XCCY samples fx fixing date

[alexnotalex]

Dear All, I’m reading irs 2.27 example 26, FX Resetting interest rate swap and am having trouble interpreting the varyingNotionalFixingDates parameters. http://www.fpml.org/spec/fpml-5-5-8-rec-2/html/confirmation/fpml-5-5-examples.html#s2.27 The example description says the fx reset happens at payment “…Notional on the floating leg of the swap has a Ccy of USD and is FX Linked to the fixed leg JPY notional. The conversion rate for each cashflow is that observed on payment day at 17:00 hours from the Bank of Japan information source. ” http://www.fpml.org/spec/fpml-5-5-8-rec-2/html/confirmation/xml/products/interest-rate-derivatives/ird-ex26-fxnotional-swap-with-cfs.xml but in the xml, the varyingNotionalFixingDates/dateRelativeTo@href points to floatingResetDates which are reset 2 days before the CalculationPeriodStartDate… which (to me) says it’s fixed 2 days before the start of the calc period, not at payment. Now I’m scratching my head. Interim PEs are floatingPaymentDates which would suggest that the fixing would be on the payment date as well since the extra notional shouldn’t be hanging around doing nothing. That’s fine, but it looks like it is being fixed at the start.. I’m sure it’s my interpretation that’s at fault and this is not an error in the sample, but i’m not understanding why the varyingNotionalFixingDates/dateRelativeTo@href says what it does. Please help, Best regards, Alex

[h_mcallister]

Hi Alex, I agree with your interpretation; fx fixing for notional exchange typically occurs at or immediately before the payment date, consistent with the example description. The FpML sample implies otherwise, and is therefore incorrect. * We might also expect the [i]cashflows[/i] block to contain [i]principalExchange[/i] elements, to illustrate usage in this type of swap. We’ll look to have this fixed, probably in the New Year now. Best regards, Harry McAllister

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