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oIRswpn_BDT1( ) Function

Component

Resolution - IRO Pricing

 

 

Function Definition

oIRswpn_BDT1(ValueDate, SwaptionType, ExerciseStyle, ExerciseSchedule, Volatility, StepsPerCoupon, SwapEffective, SwapMaturity, SwapStubDates, Notional, Coupon, Frequency, AccrualBasis, BusDayConv, InterpMethod, ZeroCurve, Holidays, Output)

Calculates the swaption value. Can also return the delta, gamma, theta or vega values.

 

 

IRO Types

Interest rate swaptions.

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

ValueDate

 

Valuation date of the swaption.

 

Date

 

 

SwaptionType

 

Payer or Reciever

 

Enumerated Constant

 

1 - Payer
2 - Receiver

ExerciseType

 

European, Bermudan or American.

 

Enumerated Constant

 

1 - European
2 -
American
3 - Bermudan

 

ExerciseSchedule

 

Lists exercise dates and the termination fee associated with each date. For European swaptions, only the last date is used. For American swaptions, every date between the first and last is assumed to be a valid exercise date.

 

Curve

 

 

Volatility

 

Annualised volatility of the underlying swap rate, expressed as a decimal.

 

Double or Curve

 

Volatility >0%
If entered as
a curve, the volatility at the value date will be used to construct the term structure.

 

StepsPerCoupon

 

Determines the number of steps used to construct the lattice. The total number of branches in the lattice is also related to the number of coupon periods outstanding between the valuation date and the maturity date of the underlying swap.

 

 

 

 

Long

 

 

 

 

 

 

 

Steps per Coupon > 0

 

 

 

SwapEffective

 

The date from which the underlying swap begins to accrue interest. Also represents the first swap reset date and is needed because the swaption may feasibly be valued prior to the start of the swap.

 

 

 

Date

 

 

 

 

 

SwapEffective < SwapMaturity

 

 

SwapMaturity

 

The maturity date of the underlying swap.

 

 

Date

 

SwapMaturity > SwapEffective

SwapStubDates

 

Only needed if the underlying swap has an odd first or last period.

 

Array of Dates

 

2 Dates entered as an array.

 

 

First Coupon Date: Date that the first coupon is paid (if swap does not have an odd first period, leave blank).

 

 

 

F.C.D > SwapEffective
F.C.D < P.C.D
F.C.D <
SwapMaturity

 

 

Penultimate Coupon Date: Date that the penultimate coupon is paid (if swap does not have an odd last period, leave blank).

 

 

 

P.C.D > SwapEffective
P.C.D > F.C.D
P.C.D <
SwapMaturity

Notional

 

The face value of the swap. Assumed to be fixed for the life of the swap.

 

Double

 

 

Coupon

 

The fixed coupon rate for the fixed leg of the swap.

 

Double

 

 

Frequency

 

The frequency of the coupon payments.

 

 

Enumerated Constant

 

 

 

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

AccrualBasis

 

Basis for determining coupon amounts and accrued interest.

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 coupon payment 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

ZeroCurve

 

The zero curve that is used to project and discount cash flows.

 

Curve

 

 

Holidays

 

Schedule of non-business days (excluding weekends).

 

Date Range

 

Leave blank if not applicable

Output

 

Indicates which result (or set of results) will be displayed in the worksheet. When returning more than one value, the function must be entered as an array function.

 

Enumerated Constant

0 - All five outputs
1 - Swaption
Value
2 - Delta
3 - Gamma
4 -
Theta
5 - Vega

 

 

 

 

 

 

 

Function Outputs

 

Output

 

Description

Swaption Value

 

The fair value of the swaption.

Delta

 

Delta measures the risk associated with a shift in the zero curve. This can be approximated by revaluing the swaption based on a zero curve that has been shifted up by 1 basis point.

Gamma

 

Defined here as the second derivative of the option value with respect to a parallel shift in the zero curve.

Theta

 

Defined as the sensitivity of option value with respect to time. This is estimated by revaluing the option one day after the specified valuation date.

Vega

 

Defined as the sensitivity of option value with respect to volatility. This is estimated by revaluing the option using an incremented volatility input.

See Also

Parameter Types

oIRswpn_BDT2( ) Function

oIRswpn_HL( ) Function

oIRswpn_HW( ) Function

oIRswpn_BK( ) Function

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