Question ID: 1551
Regulation Reference: Risk-Free Interest Rate - Financial market data
Article: 43
Status: Final
Date of submission: 24 Apr 2018
Question
CAA need to reconstruct the rfr term structure for Poland currency.
However, for the end of december 2017, we observe difference between our calculation (which follow the Technical documentation that you provide) and the curve you deliver on the 01/09/18.
For our calculation, we use the PLN Government Bond curve (G0177Z BLC2 Curncy) provided by Bloomberg.
For exemple, we have following data :
Our calculation at 12/31/17:
G0177Z BLC2 Curncy 1Y : 1.490
RFR_spot_no_VA 1Y PLN : 1.390
RFR_spot_no_VA 1Y PLN : 1.500
vs
EIOPA :
RFR_spot_no_VA 1Y PLN : 1.401
RFR_spot_with_VA 1Y PLN : 1.511
We also did the calculation for Euro currency and find the same curve that you provided.
May I have some explaination on how (with which data) you calculate the PLN RFR term structure ?
EIOPA answer
We understand that the difference between your and our calculation of Polish zloty risk-free interest rates relates to the transformation from continuously compounded to annual compounded rates.
According to the notes under table 1 of the technical documentation on the risk-free interest rates (page 24, https://www.eiopa.europa.eu/sites/default/files/publications/technical_standards/technical_documentation_31_jan_2018_0.pdf) the Bloomberg government bond tickers (with the exception of Iceland) need to be converted from continuous to annual compounded rates. For Bloomberg swap rates such a conversion is not necessary.
The Bloomberg data that you used are identical to the ones we applied, but they were apparently not converted from continuous to annual compounded rates.