Subject: Financial Option liquidation problem
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 10 Sep 2001 09:52:58 -0700 (PDT)

Norman,

I ran a couple of test calcs to follow up our discussion last week re the problem -- The 1-day lag between the financial true-up and option liquidation causes liquidation value falling out of book on the flow date ( the day after expiry).  In summary:

a.  Your suggestion of ture-up to current business day does hold the current day leg in liquidation report, HOWEVER,
b.  It causes problems for index-forward deals

I did a test calc on ST-PJM book, (PostID 12677), and if you compare its swap liquidation report to the official calc (postid 12629), you will see the difference caused by truing  up to current business day.

After talking to Stacey, we think changing the code in portcalc to force it hold the current day leg in liquidation report is probably the best way to correct this problem.  Please let us know what do you think.

Thanks 
Hai