Documentation

This is machine translation

Translated by
Mouseover text to see original. Click the button below to return to the English verison of the page.

eqptree

Construct Equal Probabilities stock tree

Syntax

``EQPTree = eqptree(StockSpec,RateSpec,TimeSpec)``

Description

example

````EQPTree = eqptree(StockSpec,RateSpec,TimeSpec)` constructs an Equal Probabilities stock tree.```

Examples

collapse all

Using the data provided, create a stock specification (`StockSpec`), rate specification (`RateSpec`), and tree time layout specification (`TimeSpec`). Then use these specifications to create an EQP stock tree with `eqptree`.

```Sigma = 0.20; AssetPrice = 50; DividendType = 'cash'; DividendAmounts = [0.50; 0.50; 0.50; 0.50]; ExDividendDates = {'03-Jan-2003'; '01-Apr-2003'; '05-July-2003'; '01-Oct-2003'}; StockSpec = stockspec(Sigma, AssetPrice, DividendType, ... DividendAmounts, ExDividendDates); RateSpec = intenvset('Rates', 0.05, 'StartDates',... '01-Jan-2003', 'EndDates', '31-Dec-2003'); ValuationDate = '1-Jan-2003'; Maturity = '31-Dec-2003'; TimeSpec = eqptimespec(ValuationDate, Maturity, 4); EQPTree = eqptree(StockSpec, RateSpec, TimeSpec)```
```Warning: RateSpec was not created with continuous compounding. Compounding will be set to continuous while leaving discount factors unaltered. This will result in the recalculation of the interest rates. EQPTree = struct with fields: FinObj: 'BinStockTree' Method: 'EQP' StockSpec: [1×1 struct] TimeSpec: [1×1 struct] RateSpec: [1×1 struct] tObs: [0 0.2493 0.4986 0.7479 0.9972] dObs: [731582 731673 731764 731855 731946] STree: {1×5 cell} UpProbs: [0.5000 0.5000 0.5000 0.5000]] ```

Use `treeviewer` to observe the tree you have created.

Input Arguments

collapse all

Stock specification, specified by the `StockSpec` obtained from `stockspec`. See `stockspec` for information on creating a stock specification.

Data Types: `struct`

Interest-rate specification for initial risk-free rate curve, specified by the `RateSpec` obtained from `intenvset`. For information on the interest-rate specification, see `intenvset`.

Note

The standard equal probabilities tree assumes a constant interest rate, but `RateSpec` allows you to specify an interest-rate curve with varying rates. If you specify variable interest rates, the resulting tree is not a standard equal probabilities tree.

Data Types: `struct`

Tree time layout specification, specified by the `TimeSpec` obtained from `eqptimespec`. The `TimeSpec` defines the observation dates of the EQP stock tree. See `eqptimespec` for information on the tree structure.

Data Types: `struct`

Output Arguments

collapse all

EQP stock tree, returned as a structure specifying the time layout for the tree.