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Retain the pre-lockout fixing in telescopic overnight coupons #3058

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Retain the pre-lockout fixing in telescopic overnight coupons #3058

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6 changes: 5 additions & 1 deletion ql/cashflows/overnightindexedcoupon.cpp
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Original file line number Diff line number Diff line change
Expand Up @@ -120,8 +120,12 @@ const std::optional<Integer>& roundingPrecision)
// if lockout days are defined, we need to ensure that
// the lockout period is covered by the value dates
tmpEndDate = fixingCal.adjust(rateCalcEndDate, Following);
const Date tmpLockoutDate = fixingCal.advance(rateCalcEndDate,
Date tmpLockoutDate = fixingCal.advance(rateCalcEndDate,
-std::max<Integer>(lockoutDays_, 1), Days);
// Retain the observation immediately before the lockout period.
// The last lockoutDays_ fixings repeat this anchor fixing.
if (lockoutDays_ != 0)
tmpLockoutDate = fixingCal.advance(tmpLockoutDate, -1, Days);
Date nextValueDate = tmpLockoutDate > valueDates_.back()
? tmpLockoutDate
: fixingCal.advance(valueDates_.back(), 1, Days);
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13 changes: 10 additions & 3 deletions test-suite/overnightindexedcoupon.cpp
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Expand Up @@ -1029,14 +1029,21 @@ BOOST_AUTO_TEST_CASE(testOvernightLegNPV) {

Handle<YieldTermStructure> discountCurve(flatRate(0.0015, Actual360()));

// Calculate NPV
Real expectedNpv = 34883.949669756257;
// Reference from independent daily SOFR deposit products with the three-day
// lockout anchored immediately before the frozen tail, then payment discounting.
const Real expectedNpv = 34638.786842594876;
Real npv = 0.0;
for (const auto& cf : leg) {
npv += cf->amount() * discountCurve->discount(cf->date());
}

CHECK_OIS_COUPON_RESULT("OvernightLeg NPV", npv, expectedNpv, 1e-8);
Leg denseLeg = vars.makeLeg(Null<Natural>(), 3, false, false, RateAveraging::Compound);
Real denseNpv = 0.0;
for (const auto& cf : denseLeg)
denseNpv += cf->amount() * discountCurve->discount(cf->date());

QL_CHECK_SMALL(npv - expectedNpv, 1e-8);
QL_CHECK_SMALL(denseNpv - expectedNpv, 1e-8);
}

BOOST_AUTO_TEST_CASE(testOvernightLegWithCapsAndFloors) {
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