Fallback Ibor Oi Def
Fallback Ibor Oi Def is a of with functions , keys and example object that represents specification data that define how the fallback rate F is constructed out of the original ibor rate L when the latter ceases to exist.
F is given by:
F = mR + s
where m is a fixed multiplier constructed as the ratio DCᴸ/DCᴿ where:
DCᴸ is the denominator of the daycount convention of the ibor rate, eg 360
DCᴿ is the denominator of the daycount convention of the overnight rate, eg 360
and s is a fixed constant known as Spread Adjustment and must be supplied as exogenous input.
Note the product mR is referred in Bloomberg as Adjusted Reference Rate.
The rate R is an appropriately defined term overnight rate, i.e. the selected overnight rate compounded over a time interval constructed from L according to the following Bloomberg rules.
Let Tᴸ the time when the ibor rate L is set, which is usually 2 business days before the respective accrual period.
Define the time T' as :
T' = Tᴸ + Δᴿ
where Δᴿ is a fixed number of business days according to the overnight index calendar and referred by Bloomberg as Reference Spot Lag
Define the time T₁ as :
T₁ = T' - Δᴼ
where Δᴼ is a fixed number of business days according to the overnight index calendar and referred by Bloomberg as Offset Lag
Define the time T₂ as :
T₂ = T₁ + Δᴸ
where Δᴸ is the tenor of the ibor rate according to the ibor index calendar and ibor index date bump convention.
Define the time Tᴾ as :
Tᴾ = T₂ + Δᴾ
where Δᴾ is a fixed number of business days according to a given payment calendar and referred as Payment Lag
If Tᴾ is equal or less than the actual payment time associated with the initial ibor cash flow, the constructed times T₁ and T₂ are the times that define the beginning and end of the overnight index accrual period.
Otherwise, T₁ is shifted backwards by one business day according to the overnight index calendar and the end time T₂ is recalculated.
This step is repeated until the produced time Tᴾ is equal or less than the actual payment time of the referenced cash flow.