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The three phases for building out the turn impact-adjusted curves:
Phase 1: Improved Methodology for deriving the Standard tenors 
  • Contributed Bank and Broker prices are pre-screened for accuracy.
  • Only quality contributors are blended to provide rates for the standard tenors. Inclusion criteria include:
  • Active contribution (Min update rate of 1 min/ 5 mins for less liquid pairs e.g. NDFs)
  • All contributors for a given currency pair & tenor are blended to create a midcurve
  • Bid/ Ask spread is applied looking at the top quartile (25%) of tightest spreads - The end result is much improved standard tenors, which are then used as the basis to imply the turn-impacted forward rates.
Above 1 min intraday chart compares standard market pricing (blue) & the new “RFB” Turnimpact adjusted FX forwards (White) for the 1 month EURUSD swap-points.
Phase 2: The curves take into account the impact of the turn-dates that take place at (e.g.) Month-end, Quarter-end, Year-end & other key market events such as IMM dates (as described above)... to analytically imply the FX Fwd Points
Methodology (High level summary and assumptions)
  • Calculations make use of the continuously compounded forward-forward interest rate differentials implicit in the quoted FX forwards curve.
  • Basic assumptions are:
  • The interest rate differential is constant in any forward-forward period between quoted tenors that is free of turns
  • In a forward-forward period that includes a turn, the interest rate differential is constant for all non-turn days
  • When the turn points are not provided as an input, a further assumption is required to calibrate them. In this case we assume that the rate differential for non-turn days in the turn period is the average of rate differentials in the preceding and subsequent periods.
  • The turn points are calibrated and/or inserted in the given curve of quoted FX forwards tenors in such a way as to satisfy the above assumptions.

(Note: the calculation for end of month turn-dates does not rely on any market data input for interest rates, but only on implicit rate differentials from FX forwards quotes. One would obtain similar results by using one-day averages of forward-forward points as the basis of calculation.)

The examples below show how the turn calibration method reflects the discontinuous nature of the turn impact, while keeping a “natural” progression of the term structure over non-turn days
Central Bank turn-impact adjustments account for changes in the interest rate differential following anticipated rate decisions.

  • Probability based models provide the expected outcome for future Central Bank meeting rate decisions. LSEG FX uses a proprietary model to determine the likely outcome for future rate decisions.
  • The impact from probability weighted future Central Bank rate expectations, together with the OIS curve are used to model a “Constant Forward Rate” which best describes the interest rate differential following the rate decision.
  • The Central Bank turn-adjusted FX Forward is implied using the “expectation based” relative constant forward rates following the rate decision.
Phase 3: FXall historical trades (post trade data) for the turn dates are used to calibrate the analytically derived FX swap points.
LSEG FX Venues enable FX trades averaging over US$460 billion daily across Spot, FX Forwards, NDFs & FX Options. This provides a considerable pool of post trade observations which we use to calibrate our curve methodology and assumptions.

LSEG FX “turn-date Impact-adjusted” FX Forward Curves.
LSEG FX has deployed this best practise methodology, leveraging the breadth of data, analytics and liquidity available within LSEG FX to provide a full suite of turn-date impact-adjusted forward FX curves across a broad range of currency pairs (available on Workspace via page FXBD, via quote <FXBLEND>, or FX Forwards analytics FWDS)

FX Forward points including the following turn-date tenors:
  • Beginning and End of month FX Fwd points
  • Beginning and End of quarter FX Fwd points
  • Beginning and End of year FX Fwd points
  • IMM Dates (March, June, September & December)
  • Central Bank rate decision tenors will be added in Q3 ’23 
The FX Forward Curves are also available via API over our Elektron/ RDP data feed to help FX market participants automate & improve their trading workflow including:
  • Price Discovery for trading
  • Client pricing
  • Mid and Back-office processes including: Risk Management, Valuation/ MtM, TCA reference rate, Surveillance etc.)

For more information, please contact your LSEG Account Manager.