| Fixed-Income Toolbox™ |   |
liborprice - Price swap given swap rate
Syntax
Price = liborprice(ThreeMonthRates, Settle, Tenor,
SwapRate, StartDate, Interpolation, ConvexAdj, RateParam,
InArrears, Sigma, FixedCompound, FixedBasis)
Arguments
| ThreeMonthRates | Three-month Eurodollar futures data or forward rate agreement
data. (A forward rate agreement stipulates
that a certain interest rate applies to a certain principal amount
for a given future time period.) An n-by-3 matrix in the form of [month year IMMQuote]. The floating rate is assumed to
compound quarterly and to accrue on an actual/360 basis. |
| Settle | Settlement date of swap. Scalar. |
| Tenor | Life of the swap. Scalar. |
| SwapRate | Swap rate in decimal. |
| StartDate | (Optional) Scalar value to denote reference date for
valuation of (forward) swap. This in effect allows forward swap valuation.
Default = Settle. |
| Interpolation | (Optional) Interpolation method to determine applicable
forward rate for months when no Eurodollar data is available. Default
is 'linear' or 1. Other possible values are 'Nearest' or 0, and 'Cubic' or 2. |
| ConvexAdj | (Optional) Default = 0 (off). 1 = on. Denotes whether
futures/forward convexity adjustment is required. Pertains to forward
rate adjustments when those rates are taken from Eurodollar futures
data. |
| RateParam | (Optional) Short-rate model's parameters (Hull-White) [a S], where the short-rate process is
 Default = [0.05 0.015]. |
| InArrears | (Optional) Default = 0 (off). Set to 1 for on. If on,
the routine does an automatic convexity adjustment to forward rates. |
| Sigma | (Optional) Overall annual volatility of caplets. |
| FixedCompound | (Optional) Scalar value. Compounding or frequency of
payment on the fixed side. Also, the reset frequency. Default = 4
(quarterly). Other values are 1, 2, and 12. |
| FixedBasis | (Optional). Scalar value. Basis of the fixed side. |
Description
Price = liborprice(ThreeMonthRates,
Settle, Tenor, SwapRate, StartDate, Interpolation, ConvexAdj, RateParam,
InArrears, Sigma, FixedCompound, FixedBasis) computes
the price per $100 notional value of a swap given the swap rate. A
positive result indicates that fixed side is more valuable than the
floating side.
Price is the present value of the difference
between floating and fixed-rate sides of the swap per $100 notional.
Examples
This example shows that a swap paying the par swap rate has
a value of 0.
Load the input data.
[EDFutData, textdata] = xlsread('EDdata.xls');
Settle = datenum('15-Oct-2002');
Tenor = 2;
Compute the fixed rate from the Eurodollar data.
FixedSpec = liborfloat2fixed(EDFutData, Settle, Tenor);
Compute the price of a par swap.
Price = liborprice(EDFutData, Settle, Tenor, FixedSpec.Coupon)
Price =
4.1633e-015
MATLAB® computes a value for Price that
is effectively equal to 0.
See Also
liborduration, liborfloat2fixed
| liborfloat2fixed | | mbscfamounts | |