floatbyhjm - Price floating-rate note from Heath-Jarrow-Morton interest-rate tree

Syntax

[Price, PriceTree] = floatbyhjm(HJMTree, Spread, Settle,
Maturity, Reset, Basis, Principal, Options, EndMonthRule)

Arguments

HJMTree	Forward-rate tree structure created by hjmtree.
Spread	Number of instruments (NINST)-by-1 vector of number of basis points over the reference rate.
Settle	Settlement dates. NINST-by-1 vector of dates representing the settlement dates of the floating-rate note.
Maturity	NINST-by-1 vector of dates representing the maturity dates of the floating-rate note.
Reset	(Optional) NINST-by-1 vector representing the frequency of payments per year. Default = 1.
Basis	(Optional) Day-count basis of the instrument. A vector of integers. 0 = actual/actual (default) 1 = 30/360 (SIA) 2 = actual/360 3 = actual/365 4 = 30/360 (BMA) 5 = 30/360 (ISDA) 6 = 30/360 (European) 7 = actual/365 (Japanese) 8 = actual/actual (ICMA) 9 = actual/360 (ICMA) 10 = actual/365 (ICMA) 11 = 30/360E (ICMA) 12 = actual/actual (ISDA) 13 = BUS/252 For more information, see basis.
Principal	(Optional) NINST-by-1 vector of the notional principal amount. Default = 100.
Options	(Optional) Derivatives pricing options structure created with derivset.
EndMonthRule	(Optional) NINST-by-1 vector representing the End-of-month rule. Default = 1.

Description

[Price, PriceTree] = floatbyhjm(HJMTree, Spread, Settle, Maturity, Reset, Basis, Principal, Options, EndMonthRule) computes the price of a floating-rate note from an HJM tree.

Price is an NINST-by-1 vector of expected prices of the floating-rate note at time 0.

PriceTree is a structure of trees containing vectors of instrument prices and accrued interest, and a vector of observation times for each node.

PriceTree.PBush contains the clean prices.

PriceTree.AIBush contains the accrued interest.

PriceTree.tObs contains the observation times.

The Settle date for every floating-rate note is set to the ValuationDate of the HJM tree. The floating-rate note argument Settle is ignored.

Examples

Price a 20 basis point floating-rate note using an HJM forward-rate tree.

Load the file deriv.mat, which provides HJMTree. The HJMTree structure contains the time and forward-rate information needed to price the note.

load deriv.mat 

Set the required values. Other arguments will use defaults.

Spread = 20;
Settle = '01-Jan-2000';
Maturity = '01-Jan-2003';

Use floatbyhjm to compute the price of the note.

Price = floatbyhjm(HJMTree, Spread, Settle, Maturity)

Price =

  100.5529

See Also

bondbyhjm | capbyhjm | cfbyhjm | fixedbyhjm | floorbyhjm | hjmtree | swapbyhjm

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