Bloomberg L.P., (2012), FWCV Forward Analysis Matching Output. Bloomberg L.P..pdf

7/25/2019 Bloomberg L.P., (2012), FWCV Forward Analysis Matching Output. Bloomberg L.P..pdf

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FWCV Forward AnalysisMatching Output

INTRODUCTION........................................................................................................................................ 2

SWDF SOURCE ......................................................................................................................................... 2

USE CASE 1: SHORT END SWAPS .............................................................................................................. 3

FWCV:HORIZONCURVESWAP CONVENTIONS .............................................................................................. 4

FWCVOLDSWAP CONVENTIONS.................................................................................................................... 4

ICVS:CURVEHORIZONSWAP CONVENTIONS ................................................................................................. 5

SWPMSWAP CONVENTIONS .......................................................................................................................... 5

FWCV:IMPLIEDFORWARDS-CASH CONVENTIONS .......................................................................................... 6

FWCVOLD-CASH CONVENTIONS ..................................................................................................................... 6

ICVS:FORWARDANALYSIS-CASH CONVENTIONS ............................................................................................ 7

SWPM-CASH CONVENTIONS ........................................................................................................................... 7

USE CASE 2: LONG ENDED SWAPS ............................................................................................................ 8

FWCV:HORIZONCURVE .............................................................................................................................. 8

FWCVOLD ................................................................................................................................................... 9

FWCV:IMPLIEDFORWARDS ...................................................................................................................... 10

SWPM ........................................................................................................................................................ 10

ICVS:FORWARDANALYSIS ........................................................................................................................ 11

ICVS:CURVEHORIZON ............................................................................................................................... 11


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Introduction

FWCV was recently revamped as part of Bloomberg NEXT with the goal of

providing a more user friendly UI and at the same time providing morefunctionality and flexibility than the previous version.

Additional consideration for short end projectionsShort ended swaps typically have different conventions then the cash rates usedon the short end of Interest rate curves and as a result Forward Analysis followsdifferent assumptions than Horizon Analysis. The former is based on theconventions of the underlying curve objects meanwhile the latter is based ongenerating forward swap rates hence using swap conventions only.

To help illustrate backward compatibility of FWCV and also the particularnuances of short ended projections we show output generated by FWCVagainstFWCV OLD, SWPM and ICVS based on two use cases (short end and longend). SWPMprovides the additional benefit of being able to see the underlyingcash-flows in reference to the projected rates in FWCV.

SWDF Source

If goal is to match the values in FWCV to FWCV OLDwe need to ensure thesame inputs are being used along with the same conventions. FWCV OLDonly

supports swap curves in SOURCE 1.

In SWDF make sure the applicable swap curve is sourced this way.


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Use Case 1: Short End Swaps

Currency: USD

Fixed FloatFloat Leg Reference Index: LIBOR 3monthsPay freq: Zero Coupon Effective Date: 1 month from today (today being April 12, 2012)Maturity: 6 months from Effective dateSwap curve #23MID valuesContributor Source: CMPN Compound Frequency:

o Semi-annual for swap conventiono No compounding for Cash conventions

Day count:o 30I360 for swap conventionso ACT360 for cash convention


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FWCV: HORIZON CURVE Swap Conventions

Horizon Curve always displays Projected rates (zero and Par Swap) based onswap conventions. This approach is consistent with the Curve Horizons tab

within SWPM.Settings:

o Rate Type: Zero Rate

Result: .9014

FWCV OLD Swap Conventions

Settings:o Day Type: 30 360o Coupon/Spot: Spot (zero coupon)

Result: .9014


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ICVS: CURVE HORIZON Swap Conventions

Settings:o View: Spot Rates

Result: .9014

SWPM Swap Conventions

Settings:o SWPM 1MOX6MO C04/16/2012 ZER0o Change effective and maturity dates

Result: .0901378 (approx .9014)


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FWCV: IMPLIED FORWARDS - Cash Conventions

Settings:o Interval: 1 month

o Tenor: 6 month

Result: .8818

FWCV OLD - Cash Conventions

Settings:o Day Type: ACT 360o Coupon/Spot: Spot (zero coupon)

Result: .8818


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Use Case 2: Long Ended Swaps

USDFixed FloatFloat Leg Reference Index: LIBOR 3monthsPay freq: Zero Coupon Effective Date: 3 years from today(today being April 12, 2012)Maturity: 4 years from start/effective dateApplicable Bloomberg swap curve #23MID valuesContributor Source: CMPN

Compound Frequency:o Semi-annual for swap convention

Day count:o 30I360 for swap conventions

Note: No convention nuance like we have for short ended swaps

FWCV: HORIZON CURVE

Result: 2.4264


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FWCV OLD

Result: 2.4264


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FWCV: IMPLIED FORWARDS

Result: 2.4264

SWPM SWPM USD 3YX4Y ZERO C04/12/2012

Change Effective date to 4/16/2015 and Maturity to 4/16/2019

Result: 2.426352 (approx. 2.4264 )


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ICVS: FORWARD ANALYSIS

Result: 2.4264

ICVS: CURVE HORIZON

Result: 2.4264

Documents

Bloomberg L.P., (2012), FWCV Forward Analysis Matching Output. Bloomberg L.P..pdf