Marc, Harry
Rule ird-7 requires compoundingMethod to be specified in the fixed
stream here. But if we do so, ird-9 and ird-29 are triggered. What
options do we have?
ird-7
calculationPeriodAmount/calculation/compoundingMethod exists if and only
if the frequencies in paymentDates/paymentFrequency and
calculationPeriodDates/calculationPeriodFrequency are different.
ird-9
calculationPeriodAmount/calculation/compoundingMethod can only be
present if a resetDates element exists.
ird-29
If compoundingMethod exists then fixedRateSchedule must not be present.
Lucio
-----Original Message-----
From: Marc Gratacos [mailto:MGratacos@xxxxxxxx]
Sent: Wednesday, January 30, 2008 8:41 AM
To: harry.mcallister@xxxxxxxxxxxxxxxxx; irdwg@xxxxxxxx
Cc: Iida, Lucio BGI SF
Subject: RE: FpML-IRD zero coupon swap example
We'll use 1T then for the payment frequency. See attached.
I have also created an issue ticket for the rule
http://www.fpml.org/issues/view.php?id=551
Thanks,
Marc
-----Original Message-----
From: harry.mcallister@xxxxxxxxxxxxxxxxx
[mailto:harry.mcallister@xxxxxxxxxxxxxxxxx]
Sent: Wednesday, January 30, 2008 6:52 AM
To: irdwg@xxxxxxxx
Cc: Marc Gratacos; Lucio.Iida@xxxxxxxxxxxxxxxxxx
Subject: RE: FpML-IRD zero coupon swap example
Marc, Lucio,
I think the use of 1T for payment frequency in this case is justified -
it
is consistent with use of the idiom in other contexts, and provides a
clear
signal that we are dealing with a zero-coupon leg.
If ird-2 prevents us from using this form, I propose that we revise the
rule, either by re-expressing it such that:
paymentDates/paymentFrequency must be an integer multiple (could
be
1) of calculationPeriodDates/calculationPeriodFrequency, or 1T
- or by revising the frequency equivalence definitions, as suggested by
Lucio, so that 1T is considered to be a positive integer multiple (>= 1)
of
any frequency.
We (BNPP) encountered this issue in the SystemWire implementation of
ird-2
some time ago, and (as I recall) resolved it by changing the
implementation
of the rule to permit paymentFrequency = 1T in conjunction with a
regular
calculationPeriodFrequency.
Best regards,
Harry
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Sorry, the previous example I sent was updated incorrectly. The fixed
leg should have a calculation frequency of 1Y. In order to avoid firing
ird-2 I didn't use 1T for the payment frequency. I guess we need to
discuss this.
Thanks,
Marc
-----Original Message-----
From: irdwg@xxxxxxxx [mailto:irdwg@xxxxxxxx] On Behalf Of Marc Gratacos
Sent: Wednesday, January 30, 2008 5:41 AM
To: Iida, Lucio BGI SF; irdwg@xxxxxxxx
Subject: RE: FpML-IRD zero coupon swap example
Lucio,
1) I think you're right. Otherwise we cannot use 1T for the floating leg
in which there is compounding.
2) I think you would simply have a calculation frequency higher than the
payment frequency without specifying the compounding element. The
compounding element only indicates whether there is flat or straight
compounding.
I updated the example to use 1T for the calculation of the fixed leg and
have a payment frequency of 30Y in the floating leg in order to avoid
firing ird-2.
Harry, please correct me if I am wrong here.
Best,
Marc
-----Original Message-----
From: Iida, Lucio BGI SF [mailto:Lucio.Iida@xxxxxxxxxxxxxxxxxx]
Sent: Monday, January 28, 2008 12:23 PM
To: Marc Gratacos; harry.mcallister@xxxxxxxxxxxxxxxxx; irdwg@xxxxxxxx
Subject: RE: FpML-IRD zero coupon swap example
Marc / Harry,
Thanks, "1T" makes sense to me, too. Two further questions:
1) Would this require an additional frequency equivalence definition for
"1T", in order to avoid ird-2 errors?
2) How would one specify periodic compounding on the fixed rate stream?
Rules ird-9 and ird-29 prohibit it.
Regards
Lucio
-----Original Message-----
From: Marc Gratacos [mailto:MGratacos@xxxxxxxx]
Sent: Monday, January 28, 2008 4:08 AM
To: harry.mcallister@xxxxxxxxxxxxxxxxx; irdwg@xxxxxxxx
Cc: Iida, Lucio BGI SF
Subject: RE: FpML-IRD zero coupon swap example
Harry,
Yes, this makes sense. See attached updated version of the example.
-----Original Message-----
From: harry.mcallister@xxxxxxxxxxxxxxxxx
[mailto:harry.mcallister@xxxxxxxxxxxxxxxxx]
Sent: Monday, January 28, 2008 6:39 AM
To: irdwg@xxxxxxxx
Cc: Marc Gratacos; Lucio.Iida@xxxxxxxxxxxxxxxxxx
Subject: Re: FpML-IRD zero coupon swap example
Marc,
My preference would be to use the "1T" idiom for payment frequency, to
signal that the single payment spans the term of the trade regardless of
the actual duration (otherwise the message consumer has to figure out
that
e.g. 30Y equates to the term of the trade), thus:
<paymentDates>
<calculationPeriodDatesReference href="N10434"/>
<paymentFrequency>
<periodMultiplier>1</periodMultiplier>
<period>T</period>
</paymentFrequency>
<payRelativeTo>CalculationPeriodEndDate</payRelativeTo>
<paymentDatesAdjustments>
<businessDayConvention>MODFOLLOWING</businessDayConvention>
<businessCenters>
<businessCenter>GBLO</businessCenter>
</businessCenters>
</paymentDatesAdjustments>
</paymentDates>
Best regards,
Harry McAllister
Fixed Income Architecture
BNP Paribas
Internet
MGratacos@xxxxxxxx
To
irdwg
Sent by: irdwg@xxxxxxxx
cc
Lucio.Iida
28/01/2008 10:31
Subject
FpML-IRD zero coupon
swap example
Please respond to
irdwg@xxxxxxxx
Hi all,
I recently got some questions about zero coupon interest rate swaps. I
created a very simple example but I'd like to check with the group
whether
it is a good example to publish. See attached.
Thanks in advance,
-Marc
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this message from your system. Any
unauthorised dissemination, distribution or copying hereof is
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BNP Paribas Fund Services UK Limited, BNP Paribas Trust Corporation UK
Limited, BNP Paribas UK Limited,
BNP Paribas Commodity Futures Ltd and Investment Fund Services Limited
are authorised and regulated by
the Financial Services Authority.
BNP Paribas, BNP Paribas Securities Services and BNP Paribas Private
Bank are authorised by the CECEI
and AMF. BNP Paribas London Branch, BNP Paribas Securities Services
London Branch and BNP Paribas
Private Bank London Branch are regulated by the Financial Services
Authority for the conduct of their UK
business. BNP Paribas Securities Services London Branch is also a
member of the London Stock Exchange.
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Attachment:
ird-ex32-zero-coupon-swap.xml
Description: ird-ex32-zero-coupon-swap.xml