Problem Note 45519: Pricing of caps, floors, caplets, and floorlets is incorrect in SAS® Risk Management for Banking and SAS® Risk Management for Insurance
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When pricing interest rate caps, floors, caplets, and floorlets using the Black model in any application of SAS Risk Management for Banking or in SAS Market Risk Management for Insurance, the pricing methods pm_cf_cashflow_caplet, pm_cf_cashflow_structure, pm_cf_cashflow_option, and pm_cf_cashflow_forward interpolate the volatility curve incorrectly.
The correct calculation is to interpolate for the time period between the current date and the cap (or floor) maturity date. However, the method instead interpolates for the time period between the caplet (or floorlet) maturity date and the cap (or floor) maturity date. Therefore, the resulting valuations for these instruments are incorrect.
For information about an available fix for this issue, contact SAS Technical Support.
Operating System and Release Information
| Product Family | Product | System | Product Release | SAS Release | ||
| Reported | Fixed* | Reported | Fixed* | |||
| SAS System | SAS Risk Management for Banking | Microsoft® Windows® for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |
| Microsoft Windows Server 2003 Datacenter Edition | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 Enterprise Edition | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 Standard Edition | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2008 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2008 for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Microsoft Windows XP Professional | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Enterprise 32 bit | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Enterprise x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Home Premium 32 bit | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Home Premium x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Professional 32 bit | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Professional x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Ultimate 32 bit | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows 7 Ultimate x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows Vista | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Windows Vista for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| 64-bit Enabled AIX | 3.1 | 3.11 | 9.3 TS1M0 | |||
| 64-bit Enabled HP-UX | 3.1 | 3.11 | 9.3 TS1M0 | |||
| 64-bit Enabled Solaris | 3.1 | 3.11 | 9.3 TS1M0 | |||
| HP-UX IPF | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Linux | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Linux for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| Solaris for x64 | 3.1 | 3.11 | 9.3 TS1M0 | |||
| SAS System | SAS Risk Management for Insurance | Microsoft® Windows® for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |
| Microsoft Windows Server 2003 Datacenter Edition | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 Enterprise Edition | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 Standard Edition | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2003 for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2008 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows Server 2008 for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Microsoft Windows XP Professional | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Enterprise 32 bit | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Enterprise x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Home Premium 32 bit | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Home Premium x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Professional 32 bit | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Professional x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Ultimate 32 bit | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows 7 Ultimate x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows Vista | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Windows Vista for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| 64-bit Enabled AIX | 2.1 | 2.11 | 9.3 TS1M0 | |||
| 64-bit Enabled HP-UX | 2.1 | 2.11 | 9.3 TS1M0 | |||
| 64-bit Enabled Solaris | 2.1 | 2.11 | 9.3 TS1M0 | |||
| HP-UX IPF | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Linux | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Linux for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||
| Solaris for x64 | 2.1 | 2.11 | 9.3 TS1M0 | |||