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Trinomial tree swaption pricing

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

Comments and Ratings (1)

Jung Soo Park

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

Updates

1.0

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

MATLAB Release
MATLAB 7.14 (R2012a)
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