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hwvolspec

Specify Hull-White interest-rate volatility process

Syntax

Volspec = hwvolspec(ValuationDate, VolDates, VolCurve,
AlphaDates, AlphaCurve, InterpMethod)

Arguments

ValuationDate

Scalar value representing the observation date of the investment horizon.

VolDates

Number of points (NPOINTS)-by-1 vector of yield volatility end dates.

VolCurve

NPOINTS-by-1 vector or scalar of yield volatility values in decimal form.

AlphaDates

MPOINTS-by-1 vector of mean reversion end dates.

AlphaCurve

MPOINTS-by-1 vector of positive mean reversion values or scalar in decimal form.

InterpMethod

(Optional) Interpolation method. Default is 'linear'. See interp1 for more information.

    Note:   The number of points in VolCurve and AlphaCurve do not have to be the same.

Description

Volspec = hwvolspec(ValuationDate, VolDates, VolCurve,
AlphaDates, AlphaCurve, InterpMethod)
creates a structure specifying the volatility for hwtree.

The volatility process is such that the variance of r(t + dt) - r(t) is defined as follows: V = (Volatility.^2 .* (1 - exp(-2*Alpha .* dt))) ./ (2 * Alpha). For more information on using Hull-White interest rate trees, see Hull-White (HW) and Black-Karasinski (BK) Modeling.

Examples

expand all

Create a Structure Specifying the Volatility for hwtree

This example shows how to create a Hull-White volatility specification (VolSpec) using the following data.

ValuationDate = '01-01-2004';
StartDate = ValuationDate;
VolDates = ['12-31-2004'; '12-31-2005'; '12-31-2006';
'12-31-2007'];
VolCurve = 0.01;
AlphaDates = '01-01-2008';
AlphaCurve = 0.1;

HWVolSpec = hwvolspec(ValuationDate, VolDates, VolCurve,...
AlphaDates, AlphaCurve)
HWVolSpec = 

             FinObj: 'HWVolSpec'
      ValuationDate: 731947
           VolDates: [4x1 double]
           VolCurve: [4x1 double]
         AlphaCurve: 0.1000
         AlphaDates: 733408
    VolInterpMethod: 'linear'

See Also

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