How Brazilian DI Futures Apply the Daily Correction Factor
Summary
The note clarifies how the daily correction factor for Brazilian DI futures is applied to settlement prices. It addresses whether the factor uses the prior day’s DI rate or the current day’s rate, and how public holidays affect the calculation.
The answer uses settlement and CDI figures for a contract maturing in July 2020. It shows that the adjusted prior settlement price is calculated by multiplying the previous settlement price by one plus the previous day’s CDI rate, raised to the one-over-252 power. This supports using the lagged rate for the ordinary daily adjustment. The holiday question is not fully resolved: the answer only points readers to a separate discussion about deposit futures, without detailing the holiday convention. The example is limited to the stated dates and does not establish every exchange handling rule.
Key ideas
- The adjusted prior settlement price uses the previous trading day’s CDI rate.
- The correction factor compounds that rate over a 252-day convention.
- The answer supports its explanation with settlement-price examples from a specific contract.
- Holiday treatment is deferred to another discussion and is not explained here.
Tags
Full text
# DI futures questions on formulas in spec # DI futures questions on formulas in spec We are now building DI futures in our system for a customer who is planning to trade Brazilian DI futures in the nearest future I have a couple of question on the specification and the calculations - Correction factor calculation : question 1 According to DI futures spec correction factor is calculated based on this formula: FCt = (1 + DIt-1/100)^(1/252) I have found that B3 exchange is showing the following numbers for FC We see DI rate change from 17-06 to 18-06, and correction factor changed as well which is the confirmation that correction factor is not based on the previous DI rate value i.e. FC is based on DIt instead of DIt-1 http://estatisticas.cetip.com.br/astec/series_v05/paginas/lum_web_v04_10_03_consulta.asp - Question 2 on correction factor If we have a public holiday and n>1 between today and previous trading session, what is the rate used on the public holiday , is it ‘0’ or the rate from the previous trading session I do not see the product of correction factors In the above screenshot; 11th June is the public holiday but I do see any impact on FC calculations ## Answer by Marcos Carreira (score 1) https://quant.stackexchange.com/a/68522 - The correction factor is DI(t-1). Let's look at data for the DI maturing in 01-Jul-2020 at Bloomberg ( ODN20 Comdty ): Fields: ``` EXCH_TODAY_ALT_SETT_IN_PRICE: Today's Settlement Price in PU EXCH_YEST_ADJ_ALT_SETT_IN_PRICE: Yesterday's Settlement Price in PU Adjusted by the CDI 17-Jun TSP = 99,911.86, CDI = 2.90 18-Jul YSPA = 99,923.19 = 99,911.86 * (1 + 2.90/100) ** (1 / 252) 18-Jun TSP = 99,924.02, CDI = 2.15 19-Jul YSPA = 99,932.45 = 99,924.02 * (1 + 2.15/100) ** (1 / 252) ``` So YSPA(t) = TSP(t-1) * (1 + CDI(t-1)/100) ** (1 / 252) Except for the holidays: - Please check this post and my comment: What exactly is a deposit futures contract?
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