Adding A Temporary Term To A Term Structure

Introduction

New terms can easily be added to a term structure and act as a new point for interpolation. For example, market expectation of a movement in interest rates on a particular date may make interpolation between the standard periods inaccurate. You can add and remove temporary points into the term structure to cater for this. Temporary terms will be used for interpolation until the application is restarted, when they are removed automatically.

Temporary terms are added via the Derivity displays. In this example we'll use FX View and assume that we want to add 15-Dec-04 as a temporary term in the TULLETT term structure for EURUSD. Note that the dates 14-Dec-04, 15-Dec-04 and 16-Dec-04 are all initially interpolated between the 2W and 1M rates.

To Add A Temporary Term

1. Select the rate cell for 15-Dec-04.
2. Right-click and then select Term List from the popup menu. The Term List dialog will be displayed.




3. Press the Add 15-Dec-04 button. The date will be displayed in the term list as a temporary term.
4. Press Close.

The application will now be using 15-Dec-04 as ladder point. In the example below an off-market rate has been entered to highlight this.

To Remove A Temporary Term

We can remove the temporary term added above as follows:

1. Select the rate cell for 15-Dec-04.
2. Right-click and then select Term List from the popup menu.




3. In the Term List dialog, press the Remove 15-Dec-04 button. The term will be removed from the list.
4. Alternatively, press the Remove All button to clear all temporary terms in the selected term structure.
5. Press Close.
6. Clear the manual rates.

All temporary terms are removed when Derivity Analytics is restarted.