Component |
Resolution - IRO Pricing |
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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. |
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IRO Types |
Interest rate swaptions. |
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Function Parameters |
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Parameters |
Description |
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Parameter Type |
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Restrictions |
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. |
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ValueDate |
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Valuation date of the swaption. |
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Date |
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SwaptionType |
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Payer or Reciever |
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Enumerated Constant |
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1 - Payer |
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ExerciseType |
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European, Bermudan or American. |
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Enumerated Constant |
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1 - European |
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ExerciseSchedule |
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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. |
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Curve |
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Volatility |
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Annualised volatility of the underlying swap rate, expressed as a decimal. |
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Double or Curve |
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Volatility >0% |
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StepsPerCoupon |
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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. |
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Long
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Steps per Coupon > 0
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SwapEffective |
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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. |
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Date
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SwapEffective < SwapMaturity
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SwapMaturity |
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The maturity date of the underlying swap. |
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Date |
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SwapMaturity > SwapEffective |
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SwapStubDates |
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Only needed if the underlying swap has an odd first or last period. |
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Array of Dates |
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2 Dates entered as an array. |
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First Coupon Date: Date that the first coupon is paid (if swap does not have an odd first period, leave blank). |
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F.C.D > SwapEffective |
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Penultimate Coupon Date: Date that the penultimate coupon is paid (if swap does not have an odd last period, leave blank). |
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P.C.D > SwapEffective |
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Notional |
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The face value of the swap. Assumed to be fixed for the life of the swap. |
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Double |
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Coupon |
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The fixed coupon rate for the fixed leg of the swap. |
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Double |
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Frequency |
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The frequency of the coupon payments. |
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Enumerated Constant
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1 - Annual |
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AccrualBasis |
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Basis for determining coupon amounts and accrued interest. |
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Enumerated Constant |
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1 - Act/Act (actual) |
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BusDayConv |
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Business day convention. Used to determine the start and end date of each coupon payment period. |
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Enumerated Constant |
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1 - No Adjustment |
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InterpMethod |
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Method used to calculate rates and discount factors from the supplied zero curve. |
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Enumerated Constant |
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1 - Discount Factors |
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ZeroCurve |
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The zero curve that is used to project and discount cash flows. |
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Curve |
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Holidays |
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Schedule of non-business days (excluding weekends). |
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Date Range |
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Leave blank if not applicable |
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Output |
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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. |
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Enumerated Constant |
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0 - All five outputs |
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Function Outputs |
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Output |
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Description |
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Swaption Value |
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The fair value of the swaption. |
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Delta |
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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. |
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Gamma |
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Defined here as the second derivative of the option value with respect to a parallel shift in the zero curve. |
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Theta |
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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. |
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Vega |
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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 |
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