FpML-FXWG-Legacy Fwd: RE: [fpml-fx] FW: FX FpML Examples 14-19 attached

["Danielle Cauthen" <dcauthen@xxxxxxxx>]

--- In fpml-fx@xxxxxxxxxxxxxxx, "Alexander Ernst" <aernst@...> wrote:

Rick,

adding an optional paymentDate adds flexibility in describing the 
trade.
Additional to specifying a specific date it should be possible to 
define
paymentDate as a relative offset to the trigger event (helps when
payoutStyle is IMMEDIATE but actually means two business days after
whenever the american trigger event has been triggered, one business
week later etc.).

Regards,

Alexander

-----Original Message-----
From: Rick Schumacher [mailto:rick.schumacher@...] 
Sent: Monday, November 19, 2001 9:39 PM
To: fpml-fx@xxxxxxxxxxxxxxx
Subject: [fpml-fx] FW: FX FpML Examples 14-19 attached


Gavin has been busy and has worked on his various digital/binary 
option
examples.  Gavin ... I'll review them over the next few days and let 
you
know if I have any questions or comments.

Gavin does raise an interesting point regarding the usage of the
<valueDate>
element.  The value date of the option, as we defined before, 
represents
the
delivery date of the underlying (typically is computed as Spot from 
the
option expiry date).  In terms of digitals/binaries, if the 
payoutStyle
is
DEFERRED, then you would expect the payout to occur on the defined
valueDate.

However, in speaking with our FX OTC Options product manager today, 
we
have
recently made some changes to our software's options valuation 
routines
to
accommodate situations where the payout delivery date is "forward" of
the
expiry date (and therefore, when you imply the payout in the
revalutation,
you have to NPV it back).  This apparently is done occasionally, and 
the
value date of the payout is agreed upon at the time the deal is 
struck.

So, for example, if I did a 1-month EURUSD one-touch with expiry on
December
21, I could specifically designate the payout as January 21, for
example.
This actually impacts the pricing and valuation of the trade.

I guess the question is whether we should include valueDate, like 
we've
done, or whether we should have an optional paymentDate within
triggerPayout
that allows you to specify a specific payment date, and would be 
allowed
if
the payoutStyle is deferred.

Comments?

Rick


-----Original Message-----
From: Gavin Smith [mailto:Gavin@...]
Sent: Monday, November 19, 2001 10:31 AM
To: 'Rick Schumacher'
Cc: Justin Oglethorpe (E-mail); Gavin Smith
Subject: FX FpML Examples 14-19 attached



Rick,

Here are my digital examples (attached).
Other than my earlier questions which you promptly resolved, I didn't
hit
any problems.

One issue arising from the example:
I'm not sure of the role of <valueDate> within <fxDigitalOption>. It
doesn't
seem to add any information in any of the examples, and in order to
complete
them, I have made it the same as <expiryDateTime>:<date>. There 
appear
to be
separate explicit date fields for all the key events in life of the
digital
option. I wonder if <valueDate> is redundant here - or whether I have
misunderstood its use?

Regards,
Gavin








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