Const Notional Cross Currency Swaps #2248

paolodelia99 · 2025-06-20T07:04:53Z

Partially solving #2201 by adding const notional xccy swaps classes from ORE and readapting them to the current QuantLib version. MTM xccy swap will be added in another PR.

Classes added:

CrossCcySwap: base class for a cross currency swap
CrossCcyFixFloatSwap: cross currency swap with a fixed leg and a floating leg
CrossCcyBasisSwap: cross currency swap with two floating legs
CrossCcySwapEngine: the cross currency swap engine

coveralls · 2025-06-20T07:43:17Z

coverage: 73.854% (+0.04%) from 73.814%
when pulling 9c82a36 on paolodelia99:feature/const-notional-xccy
into 4460bb6 on lballabio:master.

lballabio · 2025-07-29T15:55:31Z

@pcaspers — I'm assuming you're still ok with moving things here from ORE, give me a shout if things changed. Thanks!

lballabio · 2025-07-29T15:56:53Z

ql/instruments/crossccybasisswap.cpp

+    // Pay leg notional exchange at start.
+    Date initialPayDate = paySchedule_.dates().front();
+    ext::shared_ptr<CashFlow> initialPayCF(new SimpleCashFlow(-payNominal_, initialPayDate));
+    legs_[0].insert(legs_[0].begin(), initialPayCF);
+    // Pay leg notional exchange at end.
+    Date finalPayDate = paySchedule_.dates().back();
+    ext::shared_ptr<CashFlow> finalPayCF(new SimpleCashFlow(payNominal_, finalPayDate));
+    legs_[0].push_back(finalPayCF);


This means that this models only the const-notional swap, right? If so, it should probably be in the name of the class. The same goes for the other classes.

the mtm crossccy in ORE are named crossccy<type_of_crossccy>mtmresetswap, while the const-notionals are named crossccy<type_of_crossccy>swap. Would you prefer crossccy<type_of_crossccy>constnotionalswap as naming convention for const-notional xccy?

@pcaspers, would changing the class name be a problem?

lballabio · 2025-07-29T16:01:41Z

ql/instruments/crossccyswap.hpp

+        \warning The notional amounts, payment schedules, and other details of each leg must be
+                set up in the provided Leg objects before constructing the swap.
+    */
+    CrossCcySwap(const std::vector<Leg>& legs, const std::vector<bool>& payer, const std::vector<Currency>& currencies);


Do we really want an arbitrary number of legs here and the complexity that follows? @pcaspers, did you ever have a use for this in the past?

Not that I know of, but we might break our processing if we restrict the class to 2 legs now. What kind of increased complexity do you have in mind?

Just that you have to loop over the legs, no big deal. Ok to have a vector.

lballabio · 2025-07-29T16:05:51Z

ql/pricingengines/swap/crossccyswapengine.cpp

+CrossCcySwapEngine::CrossCcySwapEngine(const Currency& ccy1, const Handle<YieldTermStructure>& currency1Discountcurve,
+                                       const Currency& ccy2, const Handle<YieldTermStructure>& currency2Discountcurve,


Any better name for instead of currency1/currency2? Domestic/foreign? Base/other? Main/other? @pcaspers, was there any reason you picked 1 and 2?

Domestic / Foreign is in line with the expected fx spot quote and better than 1 and 2 in my opnion.

lballabio · 2025-07-29T16:06:52Z

ql/pricingengines/swap/crossccyswapengine.cpp

+    registerWith(spotFX_);
+}
+
+void CrossCcySwapEngine::calculate() const {


This should work for both const-notional and mark-to-market, right?

Yes, to be sure you can just check the following test

pcaspers · 2025-07-29T17:51:00Z

@pcaspers — I'm assuming you're still ok with moving things here from ORE, give me a shout if things changed. Thanks!

We are ok with that. My only ask would be to keep ORE aligned, i.e. remove the classes from ORE and make sure ORE still works with the ql version.

paolodelia99 · 2025-07-30T10:23:59Z

@pcaspers - One thing, in the CrossCcyBasisSwap class I haven't included the case when one of the of the legs are averaged ON indexes (recIsAveraged and payIsAveraged have been deleted from the constructors arguments). Should I also include those cases in the CrossCcyBasisSwap class?

pcaspers · 2025-07-30T14:21:15Z

@pcaspers - One thing, in the CrossCcyBasisSwap class I haven't included the case when one of the of the legs are averaged ON indexes (recIsAveraged and payIsAveraged have been deleted from the constructors arguments). Should I also include those cases in the CrossCcyBasisSwap class?

Yes please, CrossCcyBasisSwap is supposed to support overnight legs. I ddn't check this PR in detail, but as I said above, I would appreciate if all functionality is preserved and a corresponding PR is opened for ORE that allows to remove the migrated classes in ORE and rely on the then-ql classes.

lballabio · 2025-07-31T15:13:35Z

Yes please, CrossCcyBasisSwap is supposed to support overnight legs

Agreed — but should we use bools like recIsAveraged or autodetect overnight indexes based on the class? I think we started doing the latter of late and it might be more convenient.

paolodelia99 · 2025-08-01T10:14:21Z

Another thing @pcaspers, I see that in ORE you are using a different OvernightLeg than in QuantLib (with a bunch of other additional methods like withCaps, withFloors, withNakedOptions, ...), on top of that AverageONLeg is not present in QuantLib but you have two different pricers for AverageONIndex pricers in ORE and QuantLib, AverageONIndexedCouponPricer in ORE and ArithmeticAverageOvernightIndexCouponPricer in QuantLib. Don't know If they are meant to price the same type (they are both using the Takada approximation) of copouns since the one in QuantLib can also take into account covexity adjustements.

How should I tackle this problem?

@lballabio seeking you guidance as well

lballabio · 2025-08-01T14:58:14Z

Another thing @pcaspers, I see that in ORE you are using a different OvernightLeg than in QuantLib (with a bunch of other additional methods like withCaps, withFloors, withNakedOptions, ...), on top of that AverageONLeg is not present in QuantLib but you have two different pricers for AverageONIndex pricers in ORE and QuantLib, AverageONIndexedCouponPricer in ORE and ArithmeticAverageOvernightIndexCouponPricer in QuantLib. Don't know If they are meant to price the same type (they are both using the Takada approximation) of copouns since the one in QuantLib can also take into account covexity adjustements.

Hmm, if that's the case it's probably better to make another PR first that sorts out the overnight leg and pricers. @pcaspers, do you happen to have a summary of the differences?

pcaspers · 2025-08-02T17:29:27Z

Ah yes, ORE and QuantLib diverged for the on coupons a while ago. I'd think they have roughly the same functional scope. QuantLib is more elegant. ORE might have some extensions like a freely definable rate computation period.

Also, ORE adds cap / floors on overnight coupons.

It would be great if someone could work on aligning QuantLib and ORE in this regard. It's on our roadmap for a while, but we never came around to actually do this.

And yes, we probably better do this before migrating dependent classes like the xccy swap.

paolodelia99 · 2025-08-04T08:27:04Z

All right, make sense to work on the copouns differences before introducing these new classes.

I'll try to work on it, since I've already spotted some of the differences.

I'll ping you guys (@lballabio, @pcaspers) if I need any help with that.

paolodelia99 and others added 17 commits June 13, 2025 16:15

Added base CrossCcySwap, CrossCcySwapEngine and related tests

af4d044

Update generated headers

48e48aa

Update CrossCcySwap tests to account for usingAtParCoupons setting

3732556

Added missing imports in crossccyswapengine.hpp

a880201

Fix tag typo in QuantLib.vcxproj

5884906

Refactor xccy tests file

2d8185c

Add crossccyfixfloatswap

63f267f

Fixed typo in comments

960ab15

add usingAtParCoupons, and fix code format in crossccyfixfloatswap.cpp

59df14c

Update generated headers

9b62fab

Update copyright list in license

a65859e

Add missing import in crossccyfixfloatswap tests

ecdda37

Added crossccybasisswap and related tests

cecf124

Fix typo in crossccybasisswap filename in Makefile.am

77e673f

Update generated headers

e35c609

Add constructor docstring in crossccybasisswap.hpp

496d95d

Add constructor docstring in crossccyfixfloatswap.hpp

9c82a36

lballabio reviewed Jul 29, 2025

View reviewed changes

Rename xccyswapengine constructor params

68c8353

LZ1153 mentioned this pull request Aug 3, 2025

Instrument for cross currency basis swap #2201

Open

		CrossCcySwapEngine::CrossCcySwapEngine(const Currency& ccy1, const Handle<YieldTermStructure>& currency1Discountcurve,
		const Currency& ccy2, const Handle<YieldTermStructure>& currency2Discountcurve,

Const Notional Cross Currency Swaps #2248

Are you sure you want to change the base?

Const Notional Cross Currency Swaps #2248

Uh oh!

Conversation

paolodelia99 commented Jun 20, 2025

Uh oh!

coveralls commented Jun 20, 2025

Uh oh!

lballabio commented Jul 29, 2025

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

Choose a reason for hiding this comment

Uh oh!

pcaspers commented Jul 29, 2025

Uh oh!

paolodelia99 commented Jul 30, 2025

Uh oh!

pcaspers commented Jul 30, 2025

Uh oh!

lballabio commented Jul 31, 2025

Uh oh!

paolodelia99 commented Aug 1, 2025

Uh oh!

lballabio commented Aug 1, 2025

Uh oh!

pcaspers commented Aug 2, 2025

Uh oh!

paolodelia99 commented Aug 4, 2025

Uh oh!

Uh oh!