Tagged: Spot FX
What FX Rate is used to convert PnL to Base CCY ?
QUESTION : Why is Endur is using the O/N rate instead of the Spot rate to do FX conversions for MtM/PnL ?
We have Forward FX Rate curve for each CCY and attached to the CCY in the Currency table. Our Forward FX curves are set up with the following gridpoints – see below showing the “Label” and < ins category , start date , end date >
“Spot” = < Spot , settle , settle >
“O/N” = < Forward , current , current >
“T/N” = < Forward , next , next >
“1w” = < Forward , 1w , 1w >
“2w” = < Forward , 2w, 2w >
The rule* is that Endur will use whatever gpt is on ‘0cd’.
Now the general dates are defined as below :
current = 0d
next = current + 1gbd
settle = current + x gbd’s ( where x = days delayed ie days to settlement )
So in your example , as current = 0d and its the “O/N” Gridpoint that is defined with the current date ( = 0d ) , hence this will be used to do FX conversion rather than the “Spot” Gridpoint .
So the “O/N” gpt will be used to convert to base CCY.
Note that the Spot FX curve ( Market Manager –> Spot FX ) will show the Spot FX rate ( it identifies this by on the new set up by the gridpoint on the FX Curve that has Ins Category = Spot ) and as mentioned above :- this can be DIFFERENT to the FX Rate that’s used to convert PnL/MtM to Base Currency.
< TOM : If the 'Spot Date' field on the index definition is set to FxSpot or FxCross Spot then Endur will consider the input rate to the Spot gridpoint to be the rate for the spot date: FxSpot = 2d more or less. . If Spot Date is set to 0, then the Spot gridpoint will be for 0cd. . Either way, Endur will use the rate for 0cd to do PnL FX conversion – in the former case it will be the O/N rate that is the 0cd FX, in the latter case it will be using the Spot rate directly. . In your example it looks like the Spot rate is input directly – with Spot Date = FxSpot – and the value for O/N (today) before the Spot date is calculated by ‘backward discounting’ from the Spot date, which is a common setup. . The field “Spot Date” – is the same field as “Days Delayed”. The former name is used for FX (Market = Currency) Index definitions. . So where you use the symbolic date “settle” in that index, it will refer to the date given by the spot date/days delayed field – which is a number of GBDs offset from the current date as per your definition. . Rather than a simple number – representing a GBD offset – you can also set the Spot Date field input to “fxspot” or “fxcrosspot” – these give spot/settle date offset rules for FX a bit more complicated – again these are defined in the User Guide on the page for FX Toolset.>
We have unrivalled expertise in successful C/ETRM and TMS implementations, and digital transformation projects, as well as defining market solutions that have become system industry standards. We have a proven track record of successful deliveries at greenfield projects and at existing clients.
Copyright 2022 KWA Analytics
Openlink®, Endur®, Findur®, and the Openlink logo are trademarks, service marks or registered trademarks of Openlink Financial LLC.
KWA Analytics and Openlink Financial LLC are unaffiliated companies.