Re: QuantLib::Bond::cleanPriceFromZSpread

Posted by gigifaye29 on
URL: http://quantlib.414.s1.nabble.com/QuantLib-Bond-cleanPriceFromZSpread-tp7310p7311.html

If the call date equals the evaluation date, the engine might consider it as expired. What happens if you try a bond that will be called one day after the evaluation date?

Luigi

*****
Thanks Luigi.  Isn't that though, if the engine( I am using Hull-White) considers it as expired, the price should be very close to strike?
Yes I tried using the evaluation date just before the next call date,  the calculated price still not capped to strike as I would expect.

Am I missing anything here?

Thx,
Xinc
*****

gigifaye29 wrote

Can anyone help clarify my question?

In the CallableBonds Class,  does the member function "cleanPriceFromZSpread(...)"  calculate a clean price by discounting the  *unadjusted* cash flows, OR  *adjusted* cash flows(prices on each note revised to strike if option in the money),  by interest tree note rates plus z-spread?

I got confused because the terminology z-spread(zero volatility spread) is used in non-option setting but if this function simply just discounts all unadjusted cashflows then it is not special to this callable bond class anymore.  

If it does discount adjusted cashflows, then shouldn't the spread called OAS instead of z-spread?

Appreciate your correction on my misunderstanding,
Xinc