13.8.2 Compounding Basis Conversion

The Monte Carlo Process requires annually compounded Actual/Actual zero-coupon yields as the input. If the input IRC format is different from that, a rate conversion process is applied.

Additionally, the Rate Generator converts rates from the yield curves (which are discretely compounded, on the normal timescale) into continuously compounded rates on the equal-month timescale. This conversion has to be done for all the points in today's yield curve.

The Rate Generator always uses the latest yield curve from the Rate Management IRC and assumes that the same yield curve prevails at the As-of-Date. Monte Carlo simulation always starts from the As-of-Date.