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I'm trying to interpolate initial stub rate ( 'Index to' in the image ) for the following FRN pricing example.

  • Fixes on 2016/11/30
  • 1m : 0.623670
  • 2m : 0.742500
  • 3m : 0.93417

Please be as specific as possible ( particularly day count convention ).

3m Floater

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    $\begingroup$ Did you try asking Bloomberg help desk? $\endgroup$ – LocalVolatility Dec 21 '16 at 22:11
  • $\begingroup$ I did. Was told to look up documentation, which is nothing but minimal description of what Current Index is. $\endgroup$ – vara Dec 22 '16 at 23:10
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Basic money markets arithmetic. Using day count convention ACT/ACT,

01 Dec 2016 to 13 Jan 2017 is 43 days,

(43-30)/(60-30)*(2m Libor - 1m Libor)+(1m Libor)

= 0.675163

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  • $\begingroup$ Matches bloomberg perfectly except when the settlement date is holiday. Though it isn't a proper use case, bloomberg still gives some number which i would like to match. Any ideas there? $\endgroup$ – vara Dec 22 '16 at 22:36
  • $\begingroup$ It depends on Bloomberg's method; you may need fwd Libor rates? $\endgroup$ – rrg Dec 27 '16 at 17:02
  • $\begingroup$ Uses latest fix. No projection. $\endgroup$ – vara Dec 30 '16 at 21:20
  • $\begingroup$ Above formula works for Act/360 floaters $\endgroup$ – vara Dec 30 '16 at 21:22

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