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OpenSourceRisk / Engine

Open Source Risk Engine
http://www.opensourcerisk.org
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CMS accrual range swap #195

Open EazyDS opened 7 months ago

EazyDS commented 7 months ago

Hi, Is there a way to represent cms spread accrual range swap with ORE ? I am excited about playing with scripted trades feature but can't find a way to make it for this product either with scripted trades or directly with xml or others. (it can be seen as a strip of digital cms - one for each day during accumulation period). Are there any helpful example for cms range somewhere with callability (to make it general). Regards.

rolandlichters commented 1 month ago

Hi, apologies for the late reply - indeed, you should be able to represent that payoff as a scripted trade, but we haven't got an out-of-the box example there. Would you like to have a go and contribute an example? The ST will also be able to handle callability. But note that we are currently using a single factor Gaussian IR model under the ST, which does not seem appropriate for CMS Spreads. We really need to build this out to multi-factor models for such cases, stochastic volatility etc - there is still a lot to do in ORE. You could also have a look at the "formula leg", to be released in v12. This can handle CMS Spreads with Caps/Floors using a multi-factor lognormal model, but it does not cover callability, nor the range accrual feature. Best wishes, Roland

EazyDS commented 1 month ago

Hi, thanks for your reply. I am happy to contribute an example but as you mentioned there is a current limitation to single factor gaussian IR model which is indeed not suitable for spreads. Regards.