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Clean up inflation swaps convention #1539

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merged 3 commits into from Jul 28, 2017

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@brianweller89 brianweller89 commented Jul 28, 2017

  • USCPI now interpolated
  • JPY now interpolated (using 10th of the month inflation base)
  • All GBP indices now use 2 month inflation lag.

Primary Source: Barclays Inflation Derivatives Users Guide

“The trading month for UK RPI breakeven swaps has a lag of two months“

“US zero coupon CPI swaps have adopted an interpolated base index format“

“…with the most standard format for [JPY] zero coupon breakevens using the same interpolated inflation basis as JGBi bonds, ie, a three-month lagged inflation reference from the tenth of the month. “

USCPI now interpolated
JPY now interpolated (using 10th of the month inflation)
All GBP indices now use 2 month inflation lag.

Primary Source:
http://www.trade2win.com/boards/attachments/next-steps/101520d1296424640-inflation-trading-barclays-inflation-derivatives-users-guide.pdf
* @param businessDayAdjustment the business day
* @return the convention
*/
public static InflationRateSwapLegConvention of(
PriceIndex index,
Period lag,
PriceIndexCalculationMethod priceIndexCalculationMethod,

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@jodastephen

jodastephen Jul 28, 2017
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This is an incompatible change. Need to add an overload.

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@brianweller89

brianweller89 Jul 28, 2017
Author Contributor

Ok. Have deprecated the old method as the client should have to provide interpolation style when defining conventions. Defaulting to monthly seems slightly arbitrary.

BusinessDayAdjustment businessDayAdjustment) {

return new InflationRateSwapLegConvention(index, lag, PriceIndexCalculationMethod.MONTHLY, false,
return new InflationRateSwapLegConvention(index, lag, priceIndexCalculationMethod, false,

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@jodastephen

jodastephen Jul 28, 2017
Member

Each argument should be on a new line

@@ -157,6 +194,7 @@ private static FixedRateSwapLegConvention fixedLegZcConvention(Currency ccy, Hol
}

//-------------------------------------------------------------------------

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@jodastephen

jodastephen Jul 28, 2017
Member

No blank line here

private static final InflationRateSwapLegConvention INFL3 = InflationRateSwapLegConvention.of(GB_RPIX, LAG_3M, BDA_MOD_FOLLOW);
private static final InflationRateSwapLegConvention INFL = InflationRateSwapLegConvention.of(GB_HICP, LAG_3M, MONTHLY, BDA_MOD_FOLLOW);
private static final InflationRateSwapLegConvention INFL2 = InflationRateSwapLegConvention.of(GB_RPI, LAG_3M, MONTHLY, BDA_MOD_FOLLOW);
private static final InflationRateSwapLegConvention INFL3 = InflationRateSwapLegConvention.of(GB_RPIX, LAG_3M, MONTHLY, BDA_MOD_FOLLOW);

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@jodastephen

jodastephen Jul 28, 2017
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Could back this out when compatibility overload added.

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@brianweller89

brianweller89 Jul 28, 2017
Author Contributor

Would rather keep the test changes in order to discourage the use of the now deprecated method.

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@jodastephen jodastephen left a comment

Approved subject to fixing the build failure. (The class was incorrectly reformatted, with lots of extra blank lines)

@brianweller89 brianweller89 merged commit ff1b758 into master Jul 28, 2017
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@brianweller89 brianweller89 deleted the topic/inflation_conventions_cleanup branch Jul 28, 2017
jodastephen added a commit that referenced this pull request Jul 28, 2017
* Cleaning up inflation swaps convention:
USCPI now interpolated
JPY now interpolated (using 10th of the month inflation)
All GBP indices now use 2 month inflation lag.

Primary Source:
http://www.trade2win.com/boards/attachments/next-steps/101520d1296424640-inflation-trading-barclays-inflation-derivatives-users-guide.pdf
@jodastephen jodastephen added this to the v1.4 milestone Jul 31, 2017
@jodastephen jodastephen modified the milestone: v1.4 Jul 31, 2017
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3 participants