Mirko Raso
Quantitative Analyst - Iccrea Holding S.p.A.
Direzione Risk Management di Gruppo
Servizio Rischi Finanziari - Modelli Analisi Quantitative
Via Lucrezia Romana 41/47 - 00178 Roma
Phone: +39 06 7207 2061
Fax: +39 06 7207 2361
[hidden email]
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