[mgratacos]

Hi Robert, See answer in the e-mail exchange with Harry McAllister (chair irdwg) below: Hi Marc, Unfortunately the swaption model does not support option strategies with the same economy of expression as the cap/floor model, which permits multiple cap/floor buy/sells at varying strikes to be combined in a common structure. So while it would be nice to be able to produce the common features of the swaption strangle underlyers exactly once, with multiple instances of the Payer/Receiver buy/sells & strikes, we don’t have this facility in the current model. Therefore I agree that the best we can manage is to clip two swaptions together in a strategy. The suggestion of using productType to indicate that the product is a strangle is a reasonable one. Clearly the resulting structure carries a great deal of redundancy. Perhaps the IRD-WG might be interested in re-factoring the swaption to support a better solution? Best regards. Harry Internet Marc Gratacos 03/02/2009 17:37 To Harry MCALLISTER cc Subject Question on strangles Hi Harry, I got a question from Robert Stowsky on the Forum. He asks the following question: interest rate swaption strangle FpML has a straddle element to signify that the buyer has an option to take either side of the trade at exercise. How would one specify a similar choice for a strangle? (http://www.fpml.org/dev/modules/newbbex/viewtopic.php?topic_id=59&forum=4) Should this be represented using the Strategy element including two distinct swaptions and maybe using the product type to indicate that it is a strangle? Thanks in advance, Marc

[mgratacos]

Hi John, Can you submit the schema, xml examples, and some rationale about your design (including pictures)? You can send me the materials at mgratacos at isda dot org and we’ll post it at the proposals section of the fpml website. This should be reviewed by the FX Working Group or if that is not possible, with the Coordination Committee. Thanks, Marc

[mgratacos]

The process descriptions included as part of the specifications (section 3.3) are meant to be implemented as an automated processes. Best regards, Marc

[mgratacos]

John, I cannot see the picture. We had an image manager that hadn’t been properly configured but it is now. What you can do is create another post, and then click on MANAGER, select Images from the drop down menu, click Add new File, find the file, and then add the image to YOUR message (by clicking one of the alignment buttons under align). This image will also be added to our server. Sorry about this. Thanks, Marc

[mgratacos]

The business process descriptions are applicable to most of the FpML products, including CDS, CDX… So I’d recommend taking a look at the description of the processes (Section 3.3 of the Specifications http://www.fpml.org/spec/fpml-4-5-1-wd-1/html/index.html) In addition to the processes described in section 3.3, there is the credit event notification message contained in section 6.8 of the same specifications. Best regards, Marc

[mgratacos]

Hi John, In terms of extensions, the Architecture Specification contains a section describing FpML’s preferred approach: http://www.fpml.org/spec/2007/rec-fpml-arch-2-1-2007-12-14/rec-fpml-arch-2-1-2007-12-14-frame.html (Section 6: Extending FpML) You’ll need to browse through the schema in order to identify existing components. If you go to the Specifications http://www.fpml.org/spec/fpml-4-5-1-wd-1/html/index.html (this is the latest 4.5 version), you can go to section 1.2.1 Schema Reference which lists all schema files. In each one of the schema files pages you can find all components, including diagrams. In terms of your product, you may be able to represent it with the FpML component. My understanding is that a dual currency deposity can be modelled with a deposit and an FX option. Both products already exist in FpML (look at the fx schema file). You can bundle them together with the strategy element, which is a type of product that includes one or more products. … … Hope this helps. -Marc

[mgratacos]

Hi Johan, The tradeId is contained inside the tradeHeader structure. Take a look at section 2.7 of the spec where you’ll find a description of the main components (2.7.2 describes de trade). In terms of schema files, these main components are contained within the fpml-doc-4-x.xsd file. I’d also recommend to go through the xml examples. They’ll give you a picture of the whole skeleton of the messages. There isn’t a trade status element in FpML. The xsi:type attribute contains the type of document being sent but there isn’t a place to store the status. You’ll need to extend FpML if you require that. Hope this helps. -Marc

[mgratacos]

Hi Marc, My interpretation is that the problem here is the name of the exercise element. I note that in our original submission the element now called exercise was called commodityExercise – do you know at what point this changed? The solution would seem to be simply to revert to the original name. With regards to extending ComplexType Exercise, CommodityEuropeanExercise extends Exercise and AmericanEuropeanExercise extends SharedAmericanExercise which in turn extends Exercise Many thanks, Owen King

[mgratacos]

Hi Claude, In credit derivatives, the calculation is embedded within the Fee Leg. The protection fee is a fixed payment and the total length of the leg is specified by the Effective Date and the Termination Date of the transaction. Look at the snippets I pointed out before to see the different types of fixed payments that can be represented. The firstPeriodStartDate element is normally used in case of Novations. When there is a novation, the start date of the initial calculation period is not equal to the trades effective date. But in general, the calculation period start date corresponds to the effectiveDate and the calculation period end date corresponds to the terminationDate of the transaction. Hope this helps. -Marc

[mgratacos]

Hi SamSam, We have a high-level model representation at http://www.fpml.org/spec/fpml-4-4-10-rec-1/documents/FpML_v4.4_ProductsObjectModel_v103_20080606_11x17.pdf We don’t have UML diagrams for the products. If you are using an XML editor such as XMLSpy, Oxygen,… they offer the possibility of visualising the structures in diagrams. It’s not UML but it gives you the structures as trees, which I think is useful. Another possibility would be to reverse engineer the schema using a tool such as the Eclipse Modeling Framework. I am not an expert on this but I think it can be done. http://www.eclipse.org/modeling/emf/docs/1.x/tutorials/xlibmod/xlibmod_emf1.1.html Hope this helps. -Marc

[mgratacos]

Sorry but I think you need to be a bit more specific: The examples I pointed to include CDS and CDX trades. What do you mean by business process model? Business Processes of the OTC products: confirmations, novations, terminations…? The specification contains a section on business processes (Section 3) or do you mean some sort of UML diagrams of the objects? There is a whole section in the website about tools: http://www.fpml.org/tools/vendors/index.html But it depends on what you are trying to do. Kind regards, Marc

[mgratacos]

I think that in FpML 4.1 the equitySwap product element, even though it is named equity swap, should be able to represent return type swaps. The element was renamed in FpML 4.2 to returnSwap but its content model didn’t change much from 4.1 to 4.2. Actually, the element was renamed because there was a mismatch between content and product name. As I said, the element was named equitySwap in 4.1 but it was actually representing a return swap. So take a look at the equitySwap element in FpML 4.1 because besides the difference in product name, it may be able to cope with your requirements. Hope this helps. -Marc

[mgratacos]

Hi, I’d start looking at the examples http://www.fpml.org/spec/fpml-4-5-1-wd-1/html/fpml-4-5-examples-frame.html Look for the Credit Derivatives Examples and compare the ISDA Confirms (.pdf) with the FpML examples (.xml). You can establish the mapping between them. Then you can take a look at the documentation http://www.fpml.org/spec/fpml-4-5-1-wd-1/html/ (Section 6) that explains the different components. Hope this helps, -Marc

[mgratacos]

I assume this has been answered within the topic “how to treat several of business centers” -Marc

[mgratacos]

Rajesh, I don’t think there is explicit support of Credit Linked Notes in FpML. I guess you could extend FpML to create a new product and reference the existing creditDefaultSwap within it. If you decide to do so, please report back the extension if possible so we can send it as a proposal to the working group and include it as part of the standard. FpML covers deposits through a termDeposit product. This product can be found in the fpml-fx.xsd file. Securities coverage in FpML is limited through a set of extensions. The latest version is 2.2 and its scope is described in the following page: [url=http://www.fpml.org/documents/extensions.html]http://www.fpml.org/documents/extensions.html[/url] Hope this helps. -Marc

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