Calcualting Bond Price from The ASW (asset swap) spread

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Calcualting Bond Price from The ASW (asset swap) spread

Zabed
Hello Team Dev,

Can someone please help me pricing a bullet maturity bond with fixed coupon from the ASW spread using QuantLib?
I know how to get the ASW spread (over month Libor) from the bond price, but would like to price the bond from the ASW spread (L +ASW)
Greatly appreciated.

Kindest Regards
Zahar
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Re: Calcualting Bond Price from The ASW (asset swap) spread

Peter Caspers-4
Hi Zahar,

I would say, compute the NPV p of the AssetSwap (using the
DiscountingSwapEngine with an appropriate OIS curve reflecting the CSA
of the asset swap), then the clean bond price as of settlement = first
accrual start date of the swap's float leg is simply 100.0 - p. If you
need the bond price as of a different date, discount / compound it
using your bond discounting curve.

Kind Regards,
Peter

On 28 April 2016 at 11:58, Zabed <[hidden email]> wrote:

> Hello Team Dev,
>
> Can someone please help me pricing a bullet maturity bond with fixed coupon
> from the ASW spread using QuantLib?
> I know how to get the ASW spread (over month Libor) from the bond price, but
> would like to price the bond from the ASW spread (L +ASW)
> Greatly appreciated.
>
> Kindest Regards
> Zahar
>
>
>
>
> --
> View this message in context: http://quantlib.10058.n7.nabble.com/Calcualting-Bond-Price-from-The-ASW-asset-swap-spread-tp17428.html
> Sent from the quantlib-dev mailing list archive at Nabble.com.
>
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Re: Calcualting Bond Price from The ASW (asset swap) spread

Zabed
Hello Paul,

Many thanks for your advise and guidance. It works perfectly.
However I wanted also to ask you about dual currency (OIS) discounting (CSA agreement) with USD collateral. i.e. using EONIA (EUR) for the discounting and the EUR/USD Currency basis curve?

Can you please advise which Qunatli function supports the dual currency discounting when using EUR OIS and USD collateral (with the EUR/USD basis curve)

Kindest Regards
Zahar


 
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Re: Calcualting Bond Price from The ASW (asset swap) spread

Zabed
my apologies Peter, sorry about writing the name wrong.

Thanks in advance
Zahar
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Re: Calcualting Bond Price from The ASW (asset swap) spread

Peter Caspers-4
Hi Zahar,

no worries, they are close :-)

https://en.wikipedia.org/wiki/Feast_of_Saints_Peter_and_Paul

As it stands, with QuantLib you can use FX Forwards to strip a FX curve, but not Cross Currency Swaps. If you have USD collateral you could bootstrap a USD OIS / FedFund curve and then use EUR-USD FX Swaps to build a EUR-USD FX curve that discounts EUR cashflows under USD collateral. However FX Forwards are usually only used out to 1 or 2 years maybe for this purpose, after that Cross Currency Swaps are more common. Since QuantLib doesn’t have them currently, you’d need to read FX Forward rates from a bootstrapped curve you get from another source (like Bloomberg or some other system you have access to) and feed them as artificial FX Forward quotes into the QuantLib FX swap rate helpers. Or you feed the whole curve as discount factors or zero yields directly into QuantLib without any bootstrap, of course. We really need to add the missing cross currency stuff to QuantLib soon I guess.

Kind Regards
Peter

> On 13 May 2016, at 15:05, Zabed <[hidden email]> wrote:
>
> my apologies Peter, sorry about writing the name wrong.
>
> Thanks in advance
> Zahar
>
>
>
>
> --
> View this message in context: http://quantlib.10058.n7.nabble.com/Calcualting-Bond-Price-from-The-ASW-asset-swap-spread-tp17428p17453.html
> Sent from the quantlib-dev mailing list archive at Nabble.com.
>
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Re: Calcualting Bond Price from The ASW (asset swap) spread

Zabed
Hi Peter,

cool :) , that's great.

I see what you mean, I will try and build it as you suggested and test it. it should work perfectly, thanks a lot!

Kindest Regards
Zahar
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