[Quantlib-users] BondFunctions::basisPointValue

[Francois Botha]

Hi,

I'm looking at BondFunction::basisPointValue and comparing it to the crude
approach of manually calculating the dirty price of a bond, shocking the
YTM by a basis point and recalculating the value and taking the difference.
Two 2 values seem to differ a lot, and for some of my bonds (especially the
longest bonds) the values are quite different, e.g. -0.1143606982 vs
-0.1531900216 per 100 nominal.

I can see that the basisPointValue() uses 2nd order Taylor expansion as
estimation, so do you think the reason for the difference is that the
Taylor expansion method isn't accurate enough?

thanks
Francois Botha

[Luigi Ballabio]

Hello,
yes, it's possible. May you try using a smaller dy and see if the two
values converge? (Also, I'm not sure why we're using the Taylor expansion
instead of calculating the value by difference directly, but that might be
a question for later...)

Luigi

Post by Francois Botha
Hi,
I'm looking at BondFunction::basisPointValue and comparing it to the crude
approach of manually calculating the dirty price of a bond, shocking the
YTM by a basis point and recalculating the value and taking the difference.
Two 2 values seem to differ a lot, and for some of my bonds (especially the
longest bonds) the values are quite different, e.g. -0.1143606982 vs
-0.1531900216 per 100 nominal.
I can see that the basisPointValue() uses 2nd order Taylor expansion as
estimation, so do you think the reason for the difference is that the
Taylor expansion method isn't accurate enough?
thanks
Francois Botha
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