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Given the following datas :

enter image description here

If we do the bootstrap methodology for CASH Instrument we gotta :

Calculate the DF associated to the Market Quoted Rate (2.91157). For the 3M Fixing we have : T = 0.26115.

So the DF for this Market Quoted Rate is :

enter image description here

Then we can deduct the ZC Rate :

enter image description here

Which obviously does not match the Zero Rate shown in SWPM : 2.94084%

However doing :

enter image description here

Am I missing something or is Bloomberg SWPM Curve wrong ?

Pleb
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TourEiffel
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  • If you ask the help desk they will probably be able to give you the formula they are using. – assylias Aug 10 '22 at 09:12
  • @assylias Sadly, they don't help much.. Quant exchange is my only hope. – TourEiffel Aug 10 '22 at 09:19
  • Bloomberg help page for the ICVS function includes a paper named "Building the Bloomberg Interest Rate Curve – Definitions and Methodology." Did you check it? – AKdemy Aug 10 '22 at 09:26
  • @AKdemy I did, and following the white paper we can dress the equation 1(1+Continuous Rate T) = exp(-ZCT) So to get ZC rate we solve the equation. But this does not it on what is shown on the screen. 2.901% would be the right rate if I follow the white paper. – TourEiffel Aug 10 '22 at 09:34

1 Answers1

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The displayed curve uses ACT/365 daycount with continuous compounding. The ZC is calculated by converting from simple discounting (ACT/360) to continuous compounding (ACT/365).

Hence, you can replicate the discount factor using the ZC rate displayed above:

=EXP(-2.94084%*94/365)

which gives 0.992455. As far as I remember this value is for display only and in the backend the curve will be stripped with the daycount that's applicable to your deal.

oronimbus
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