Re: FpML-IRD forwarding question: resetRelativeTo in relation to Averaging trades

[harry.mcallister@xxxxxxxxxxxxxxxxx]

Pauline,

I agree that the meaning of resetRelativeTo
is not obvious in these circumstances. I don't think the FpML documentation
is clear on this point - the schema annotation states that the element
must not be produced where the reset frequency is Daily, but does not give
any guidance on what to do for averaging rates.

Can anybody propose a situation where
it is meaningful to produce ResetRelativeTo for an averaging trade, and
what significance the value would have in the context?

Best regards,
Harry McAllister

• The problem is illustrated by the following xml fragment, taken from a SwapsWire message for a swap with weekly resets against a 3M US Municipal swap rate. In this case, resetRelativeTo has value "CalculationPeriodStartDate", but it is not obvious how we should construe this in the context - the use of an averaging method implies that reset is necessarily retrospective (a sequence of observations must occur, after which we can calculate the averaged rate) - certainly, it seems incorrect to specify that reset is relative to the calculation period start.

        <resetDates
id="floatingLegResetDates">
         
      <calculationPeriodDatesReference
href="floatingLegCalcPeriodDates"/>
         
      <resetRelativeTo>CalculationPeriodStartDate</resetRelativeTo>
         
      <fixingDates>
         
              <periodMultiplier>0</periodMultiplier>
         
              <period>D</period>
         
              <businessDayConvention>PRECEDING</businessDayConvention>
         
              <businessCenters>
         
               
      <businessCenter>USNY</businessCenter>
         
              </businessCenters>
         
              <dateRelativeTo
href="floatingLegResetDates"/>
         
      </fixingDates>
         
      <resetFrequency>
         
              <periodMultiplier>1</periodMultiplier>
         
              <period>W</period>
         
              <weeklyRollConvention>THU</weeklyRollConvention>
         
      </resetFrequency>
         
      <resetDatesAdjustments>
         
              <businessDayConvention>MODFOLLOWING</businessDayConvention>
         
              <businessCenters>
         
               
      <businessCenter>GBLO</businessCenter>
         
               
      <businessCenter>USNY</businessCenter>
         
              </businessCenters>
         
      </resetDatesAdjustments>
        </resetDates>
        <calculationPeriodAmount>
         
      <calculation>
         
              <notionalSchedule>
         
               
      <notionalStepSchedule>
         
               
              <initialValue>987654321</initialValue>
         
               
              <currency>USD</currency>
         
               
      </notionalStepSchedule>
         
              </notionalSchedule>
         
              <floatingRateCalculation>
         
               
      <floatingRateIndex>USD-SIFMA
Municipal Swap Index</floatingRateIndex>
         
               
      <averagingMethod>Weighted</averagingMethod>
         
              </floatingRateCalculation>
         
              <dayCountFraction>ACT/ACT.ISDA</dayCountFraction>
         
      </calculation>
        </calculationPeriodAmount>

Internet  
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Sent by: irdwg@xxxxxxxx

01/04/2009 09:47

Please respond to
irdwg@xxxxxxxx

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Subject	FpML-IRD forwarding question: resetRelativeTo in relation to Averaging trades

See question from Pauline Mullan (Markit) regarding
Averaging trades. I added her email address to the distribution list.


Subject: resetRelativeTo in relation to Averaging trades.
Date: Wed, 1 Apr 2009 09:43:24 +0100
From: "Pauline Mullan" <pauline.mullan@xxxxxxxxxx>
To: irdwg@xxxxxxxx


Hi all,

I have a question regarding the use of the resetRelativeTo element in =
averaging trades.

If we have a trade with weekly or monthly averaging, does it make sense
=
to include the resetRelativeTo element in FpML as I am not sure that it
=
makes sense in that context?

So you have a calculationPeriodFrequency of 3m and a resetFrequency of
=
1m, does it make sense to have the resetRelative to the the =
calculationPeriodStartDate?

Many Thanks,

Pauline

Pauline Mullan
Vice President
Trade Processing

Markit



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