Financial Derivatives Toolbox™floorbyhjm   hedgeopt
  

floorbyhw - Price floor instrument from Hull-White interest-rate tree

Syntax 

[Price, PriceTree] = floorbyhw(HWTree, Strike, Settle, Maturity, 
Reset, Basis, Principal, Options)

Arguments

HWTree

Interest-rate tree structure created by hwtree.

Strike

Number of instruments (NINST)-by-1 vector of rates at which the floor is exercised.

Settle

Settlement date. NINST-by-1 vector of dates representing the settlement dates of the floor. The Settle date for every floor is set to the ValuationDate of the HW tree. The floor argument Settle is ignored.

Maturity

NINST-by-1 vector of dates representing the maturity dates of the floor.

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 (PSA)

  • 5 = 30/360 (ISDA)

  • 6 = 30/360 (European)

  • 7 = actual/365 (Japanese)

  • 8 = actual/actual (ISMA)

  • 9 = actual/360 (ISMA)

  • 10 = actual/365 (ISMA)

  • 11 = 30/360E (ISMA)

  • 12 = actual/365 (ISDA)

Principal

(Optional) The notional principal amount. Default = 100.

Options

(Optional) Derivatives pricing options structure created with derivset.

Description

[Price, PriceTree] = floorbyhw(HWTree, Strike, Settlement, Maturity, Reset, Basis, Principal, Options) computes the price of a floor instrument from an HW tree.

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

PriceTree is the tree structure with values of the floor at each node.

Examples

Price a 3% floor instrument using a Hull-White interest-rate tree.

Load the file deriv.mat, which provides HWTree. The HWTree structure contains the time and interest rate information needed to price the floor instrument.

load deriv.mat;

Set the required values. Other arguments will use defaults.

Strike = 0.03;
Settle = '01-Jan-2005';
Maturity = '01-Jan-2009';

Use floorbyhw to compute the price of the floor instrument.

Price = floorbyhw(HWTree, Strike, Settle, Maturity)

Price =

  0.4616

See Also

capbyhw, cfbyhw, hwtree, swapbyhw

  

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