Component 
Resolution  IRO Pricing 




Function Definition 
oIRcallPutBond_BK(ValueDate, BondType, ExerciseStyle, ExerciseSchedule, Volatility, MeanReversion, StepsPerCoupon, BondDated, BondMaturity, BondStubDates, Notional, Coupon, Frequency, AccrualBasis, BusDayConv, InterpMethod, ZeroCurve, Holidays, Output) Calculates the clean price and can also return various risk statistics. 




IRO Types 
Interest Rate Callable and Puttable Bonds. 




Function Parameters 



Parameters 
Description 

Parameter Type 

Restrictions 

. 

ValueDate 

Valuation date of the bond option. 

Date 



OptionType 

Call or Put 

Enumerated Constant 

1  Call 

ExerciseType 

European, Bermudan or American. 

Enumerated Constant 

1  European 

ExerciseSchedule 

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

Curve




Volatility 

Annualised volatility of the underlying term structure, expressed as a decimal. 

Double or Curve 

Volatility >0% 

MeanReversion 

Requires an estimate of the mean reversion rate. 

Double 

> 0 

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 bond. 

Long


Steps per Coupon > 0


BondDated 

The original issue date of the bond. 

Date 



BondMaturity 

The maturity date of the bond. 

Date 



BondStubDates 

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

Array of Dates 





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



F.C.D > BondDated 



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



P.C.D > Bond Dated 

Notional 

The face value of the bond. Assumed to be fixed for the life of the bond. This means that amortizing and accreting bonds are not supported. 

Double 



Coupon 

Defines the coupon rate to be used. Can be set to zero if required. 

Double 



Frequency 

The frequency of the coupon. 

Enumerated Constant


1  Annual 

AccrualBasis 

Basis for determining coupon amounts and accrued interest. 

Enumerated Constant 

1  Act/Act (actual) 

BusDayConv 

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

Enumerated Constant 

1  No Adjustment 

InterpMethod 

Used in the interpolation process that is required to compute the appropriate zero rates. 

Enumerated Constant 

1  Discount Factors


ZeroCurve 

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

Curve 



Holidays 

Schedule of nonbusiness 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 seven outputs 









Function Outputs 



Output 

Description 

Clean Price 

Computed as the derived dirty price less accrued interest. 

Accrued Interest 

As for straight bonds, accrued interest is computed based on the selected accrual basis and is independent from the valuation model being used. 

Dirty Price 

This is the price determined directly from the constructed interest rate lattice. 

Modified Duration 

For bonds with embedded options, this measure is often referred to as effective duration. 

Modified Convexity 

For bonds with embedded options, this measure is often referred to as effective convexity. 

Theta 

Defined as the sensitivity of option value with respect to an increase in time (reduction in time to maturity). This is estimated by revaluing the option with the valuation date incremented by one day. 

PVBP 

Measures the impact on bond price of a basis point increase in the entire yield curve. 




See Also oIRcallPutBond_BDT1( ) Function 
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