FPML 4.7 Question – DCD Implementation – fixedRate is deposit’s interest rate or overall coupon?

[alexadranghi]

I have an implementation question for DCD in FPML 4.7. The term deposit’s fixedRate field represent the deposit rate for the individual leg, or the overall enchanced coupon of the strategy? I believe its the former, as in FPML a DCD is modeled in its multileg form of a vanilla option and a money market deposit. The fields in each one belong to each leg. In which case, there is no explicate way to enter the enhanced coupon except implicitly calculated from the option premium and term deposit internet rate. Another view is that in the case of a DCD, the term deposit’s fixedRate represents the enhanced coupon. While this makes far more sense from the view of a terms sheet, the coupon is a structural field, and isn’t part of any leg.. which the fixedRate is. Any help or clarification much welcomed. Thanks

[mgratacos]

Hi Alex, I think it represents the enhanced coupon. Best Regards, Marc

[h_mcallister]

I suspect the correct answer is that this has not been explicitly considered in the modelling done to date. Some other issues have recently been reported with respect to the dual currency deposit model under FpML 5-1; please see FpML issue 1054 (http://www.fpml.org/issues/view.php?id=1054), also related discussions on the FX working group (http://www.fpml.org/_wgmail/_fxwgmail/msg00178.html). The FX WG would welcome any input you may be able to offer on these issues. Best regards, Harry

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