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Re: FpML-IRD Re: Use of Formula?
Jim,
Marc is correct in observing that the formula component was introduced in
FpML 4.2 as part of the work to support Inflation swaps. There is no
convention on the use of the formula component with interest rate products
- that is to say, it has no designated role (although it is possible that
one could be devised in future). This needs to be documented more clearly
in the schema - I was looking at this recently, so it's already on my to-do
list.
In your example, the structure is represented using the
floatingRateMultiplierSchedule (optional child of FloatingRate), which
permits a series of multiplier values to be defined over the term of the
swap (compare the use of notionalStepSchedule, spreadSchedule etc.). In
your case the multiplier is constant over the term, so it is only necessary
to specify floatingRateMultiplierSchedule/initialValue.
The resulting structure looks something like:
<floatingRateCalculation>
<floatingRateIndex>USD-LIBOR-BBA</floatingRateIndex>
<indexTenor>
<periodMultiplier>1</periodMultiplier>
<period>M</period>
</indexTenor>
<floatingRateMultiplierSchedule>
<initialValue>0.7</initialValue>
</floatingRateMultiplierSchedule>
</floatingRateCalculation>
- note that (as elsewhere in FpML) the percentage is expressed as a real
number i.e. 70% = 0.7
Best regards,
Harry McAllister
Fixed Income Architecture
BNP Paribas
+44 20 7595 3416
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Hi Jim,
Sorry I was on vacation. I'll forward your question to the ird working
group. The only examples I've seen using the formula component are in
equity swaps.
<amount>
<paymentCurrency href="ReferenceCurrency"/>
<formula>
<formulaDescription>Final Price * Number of
Shares</formulaDescription>
<math>
<mi>valuationPriceFinal</mi>
<mo>*</mo>
<mi>openUnits</mi>
</math>
</formula>
<cashSettlement>true</cashSettlement>
</amount>
I know the formula component was added for inflation swaps but I haven't
seen any example. I guess it could be used for interest rate swaps as well.
Best regards,
Marc
On 8/28/07, Jim Brous <jbrous@xxxxxxxxxxxxxxxxxx > wrote:
Hello Marc,
Perhaps you could direct me to the someone on the IR Derivatives working
group for guidance.
I am looking for examples that use the Formula complex type in a
swapStream,
and suggestions on best practice for using Formula.
In the particular trade example that I am trying to represent in FpML,
the
floating rate is specified at 70.00 % x 1-Month USD-LIBOR-BBA.
Thank you and best regards,
Jim
Jim Brous
Managing Partner
Metro Solutions LLC
917.593.4195
jbrous@xxxxxxxxxxxxxxxxxx
www.metrosolutions.com
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