Re: QuantLib::Bond::cleanPriceFromZSpread

Posted by gigifaye29 on
URL: http://quantlib.414.s1.nabble.com/QuantLib-Bond-cleanPriceFromZSpread-tp7310p7318.html

I think you are right on the z-spread calculation - no option pricing engine involved, as Luigi 's previous, it was inherited from generic bond class. I used HW is because I feed the pricing engine for the .npv() calculation which adjusts optionality.

I too need to calculate OAS. I think OAS calculation by Quantlib is on their to-do list.  

One thing I still haven't figured out is that, .npv() gives me a value beyond strike(not capped) in the situation that the option is in money....

Xinc

Guowen Han wrote

Conceptually, Z-Spread is calculated from one interest rate scenario, for
example zero curve. Why Hull-White model is used?
Look at the implementation, the dirtyPriceFromZSpreadFunction() only use
the cashflow (coupons) and discount with the spreadedCurve as the discount
curve. There is no option involved at all.

I have been thinking of how to implement a member function to calculate
the OAS (option adjusted spread) and price from OAS. In fact, such a
function will be much useful than Yield practically and Z-Spread should be
only its simple case. However, with currently design,  for each iteration
for OAS finding, a new curve has to be initialized and is not efficient.
It would be much easier and efficient if the rollback function can accept
a spread parameter.

I may be wrong about it.

Thanks,
 




gigifaye29 <[e-mail]> 
03/02/2009 11:11 AM

To
[e-mail]
cc

Subject
Re: [Quantlib-users] QuantLib::Bond::cleanPriceFromZSpread







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
>

--
View this message in context:
http://www.nabble.com/QuantLib%3A%3ABond%3A%3AcleanPriceFromZSpread-tp22183771p22291035.html

Sent from the quantlib-users mailing list archive at Nabble.com.


------------------------------------------------------------------------------
Open Source Business Conference (OSBC), March 24-25, 2009, San Francisco,
CA
-OSBC tackles the biggest issue in open source: Open Sourcing the
Enterprise
-Strategies to boost innovation and cut costs with open source
participation
-Receive a $600 discount off the registration fee with the source code:
SFAD
http://p.sf.net/sfu/XcvMzF8H
_______________________________________________
QuantLib-users mailing list
[e-mail]
https://lists.sourceforge.net/lists/listinfo/quantlib-users



-----------------------------------------
________________________________________________________
DTCC DISCLAIMER: This email and any files transmitted with it are
confidential and intended solely for the use of the individual or
entity to whom they are addressed. If you have received this email
in error, please notify us immediately and delete the email and any
attachments from your system. The recipient should check this email
and any attachments for the presence of viruses.  The company
accepts no liability for any damage caused by any virus transmitted
by this email.
 
------------------------------------------------------------------------------
Open Source Business Conference (OSBC), March 24-25, 2009, San Francisco, CA
-OSBC tackles the biggest issue in open source: Open Sourcing the Enterprise
-Strategies to boost innovation and cut costs with open source participation
-Receive a $600 discount off the registration fee with the source code: SFAD
http://p.sf.net/sfu/XcvMzF8H
_______________________________________________
QuantLib-users mailing list
[e-mail]
https://lists.sourceforge.net/lists/listinfo/quantlib-users