Fixed Income

Design, price, and hedge fixed-income instruments

A fixed-income instrument is a contract between a borrower and an issuer to exchange cash flows in a predetermined and periodic (fixed) time frame.  Cash flows at each period in time may be variable.  Traditional fixed-income securities include loans, notes, bills and bonds.  Non-traditional securities include interest rate derivatives, inflation derivatives, and credit derivatives.

You can perform fixed-income modeling and analysis using MATLAB^® and Financial Instruments Toolbox^™. The toolbox includes tools for fitting yield curves to market data using parametric fitting models and bootstrapping. You can calculate the price, rates, and sensitivities for interest rate swaps. You can also price and value other derivatives, including credit default swaps, bond futures, and convertible bonds.

Fixed-Income Toolbox also includes tools for determining the price, yield, and cash flow for many types of fixed-income securities, including mortgage-backed securities, corporate bonds, treasury bonds, municipal bonds, certificates of deposit, and treasury bills.

Examples and How To

• Fitting Interest Rate Curve Functions to Fixed-Income Data (Example)
• Bootstrapping a Swap Curve (Example)
• Modeling the U.S. Yield Curve Using a Diebold Li Model (Example)
• Pricing Mortgage Backed Securities Using the Black-Derman-Toy Model (Example)

Software Reference

• Bootstrap Interest-Rate Curves from Fixed-Income Market Data (Documentation)
• Model Mortgage-Backed Securities (MBS) and Compute Option Adjusted Spreads (Documentation)
• Price Credit Default Swaps (CDS) and Estimate Default Probability Term Structure (Documentation)
• Price Interest-Rate Derivatives Using Tree Models (Documentation)

See also: credit risk, financial derivatives, zero curve, swap curve, Financial Toolbox, Financial Derivatives Toolbox