Financial Derivatives Toolbox™

hjmtree - Construct HJM interest-rate tree

Syntax

HJMTree = hjmtree(VolSpec, RateSpec, TimeSpec)

Arguments

`VolSpec`	Volatility process specification. Sets the number of factors and the rules for computing the volatility for each factor. See `hjmvolspec` for information on the volatility process.
`RateSpec`	Interest-rate specification for the initial rate curve. See `intenvset` for information on declaring an interest-rate variable.
`TimeSpec`	Tree time layout specification. Defines the observation dates of the HJM tree and the compounding rule for date to time mapping and price-yield formulas. See `hjmtimespec` for information on the tree structure.

Description

HJMTree = hjmtree(VolSpec, RateSpec, TimeSpec) creates a structure containing time and forward-rate information on a bushy tree.

Examples

Using the data provided, create an HJM volatility specification (VolSpec), rate specification (RateSpec), and tree time layout specification (TimeSpec). Then use these specifications to create an HJM tree using hjmtree.

Compounding = 1;
ValuationDate = '01-01-2000';
StartDate = ['01-01-2000'; '01-01-2001'; '01-01-2002'; '01-01-2003'; '01-01-2004'];
EndDates = ['01-01-2001'; '01-01-2002'; '01-01-2003'; '01-01-2004'; '01-01-2005'];
Rates = [.1; .11; .12; .125; .13];
Volatility = [.2; .19; .18; .17; .16];
CurveTerm = [1; 2; 3; 4; 5]; 

HJMVolSpec = hjmvolspec('Stationary', Volatility , CurveTerm);

RateSpec = intenvset('Compounding', Compounding,...
           'ValuationDate', ValuationDate,...
           'StartDates', StartDate,...
           'EndDates', EndDates,...
           'Rates', Rates);

HJMTimeSpec = hjmtimespec(ValuationDate, EndDates, Compounding);
HJMTree = hjmtree(HJMVolSpec, RateSpec, HJMTimeSpec)

Use treeviewer to observe the tree you have created.

treeviewer(HJMTree)

hjmtree - Construct HJM interest-rate tree

Syntax

Arguments

Description

Examples

See Also