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. 0 = actual/actual 1 = 30/360 (SIA, default) 2 = actual/360 3 = actual/365 4 = 30/360 (PSA) 5 = 30/360 (ISDA) 6 = 30/360 (European) 7 = act/365 (Japanese)

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.

liborprice - Price swap given swap rate

Syntax

Arguments

Description

Examples

See Also