http://quantlib.414.s1.nabble.com/Cannot-bootstrap-a-yieldcurve-tp8530p8540.html
Heres a paper by Nando (Fernando M. Ametrano), and Marco Bianchetti.
> HI Ferdinando,
>
> What are the new school ways to bootstrap yield curve? Any paper
> suggestion is strongly appreciated.
>
> Thanks
>
>
>
>
>
>
> On Mon, Oct 25, 2010 at 10:47 AM, Ferdinando Ametrano
> <
[hidden email]> wrote:
>> Hi Simon
>>
>> you're right, anyway whatever major currency is considered (at least
>> EUR, USD, GBP) a curve built using "ON", "1w", "2w", "1m", "2m",
>> "3m", "4m", "5m", "6m", "7m", "8m", "9m", "10m", "11m", "1y", "2y",
>> etc is very much old school inhomogeneous approach
>>
>> Unless it's used for estimating some funding cost (and in this case
>> the xY swap should be spreaded) there is no way you can bootstrap
>> such
>> a curve in the current market conditions without negative rates
>>
>> ciao -- Nando
>>
>> On Mon, Oct 25, 2010 at 1:01 PM, Simon Ibbotson
>> <
[hidden email]> wrote:
>>>
>>> Hi Nando,
>>>
>>> Nowhere does the OP state that the curve is for EUR, so it could
>>> have a 6M or even a 12M floating rate (not to mention 90D, 12W or
>>> 4W markets). However, it is likely (given the values) that it does
>>> include a 3M basis.
>>>
>>> Cheers,
>>> Simon
>>>
>>>
>>> -----Original Message-----
>>> From:
[hidden email] [mailto:
[hidden email]
>>> ] On Behalf Of Ferdinando Ametrano
>>> Sent: 25 October 2010 11:56
>>> To: Simon Ibbotson
>>> Cc: Leon Sit;
[hidden email]
>>> Subject: Re: [Quantlib-users] Cannot bootstrap a yieldcurve
>>>
>>> 1Y swap is based on 3M euribor, so it's comparable with 3 months
>>> rate
>>>
>>> no way it's going to be in line with a 11M rate with the current
>>> market conditions.
>>>
>>> people keep bootstrapping one single curve with inhomogeneous rates,
>>> but it's not possible anymore.
>>>
>>> Attend the QuantLib forum for more details on this issue (or wait
>>> for
>>> the slides)
>>>
>>> ciao -- Nando
>>>
>>>
>>> On Tue, Oct 19, 2010 at 5:18 PM, Simon Ibbotson
>>> <
[hidden email]> wrote:
>>>> For reference, just because these quotes were seen in the market
>>>> does not mean that they are liquid or even valid quotes!
>>>> Many banks only give out a live quote once a day (for Libor) and
>>>> then update the other non-traded rates on an ad-hoc basis.
>>>>
>>>> 1Y swaps are not very liquid (in many currencies) as most banks
>>>> hedge their positions with futures at the short end.
>>>>
>>>>
>>>> -----Original Message-----
>>>> From: Leon Sit [mailto:
[hidden email]]
>>>> Sent: 19 October 2010 16:14
>>>> To: Simon Ibbotson
>>>> Cc:
[hidden email]
>>>> Subject: Re: [Quantlib-users] Cannot bootstrap a yieldcurve
>>>>
>>>> I will give that a try later. My boss says negative forward is not
>>>> reasonable for our team :)
>>>>
>>>> Thanks a lot for the issue.
>>>>
>>>> Leon
>>>>
>>>>
>>>>
>>>> On Tue, Oct 19, 2010 at 10:05 AM, Simon Ibbotson
>>>> <
[hidden email]> wrote:
>>>>> See if it works first - then worry about the rest of the
>>>>> library. It shouldn't matter much, the #define is specific for
>>>>> rates in yieldcurves.
>>>>>
>>>>> -----Original Message-----
>>>>> From: Leon Sit [mailto:
[hidden email]]
>>>>> Sent: 19 October 2010 16:02
>>>>> To: Simon Ibbotson
>>>>> Cc:
[hidden email]
>>>>> Subject: Re: [Quantlib-users] Cannot bootstrap a yieldcurve
>>>>>
>>>>> I noticed that issue too. However these are a set of real quote
>>>>> from
>>>>> market so I was hoping that I did not use quantlib right instead
>>>>> of
>>>>> data issue. What is the consequence of allowing negative forward
>>>>> rate
>>>>> for other parts of quantlib if I am only working with swap,
>>>>> futures,
>>>>> and equity derivatives?
>>>>>
>>>>> Thanks.
>>>>>
>>>>>
>>>>> On Tue, Oct 19, 2010 at 9:50 AM, Simon Ibbotson
>>>>> <
[hidden email]> wrote:
>>>>>> Sorry, all those figures should be divided by 10... e.g. 0.8%
>>>>>> rather
>>>>>> than 8%.
>>>>>>
>>>>>> The same principle applies.
>>>>>>
>>>>>> -----Original Message-----
>>>>>> From: Simon Ibbotson
>>>>>> Sent: 19 October 2010 15:50
>>>>>> To: 'Leon Sit';
[hidden email]
>>>>>> Subject: RE: [Quantlib-users] Cannot bootstrap a yieldcurve
>>>>>>
>>>>>> I suspect that you're generating negative forward rates at the
>>>>>> point
>>>>>> where the rate drops from 8% (11M cash) to 4.7% (1Y swap) and
>>>>>> have not
>>>>>> enabled this as an option:- userconfig.hpp : uncomment out
>>>>>> #define
>>>>>> QL_NEGATIVE_RATES.
>>>>>>
>>>>>> You've not provided enough code to see whether your curve has
>>>>>> properly
>>>>>> defined the cash/swap transition.
>>>>>>
>>>>>> The curve does look rather unrealistic: 8% 11M cash then 4.71%
>>>>>> 1Y swap,
>>>>>> followed by a 7% 2Y swap.
>>>>>>
>>>>>> Simon
>>>>>>
>>>>>>
>>>>>> -----Original Message-----
>>>>>> From: Leon Sit [mailto:
[hidden email]]
>>>>>> Sent: 19 October 2010 15:33
>>>>>> To:
[hidden email]
>>>>>> Subject: [Quantlib-users] Cannot bootstrap a yieldcurve
>>>>>>
>>>>>> Hi All:
>>>>>>
>>>>>> I am using the following set of rates to bootstrap a yieldcurve
>>>>>>
>>>>>> double[] rates = {
>>>>>> 0.0022438 ,
>>>>>> 0.0025469 ,
>>>>>> 0.0025688 ,
>>>>>> 0.0026156 ,
>>>>>> 0.0027969 ,
>>>>>> 0.0030375 ,
>>>>>> 0.0036906 ,
>>>>>> 0.0044063 ,
>>>>>> 0.0051125 ,
>>>>>> 0.0057 ,
>>>>>> 0.0062838 ,
>>>>>> 0.0068188 ,
>>>>>> 0.0074125 ,
>>>>>> 0.0080344 ,
>>>>>> 0.00471 ,
>>>>>> 0.007027 ,
>>>>>> 0.00991 ,
>>>>>> 0.01303 ,
>>>>>> 0.016065 ,
>>>>>> 0.018773 ,
>>>>>> 0.021 ,
>>>>>> 0.02282 ,
>>>>>> 0.0243 ,
>>>>>> 0.025525 ,
>>>>>> 0.0266 ,
>>>>>> 0.027458 ,
>>>>>> 0.02835 ,
>>>>>> 0.02889 ,
>>>>>> 0.02939 ,
>>>>>> 0.02988 ,
>>>>>> 0.0302 ,
>>>>>> 0.0305 ,
>>>>>> 0.03075 ,
>>>>>> 0.03096 ,
>>>>>> 0.031655 ,
>>>>>> 0.031923 ,
>>>>>> 0.03222 ,
>>>>>> 0.031975};
>>>>>>
>>>>>> string[] labels = {"ON",
>>>>>> "1w",
>>>>>> "2w",
>>>>>> "1m",
>>>>>> "2m",
>>>>>> "3m",
>>>>>> "4m",
>>>>>> "5m",
>>>>>> "6m",
>>>>>> "7m",
>>>>>> "8m",
>>>>>> "9m",
>>>>>> "10m",
>>>>>> "11m",
>>>>>> "1y",
>>>>>> "2y",
>>>>>> "3y",
>>>>>> "4y",
>>>>>> "5y",
>>>>>> "6y",
>>>>>> "7y",
>>>>>> "8y",
>>>>>> "9y",
>>>>>> "10y",
>>>>>> "11y",
>>>>>> "12y",
>>>>>> "13y",
>>>>>> "14y",
>>>>>> "15y",
>>>>>> "16y",
>>>>>> "17y",
>>>>>> "18y",
>>>>>> "19y",
>>>>>> "20y",
>>>>>> "25y",
>>>>>> "30y",
>>>>>> "40y",
>>>>>> "50y"};
>>>>>>
>>>>>> everything is fine until it iterates to the first swap quote.
>>>>>> Does
>>>>>> anybody know what I might have missed?
>>>>>>
>>>>>> I am using the following yield curve class
>>>>>>
>>>>>> new PiecewiseYieldCurve<Discount, LogLinear>(
>>>>>> settlementDate, depositFutureSwapInstruments,
>>>>>> depositDayCounter, 10e-5));
>>>>>>
>>>>>> Thanks
>>>>>>
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