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floatbyhjm - Price floating-rate note from HJM interest-rate tree

Syntax

[Price, PriceTree] = floatbyhjm(HJMTree, Spread, Settle, Maturity, Reset, Basis, Principal, Options, EndMonthRule)

Arguments

`HJMTree`	Forward-rate tree structure created by `hjmtree`.
`Spread`	Number of instruments (`NINST`)-by-`1` vector of number of basis points over the reference rate.
`Settle`	Settlement dates. `NINST`-by-`1` vector of dates representing the settlement dates of the floating-rate note.
`Maturity`	`NINST`-by-`1` vector of dates representing the maturity dates of the floating-rate note.
`Reset`	(Optional) `NINST`-by-`1` vector representing the frequency of payments per year. Default = `1`.
`Basis`	(Optional) Day-count basis of the instrument. A vector of integers. 0 = actual/actual (default) 1 = 30/360 (SIA) 2 = actual/360 3 = actual/365 4 = 30/360 (BMA) 5 = 30/360 (ISDA) 6 = 30/360 (European) 7 = actual/365 (Japanese) 8 = actual/actual (ICMA) 9 = actual/360 (ICMA) 10 = actual/365 (ICMA) 11 = 30/360E (ICMA) 12 = actual/actual (ISDA) 13 = BUS/252
`Principal`	(Optional) `NINST`-by-`1` vector of the notional principal amount. Default = `100`.
`Options`	(Optional) Derivatives pricing options structure created with `derivset`.
`EndMonthRule`	(Optional) `NINST`-by-`1` vector representing the End-of-month rule. Default = `1`.

Description

[Price, PriceTree] = floatbyhjm(HJMTree, Spread, Settle,Maturity, Reset, Basis, Principal, Options, EndMonthRule) computes the price of a floating-rate note from an HJM tree.

Price is an NINST-by-1 vector of expected prices of the floating-rate note at time 0.

PriceTree is a structure of trees containing vectors of instrument prices and accrued interest, and a vector of observation times for each node.

PriceTree.PBush contains the clean prices.

PriceTree.AIBush contains the accrued interest.

PriceTree.tObs contains the observation times.

The Settle date for every floating-rate note is set to the ValuationDate of the HJM tree. The floating-rate note argument Settle is ignored.

Examples

Price a 20 basis point floating-rate note using an HJM forward-rate tree.

Load the file deriv.mat, which provides HJMTree. The HJMTree structure contains the time and forward-rate information needed to price the note.

load deriv.mat

Set the required values. Other arguments will use defaults.

Spread = 20;
Settle = '01-Jan-2000';
Maturity = '01-Jan-2003';

Use floatbyhjm to compute the price of the note.

Price = floatbyhjm(HJMTree, Spread, Settle, Maturity)

Price =

  100.5529

floatbyhjm - Price floating-rate note from HJM interest-rate tree

Syntax

Arguments

Description

Examples

See Also