A formula for computing the discount margin of a floater is provided in an image displayed in this answer as well as below. The image below comes from page 14 of the paper "Credit Spreads Explained" by O'Kane and Sen in 2004.

However, no precise definition or formula is provided for $L_{\operatorname{stub}}$. I believe that on the Bloomberg YAS page this is the Index To (next coupon date) and that it is an interpolated rate. But which LIBOR rates (maturity and date) are used?

Definition of discount margin enter image description here

  • $\begingroup$ In the original answer, the formula is posted as an image taken from a book. Following your advice, I've added the image to my question. Thanks. $\endgroup$
    – Deane Yang
    Commented May 2, 2023 at 22:43
  • $\begingroup$ Did you have a chance to review the quoted paper "Credit Spreads Explained" from 2004 by O'Kane and Sen? It appears to have an example for this formula on page 14. $\endgroup$
    – Alper
    Commented May 3, 2023 at 8:48
  • $\begingroup$ If you want a Bloomberg specific answer you can directly ask the help desk (F1 F1). $\endgroup$
    – AKdemy
    Commented May 3, 2023 at 8:54
  • $\begingroup$ @Alper, thanks for your suggestions. The example, which is also in the Jupyter notebook cited in the answer, does not explain which two LIBOR rates were interpolated to get the stub rate. And, alas, I am unable to ask Bloomberg. $\endgroup$
    – Deane Yang
    Commented May 3, 2023 at 14:59
  • $\begingroup$ If you have access to the Bloomberg YAS function you also have access to the help desk. $\endgroup$
    – AKdemy
    Commented May 3, 2023 at 16:04


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