Multiple Currency basis Swap curves in Curve config

[rkapl]

Dear All!

Following the “XYZ in EUR” curve examples in the curveconfig.xml, is it possible to also have more than one tenor basis swap segment (e.g. allowing a EUR-CAD pricing via EUR-USD and USD-CAD basis swap curves)? Are there any special arrangements to be made in the configuration? From what I have seen from Reuters you get to the EURECB (EURCAD basis curve) by subtracting the EURCBS (EURUSD basis curve) from the CADCBS (USDCAD basis curve). Does ORE do that as well?

For EURCAD basis I wouldn’t need that so much, but rather for CNY/CNH.

-kind regards,
Roland

[Anonymous]

Hi Roland,

Yes, that is possible. If you have EUR-IN-USD built (using EURUSD XCCY) and CAD-IN-USD (using USDCAD XCCY) then you can build a CAD-IN-EUR curve with the configuration

    <YieldCurve>
      <CurveId>CAD-IN-EUR</CurveId>
      <CurveDescription>CAD collateralised in EUR discount curve</CurveDescription>
      <Currency>CAD</Currency>
      <DiscountCurve/>
      <Segments>
        <DiscountRatio>
          <Type>Discount Ratio</Type>
          <BaseCurve currency="EUR">EUR-EONIA</BaseCurve>
          <NumeratorCurve currency="CAD">CAD-IN-USD</NumeratorCurve>
          <DenominatorCurve currency="EUR">EUR-IN-USD</DenominatorCurve>
        </DiscountRatio>
      </Segments>
    </YieldCurve>

This builds a Discount Factor curve using the ratio of the two. This way you can build up a full set of “XYZ in EUR” curves using the most liquid quotes for each pair (USDCAD, USDMXN, etc)

Regards,
Niall.

[Author]

Posts