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 ).
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3$\begingroup$ Did you try asking Bloomberg help desk? $\endgroup$– LocalVolatilityCommented Dec 21, 2016 at 22:11
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$\begingroup$ I did. Was told to look up documentation, which is nothing but minimal description of what Current Index is. $\endgroup$– varaCommented Dec 22, 2016 at 23:10
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1 Answer
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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? $\endgroup$– varaCommented Dec 22, 2016 at 22:36
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$\begingroup$ It depends on Bloomberg's method; you may need fwd Libor rates? $\endgroup$– rrgCommented Dec 27, 2016 at 17:02
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$\begingroup$ Above formula works for Act/360 floaters $\endgroup$– varaCommented Dec 30, 2016 at 21:22