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oIRcap1_ZCC( ) - Interest Rate Specified (Zero) Cost Collar 1 Function

Component

Resolution - IRO Pricing

 

 

Function Definition

oIRcap1_ZCC(OptionType, TargetPremium, ValueDate, EffectiveDate, MaturityDate, Notional, StrikeRate, ResetFreq, AccrualBasis, BusDayConv, InterpMethod, Volatility, ResetCycle, PaymentTiming, PastRates, ResetCurve, DiscountingCurve, Holidays)

Calculates the strike rate required to give a collar premium equal to the "target premium". Users can specify which leg of the collar is solved for.

 

 

IRO Types

Vanilla interest rate collars.

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

OptionType

 

Specifies whether the known leg of the collar is a cap or a floor.

 

Enumerated Constant

1 - Cap
2 - Floor

TargetPremium

 

The target premium for the collar.

 

Double

 

TargetPremium >= 0

ValueDate

 

The valuation date of the collar.

 

Date

 

ValDate < SettleDate

EffectiveDate

 

The reset date of the first optlet.

 

Date

 

EffDate < MatDate

MaturityDate

 

The maturity date of the collar.

 

Date

 

As above.

Notional

 

The notional value of the collar.

 

Double

 

Notional >= 0

StrikeRate

 

The exercise rate of the known leg, as specified by OptionType.

 

Double

 

StrikeRate >= 0

ResetFreq

 

Frequency of the optlets.

 

Enumerated Constant

 

1 - Annual
2 - Semi-Annual
3 - Quarterly
4 - Monthly
5 - Bi-Weekly
6 - Weekly

AccrualBasis

 

Basis for determining optlet payment amounts.

See Day Count Conventions

 

Enumerated Constant

 

1 - Act/Act (actual)
2 - Act/Act (bond)
3 - Act/360
4 - Act/365
5 - Act/365 ISDA
6 - Act/365 JGB (NL)
7 - 30/360 ISDA
8 - 30/360 PSA
9 - 30E/360
10 - 30E+/360
11 - Act/365L

BusDayConv

 

Business day convention. Used to determine the start and end date of each optlet period.

See Business Day Conventions

 

Enumerated Constant

 

1 - No Adjustment
2 - Previous
3 - Following
4 - Mod Previous
5 - Mod Following
6 - EOM No Adjust
7 - EOM previous
8 - EOM following

InterpMethod

 

Method used to calculate rates and discount factors from the supplied zero curve.

 

Enumerated Constant

 

1 - Discount Factors
2 - Zero Rates

Volatility

 

Annualized volatility of the underlying asset, expressed as a decimal.

 

Double

 

Volatility > 0%

ResetCycle

 

Determines if the rate reset cycle is computed backwards from the maturity date or forwards from the effective date.

 

Enumerated Constant

 

1 - Maturity Date
2 - Effective Date

PaymentTiming

 

Determines the timing of the optlet payments.

 

Enumerated Constant

 

1 - Advance
2 - Arrears

PastRates

 

The rates observed at the previous rate reset dates.

 

Curve

 

If the past reset rates are all the same (or if there is only one), then enter a single value. Otherwise, you can enter either a rate curve or a zero curve.

ResetCurve

 

Zero curve used for projecting the rates.

 

Curve

 

Curve must be three columns.

DiscountingCurve

 

Zero curve used for discounting.

 

Curve

 

Curve must be three columns.

HolidaySchedule

 

Schedule of non-business days (excluding weekends)

 

Date Range

 

Leave blank if not applicable

 

 

 

 

 

 

 

See Also

oIRcap1_Price( ) - Interest Rate Cap Floor or Collar 1 Price Function

oIRcap1_CFM( ) - Interest Rate Cap Floor or Collar 1 Cash Flow Map Function

oIRcap2_ZCC( ) - Interest Rate Specified (Zero) Cost Cap Floor or Collar 2 Function

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