Main Content

cfbyhjm

Price cash flows from Heath-Jarrow-Morton interest-rate tree

collapse all in page

Syntax

[Price,PriceTree] = cfbyhjm(HJMTree,CFlowAmounts,CFlowDates,Settle)
[Price,PriceTree] = cfbyhjm(___,Basis,Options)

Description

example

[Price,PriceTree] = cfbyhjm(HJMTree,CFlowAmounts,CFlowDates,Settle) prices cash flows from a Heath-Jarrow-Morton interest-rate tree.

example

[Price,PriceTree] = cfbyhjm(___,Basis,Options) adds optional arguments.

Examples

collapse all

Open Live Script

Price a portfolio containing two cash flow instruments paying interest annually over the four-year period from January 1, 2000 to January 1, 2004.

Load the file deriv.mat, which provides HJMTree. The HJMTree structure contains the time and interest-rate information needed to price the instruments. 

load deriv.mat;

The valuation date (settle date) specified in HJMTree is January 1, 2000 (date number 730486). 

HJMTree.RateSpec.ValuationDate
ans = 730486

Provide values for the other required arguments. 

CFlowAmounts =[5 NaN 5.5 105; 5 0 6 105];
CFlowDates = [730852, NaN, 731582, 731947; 
              730852, 731217, 731582, 731947];

Use this information to compute the prices of the two cash flow instruments. 

[Price, PriceTree] = cfbyhjm(HJMTree, CFlowAmounts,... 
CFlowDates, HJMTree.RateSpec.ValuationDate)
Price = 2×1

   96.7805
   97.2188


PriceTree = struct with fields:
    FinObj: 'HJMPriceTree'
      tObs: [0 1 2 3 4]
     PBush: {1x5 cell}

You can visualize the prices of the two cash flow instruments with the treeviewer function.

Input Arguments

collapse all

Interest-rate tree structure, specified by using hjmtree.

Data Types: struct

Cash flow amounts, specified as a Number of instruments (NINST) by maximum number of cash flows (MOSTCFS) matrix of cash flow amounts. Each row is a list of cash flow values for one instrument. If an instrument has fewer than MOSTCFS cash flows, the end of the row is padded with NaNs.

Data Types: double

Cash flow dates, specified as NINST-by-MOSTCFS vector using serial date numbers. Each entry contains the serial date number of the corresponding cash flow in CFlowAmounts.

Data Types: double

Settlement date, specified as a vector using serial date numbers or date character vectors. The Settle date for every cash flow is set to the ValuationDate of the HJM tree. The cash flow argument, Settle, is ignored.

Data Types: double | char

(Optional) Day-count basis of the instrument, specified as a vector of integers.

  • 0 = actual/actual

  • 1 = 30/360 (SIA)

  • 2 = actual/360

  • 3 = actual/365

  • 4 = 30/360 (PSA)

  • 5 = 30/360 (ISDA)

  • 6 = 30/360 (European)

  • 7 = actual/365 (Japanese)

  • 8 = actual/actual (ICMA)

  • 9 = actual/360 (ICMA)

  • 10 = actual/365 (ICMA)

  • 11 = 30/360E (ICMA)

  • 12 = actual/365 (ISDA)

  • 13 = BUS/252

For more information, see Basis.

Data Types: double

(Optional) Derivatives pricing options structure, specified using derivset.

Data Types: struct

Output Arguments

collapse all

Expected prices at time 0, returned as a NINST-by-1 vector.

Tree structure of instrument prices, returned as a MATLAB® structure of trees containing vectors of instrument prices and observation times for each node. Within PriceTree:

  • PriceTree.tObs contains the observation times.

  • PriceTree.PBush contains the clean prices.

Version History

Introduced before R2006a

See Also

| | |

Topics