oIRcap2_CFM( ) Example

 Specification Consider a 3-year interest rate cap with semi-annual resets that has an effective date of 20 June 2003 and a maturity date of 20 June 2006. The cap has Business Day and Accrual Basis conventions of 'previous day' and 'actual/365' respectively. The rate reset cycle is computed backwards from the maturity date and rates are interpolated from the zero rates. The strike rate and notional schedules can be found by following the appropriate links below. What is the cash flow map of the cap assuming a valuation date of 12 August 2003? Function Specification =oIRCap2_CFM(1, "12/8/2003", "20/6/2003", "", "", "20/6/2006", D1:D10, F1:F10, 2, 4, 2, 2, I1:J24, 1, L1:N24, P1:R24, T1:T75) Parameter Name Parameter Value Option Type 1 Value Date 12/8/2003 Effective Date 20/6/2003 First Coupon Date Penultimate Coupon Date Maturity Date 20/6/2006 Notional D1:D10 See Notional Schedule Strike Rate F1:F10 See Strike Rates Reset Frequency 2 Accrual Basis 4 Business Day Convention 2 Interpolation Method 2 Volatility I1:J24 See Volatility Curve Date Generation 1 Reset Curve L1:N24 See Zero Curve Discounting Curve P1:R24 See Zero Curve Holiday Schedule T1:T75 See Holiday Schedule Solution The following results are obtained: Leg Reset Date Payment Date Days in Period Days to Maturity Strike Rate Forward Rate Notional Payment 1 20 Jun 2003 19 Dec 2003 182 -53 6.0000% 5.3594% \$1,000,000 2 19 Dec 2003 18 Jun 2004 182 129 6.0125% 5.5179% \$950,000 3 18 Jun 2004 20 Dec 2004 185 311 6.0250% 5.6651% \$900,000 4 20 Dec 2004 20 Jun 2005 182 496 6.0375% 5.7337% \$850,000 5 20 Jun 2005 20 Dec 2005 183 678 6.0500% 5.7869% \$800,000 6 20 Dec 2005 20 Jun 2006 182 861 6.0625% 5.8959% \$750,000 Solution (continued....) Discount Factor Optlet Value Optlet Delta Optlet Gamma Optlet Theta Optlet Vega Leg Type 0.981167 \$0.00 0.0000 0.0000 0.00000 0.00000 Cap 0.954895 \$528.57 0.2659 44.2047 -0.00323 0.01052 Cap 0.928241 \$1,353.65 0.3917 31.1952 -0.00232 0.01899 Cap 0.902441 \$1,815.95 0.4277 23.8566 -0.00175 0.02401 Cap 0.876996 \$2,125.74 0.4425 19.5174 -0.00139 0.02759 Cap 0.851950 \$2,400.76 0.4587 16.3229 -0.00113 0.03063 Cap