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Trinomial tree swaption pricing

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Trinomial tree swaption pricing



01 May 2013 (Updated )

Swaption pricing function under the Hull-White lattice model. It allows finer grid.

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% This function generates the Swaption price, from a portfolio
% of underlying swaps' cash-flow. The Bermudian type swaptions
% can be exercised at the underlying cash-flow dates. The cash-flow
% structure allows varying notionals, but only the first and last coupon
% might be irregular.
% This function allows for a finer time-grid.

% Reminder: this swap pricing function includes the fraction
% of the current coupon if the settlement is the start date
% the floating leg is determined by the current fwd rate.
% The function cannot determine fwd rates back in the past
% (i.e. before the settlement). If the running coupon
% is to be excluded, just set the start date fwd. The cash-flow
% stream is basically determined by the Maturity time.

% The option exposure is assumed to be long (option buyer) with the convention that
% a negative fixed leg cash-flow (fix payer) entails call option exposure.
% On the other side, a positive fixed leg cash-flow (fix reciever) is associated
% to a long put swaption exposure.
% input
% U : code, date, principal, coupon, basis, period.
% Curve : interest rate curve object
% opt_type :
% 'vanilla'
% 'bermudan'
% 'american'
% 'swap' (no option)
% model :
% 'EV' (extended Vasicek)
% 'BK' (Black-Karasinski)
% a : parameter vector (3 dim vector)
% d_aug : number of time-points between cash-flow dates

Required Products Financial Derivatives Toolbox
Financial Toolbox
Fixed-Income Toolbox
Financial Instruments Toolbox
MATLAB release MATLAB 7.14 (R2012a)
MATLAB Search Path
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Comments and Ratings (1)
13 Sep 2016 Jung Soo Park

This function covers various kind of swaption model pricing which require exponential times of efforts.

09 Jul 2015 1.0

just changed the title of the link to the file. No code changes.

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