FpML Issues Tracker
closed
Tweak
N/A
Validation Rules
XAPWG
Liudmyla
None
Summary
Hello,
Could you please clarify if the <spreadSchedule> element for the Floating leg can be present when the <calculationParameters> structure is applied? If it can be present, which <compoundingMethod> in such a case is used? According to the validation rule ird-9 the calculationPeriodAmount/calculation/compoundingMethod can only be present if an <resetDates> element is present, therefore it is not possible to choose the type of <compoundingMethod> when <calculationParameters> structure and element <spreadSchedule> are present.
Best Regards,
Liudmyla
Notes:
mgratacos
06/21/23 12:56 pm
Input from Guy Gurden (OSTTRA):
When the calculationParameters are specified within the floatingRateCalculation on a floating leg swapStream they are specifying parameters associated with one of the Overnight Rate Compounding Methods or Overnight Rate Averaging Methods such as ‘Compounding with Lookback’, ‘Compounding with Observation Period Shift’, ‘Compounding with Lockout’ etc. From the ISDA Definitions perspective these Overnight Rate Compounding/Averaging Methods determine a ‘Floating Rate’ for a given Calculation Period which is then used to determine the Floating Amount according to the formula laid out in the Section 6.2.1 of the 2021 Definitions shown below. A Spread (which would be captured in the FpML spreadSchedule) can then be added to that ‘Floating Rate’ per the formula for Floating Amount calculation.
The FpML compoundingMethod is used only when one of the original ISDA Straight Compounding, Flat Compounding or Spread Exclusive Compounding methods are being specified in the confirmation and the compoundingMethod element specifies which of the applicable methods applies. A Spread can be applicable when either of these 3 methods are specified and how the Spread is used in the compounding calculation is defined within the definition for each method within the 2021 Definitions.
The FpML compoundingMethod would not be applicable (and shouldn’t be included) when the calculationParameters are specified as Overnight Rate Compounding/Averaging Methods are mutually exclusive to the Straight Compounding, Flat Compounding and Spread Exclusive Compounding methods.
jbaserba
03/18/24 11:14 am
Request for information solved. Marked as closed.