businessDayConvention on calculationPeriodDates and resetDates

[gagansab]

Hi All, I do see that FPML has provided businessDayConvention tag in both calculationPeriodDatesAdjustments and resetDatesAdjustment. There must be a purpose to it. Could some one please give me an example of a case where the value of convention in calculationPeriodDates/calculationPeriodDatesAdjustments/businessDayConvention happens to be different from resetDates/resetDatesAdjustments/businessDayConvention ? Regards Gagan

[h_mcallister]

Hi Gagan, I’ve asked this question in the past … I can’t think of a case – I suspect that this aspect of the model is over-engineered, and that it is unlikely that this degree of flexibility will ever be required. I’m not convinced that the reset dates business day convention actually ever means something different from that defined for the calculation periods – but I’m willing to be proved wrong, if I’ve overlooked a use case (!) Best regards, Harry McAllister Chair, IRD-WG

[gagansab]

Hi Harry, Many thanks for your answer. So are we indirectly saying that there can never be case where both businessDayConvention in resetDates and calculationPeriodDates can be NONE ? I see that one of the enumerated values of businessDayConvention is NONE. Regards Gagan

[h_mcallister]

Hi Gagan, No: we are saying that we normally expect the [i]businessDayConvention[/i] in [i]calculationPeriodDates[/i] and [i]resetDates[/i] to be the same. It is quite possible to specify unadjusted period dates for accrual (i.e. [i]calculationPeriodDatesAdjustment/businessDayConvention[/i]=NONE), with adjusted dates for payment (e.g. [i]paymentDatesAdjustments/businessDayConvention[/i]=MODFOLLOWING). Please see my earlier post on a related issue at the link below (I think you commented on the thread). Best regards, Harry http://www.fpml.org/dev/modules/newbbex/viewtopic.php?viewmode=thread&topic_id=155&forum=4&post_id=355#355

[gagansab]

Hi Harry, Thanks for your time.Much appreciated. Well let me tell you before I posted this question, I went through your post http://www.fpml.org/dev/modules/newbbex/viewtopic.php?viewmode=thread&topic_id=155&forum=4&post_id=355#355 🙂 Your post says that “So calculation-period- and payment- date adjustments are defined independently of each other, and can be configured to yield the required behavior.” The question is about resetDates-businessDayConvention, my understanding is a reset date can never fall on a holiday, therefore if we have a case where resetDate comes out to be a non business day(by adding reset frequency to calc period start date), a businessDayConvention of ‘NONE’ can/should never be applied and a non NONE business day convention should always be applied. Is my understanding correct ? Regards Gagan

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