How to represent CMS spread note/swap type structures

[arpit]

Hi, I have been trying to figure out how one can represent structures based on floating rate spreads, where we need to specify two RefIndexes and the payoff is dependent on the difference and may be gear factor (multiplier), i got the multiplier part and way to do inverse floaters but have not been able to find a way to represent spread swap/notes. It will be great if anyone can guide me on this. Thanks in advance

[mgratacos]

Hi, Did you you look at the spreadSchedule structure within FloatingRateCalculation complex type? Thanks, Marc

[arpit123]

Hi Marc, I did look into the spreadschedule but it does not allow me to pass refindexes for defining the floating side payoff for e.g. if i want to define the floating side payoff equivalent to (2y USD Libor – 5y USD Libor). Arpit

[mgratacos]

Hi Arpit, I think you’ll need an extension at that level to be able to represent the payoff. Thanks, Marc

[Admin]

I suspect that the solution is a “floatingRateSpreadCalculation” containing (at least) two floating rate indices with independent multipliers. This would be a member of the rateCalculation substitution group, enabling it to be used in place of floatingRateCalculation.

[Author]

Posts