Hello Simon,
Asian-style financially-settled options were included in FpML 4.5,
though the structure is slightly different to that used by equity
derivatives. Currently only the averaging of price observations is
supported ("asianing-in" options, where the strike price itself is based
on other price observations, are on the group's to-do list but have not
yet been considered).
I have attached one of the example trades that ships with the schema
which illustrates a three-month strip of asian-style Gas Oil call
options. For a single-period option, the recommendation is that within
calculationPeriodsSchedule you would set period to "T".
Very briefly, the price will be observed and averaged according to the
details within pricingDates between effectiveDate and
exercise/europeanExercise/expirationDate. You can determine than an
option is asian-style by the presence of effectiveDate (and indeed the
whole of CommodityAsian.model).
Hope this helps,
Owen King
+44 20 7071 0137
-----Original Message-----
From: commwg@xxxxxxxx [mailto:commwg@xxxxxxxx] On Behalf Of
simon.jones@xxxxxxxxxx
Sent: 21 July 2009 10:33
To: commwg@xxxxxxxx
Subject: RE: FpML-Com 2009-07-17 Minutes
Hi Owen/Working Group,
Was a decision ever made about how to represent Asian Options for
commodities? I see in the minutes that the question was raised but I
can't find an answer (I've run a search on the FpML website for Asian
Option). Apologies if the answer is already there.
We're in the process of mapping Asian Options so would like to see if a
decision has been made. If no decision has yet been taken I suspect we
will extend the schema to include the optionFeatures block used for
equity derivatives.
Thanks
Simon
-----Original Message-----
From: commwg@xxxxxxxx [mailto:commwg@xxxxxxxx] On Behalf Of Owen King
Sent: 17 July 2009 17:20
To: commwg@xxxxxxxx
Subject: FpML-Com 2009-07-17 Minutes
* Present
Marc Gratacos, ISDA
Raphael Iyageh, GS
Andrew Jacobs, HandCoded
Owen King, Markit (Chair)
Peter Stockman, DTCC
Irina Yermakova, ISDA
* Review outstanding actions
>> ALL to find out more details on averaging-in options.
Awaiting feedback. [Carried Forward]
>> ALL to provide feedback on the physical coal questions paper.
Further input would be helpful. [Carried Forward]
>> MS to distribute the physical coal questions document within DB for
feedback.
No update for several calls so closing. [Closed]
* Minutes
1. Reminder about public availability of working group communications
OK reminded the group that all emails to the distribution list are
publicly available and that any comments made on working group calls can
be minuted unless a specific request is made otherwise.
2. Discussion of Andrew Jacob's Commodities Model Review (attached)
The group reviewed the document in detail and made the following
observations and decisions:
- AbsoluteTolerance (Complex Type)
+ The group agreed with this point. OK will review the rest of the
commodities schema for a precedent and recommend an appropriate change
for 4.6.
- PricingDays.model (Model Group)
+ OK recalled that this had been attempted before but that the
change had obviously not been made in the final schema. The suggested
change will be re-implemented for 4.6.
- SettlementPeriodDurationEnum (Simple Type)
+ AJ and OK discussed the relative merits of the current structure
and separating the multiplier and unit. It was decided to leave the
element unchanged for simplicity.
- calculatonPeriods (Local Element)
+ The group agreed that the annotation should be clarified for 4.6.
- Effective and Termination Dates 1
+ AJ noted that other products/asset classes covered by FpML
supported the specification of Effective and Termination Dates at the
leg, rather than trade level.
+ OK noted that many of the cases where legs starting and ending on
different dates might be used could be representing by the current
schema using the existing periodic and/or lag structures.
+ The group agreed to review the current structure for FpML 5.0.
- Effective and Termination Dates 2
+ AJ noted that relativeDates were originally added to FpML for
pricing.
+ OK will investigate whether there is a simple change that could be
made to tighten up the date type choices and noted that the annotations
on effectiveDate and terminationDate are incorrect and should be
updated.
- Notionals and NotionalSchedules
+ AJ pointed out that the FpML Architecture specification does not
allow the order of repeated elements to have significance in an instance
document.
+ The group agreed that schema does not follow this guideline and
discuss possible solutions including step dates and sequence numbers.
However, all agreed that any change would be significant and so will be
considered for FpML 5.0.
- Inter-Leg Referencing
+ OK felt that the group should wait for a cross-asset class
architectural recommendation before proposing changes to the existing
schema but will consider these points carefully when developing the
physical options schema.
- Commodity Forwards vs. Swaps
+ OK noted that this issue has been discussed at recent working
groups. As possible approach is that as support for periodic bullion
trades is added within CommoditySwap, the CommodityForward type could be
deprecated.
+ AJ said that could be merit in maintaining a specific
CommodityForward in the interests of providing a simple structure for
vanilla bullion forwards.
- Options, Option Strips and Option Strategies
+ OK noted that swaption and strategy-specific values had been
removed from the commodity-specific equivalent of OptionType for the
LCWD.
+ The group agreed that any changes to the existing schema would
have to occur in FpML 5.0 but will review the current structure against
that of other asset classes for physical options.
3. Physical and financial POWER
- Business centres / time zones for load shapes
+ OK noted that more detailed analysis of ISO 3166 suggested that is
was not appropriate for time zones since it did not provide city-level
data in the USA and recommended the tz standard instead.
+ There were no objections to the creation of a new PrevailingTime
type.
- Update of commodity-business-calendar coding scheme to include
values from the business-centre scheme
+ OK asked the group to review the list of business centres in the
agenda and propose any additions that are required for the purposes of
determining Settlement Period holidays.
4. Request for sample physical option confirmations for FpML 4.7
OK asked the group to provide copies of physically-settled option
confirmations, noting that he had received some gas confirmations.
5. Bullion Interest Rate products
OK and MC explained that SWIFT had expressed an interest in using FpML
for bullion interest rate products; OK suggested that the group could
look to develop these products if SWIFT are able to provide an initial
proposal.
* Actions
[Carried Forward] ALL to find out more details on averaging-in options.
[Carried Forward] ALL to provide feedback on the physical coal questions
paper (attached).
[New] All to provide copies of physically-settled option confirmations
* Next meeting 15:00 UK / 10:00 US Fri 24th July 2009
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Attachment:
com-ex8-oil-call-option-strip.xml
Description: com-ex8-oil-call-option-strip.xml