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Knowledge Base » Coupon Modelling Bug

Coupon Modelling Bug

Document ID: 2006-684 (previously 2005/012)
Published on: 1st January 2006
Author: Steven Morrison

Generic bond portfolios paying coupons appear to fail the martingale test when modelled using a monthly time-step. This occurs for both the Libor Market Model and the 2FBK model. The problem occurs for bonds paying non-zero coupons only, and doesn’t occur when using annual time-steps. The bug was fixed in ESG Version 5.2.0 (release data 01/02/2006)

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