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Using the Resolution Functions

The Resolution functions for simple interest rate options are split into 2 groups, with the functions in the second group capable of dealing with more complex instruments. The prefixes for the function groups are as follows:

 

Function Group Prefix

Description

.

oIRCap1

Functions that can be used to handle vanilla style interest rate options with flat (constant) volatility.

oIRCap2

Functions that can deal with a range of custom features such as:

 

  • amortizing or accreting notional principal amounts
  • step-up or step-down cap or floor rates
  • volatility curve

 

Note that while the function names only contains "Cap", they are capable of dealing with floors and collars as well. Within each group of functions there are the following common function types:

Function Name

Description

.

_Price

Returns the fair value and risk statistics for the IRO.

_CFM

Returns relevant valuation detail for each of the optlets in the cap, floor, or collar.

_ZCC

Returns the strike rate for the 'unknown' leg of a collar such that the collar premium equals the target amount.

 

 

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