floatmargin

Margin measures for floating-rate bond

Syntax

[Margin,AdjPrice] = floatmargin(Price,SpreadSettle,Maturity)

[Margin,AdjPrice] = floatmargin(___,Name,Value)

Description

[Margin,AdjPrice] = floatmargin(Price,SpreadSettle,Maturity) calculates margin measures for a floating-rate bond.

Use floatmargin to calculate the following types of margin measures for a floating-rate bond:

• Spread for life

• Adjusted simple margin

• Adjusted total margin

To calculate the discount margin or zero discount margin, see floatdiscmargin.

[Margin,AdjPrice] = floatmargin(___,Name,Value) adds optional name-value pair arguments.

Examples

Compute Margin Measures for a Floating-Rate Bond

Use floatmargin to compute margin measures for spreadforlife, adjustedsimple, and adjustedtotal for a floating-rate note.

Define data for the floating-rate note.

Price = 99.99;
Spread = 50;
Settle = '20-Jan-2011';
Maturity = '15-Jan-2012';
LatestFloatingRate = 0.05;
StubRate = 0.049;
SpotRate = 0.05;
Reset = 4;
Basis = 2;

Calculate spreadforlife.

Margin = floatmargin(Price, Spread, Settle, Maturity, 'Reset', ...
Reset, 'Basis', Basis)

Margin = 51.0051

Calculate adjustedsimple margin.

[Margin, AdjPrice] = floatmargin(Price, Spread, Settle, Maturity, ...
'SpreadType', 'adjustedsimple', 'RateInfo', [StubRate, SpotRate], ...
'LatestFloatingRate', LatestFloatingRate, 'Reset', Reset, 'Basis', Basis)

Margin = 53.2830

AdjPrice = 99.9673

Calculate adjustedtotal margin.

[Margin, AdjPrice] = floatmargin(Price, Spread, Settle, Maturity, ...
'SpreadType', 'adjustedtotal', 'RateInfo', [StubRate, SpotRate], ...
'LatestFloatingRate', LatestFloatingRate, 'Reset', Reset, 'Basis', Basis)

Margin = 53.4463

AdjPrice = 99.9673

Compute Margin Measures for a Floating-Rate Bond Using datetime Inputs

Use floatmargin to calculate margin measures for spreadforlife, adjustedsimple, and adjustedtotal for a floating-rate note using datetime inputs.

Price = 99.99;
Spread = 50;
Settle = '20-Jan-2011';
Maturity = '15-Jan-2012';
LatestFloatingRate = 0.05;
StubRate = 0.049;
SpotRate = 0.05;
Reset = 4;
Basis = 2;

Settle = datetime(Settle,'Locale','en_US');
Maturity = datetime(Maturity,'Locale','en_US');
[Margin, AdjPrice] = floatmargin(Price, Spread, Settle, Maturity, ...
'SpreadType', 'adjustedsimple', 'RateInfo', [StubRate, SpotRate], ...
'LatestFloatingRate', LatestFloatingRate, 'Reset', Reset, 'Basis', Basis)

Margin = 53.2830

AdjPrice = 99.9673

Input Arguments

Price — Bond prices where spreads are to be computed

matrix

Bond prices where spreads are to be computed, specified as a NINST-by-1 matrix.

Data Types: double

Spread — Number of basis points over the reference rate

numeric

Number of basis points over the reference rate, specified as a NINST-by-1 matrix.

Data Types: double

Settle — Settlement date of the floating-rate bonds

serial date number | date character vector | datetime

Settlement date of the floating-rate bonds, specified as serial date number, date character vector, or datetime array. If supplied as a NINST-by-1 vector of dates, all settlement dates must be the same (only a single settlement date is supported)

Data Types: double | char | datetime

Maturity — Maturity date of the floating-rate bond

serial date number | date character vector | datetime

Maturity date of the floating-rate bond, specified as serial date number, date character vector, or datetime array.

Data Types: double | char | datetime

Name-Value Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside quotes. You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

Example: [Margin,AdjPrice] = floatmargin(Price,Spread,Settle,Maturity, 'SpreadType','adjustedtotal','RateInfo',[StubRate,SpotRate],'LatestFloatingRate',.0445,'Reset',2,'Basis',5)

SpreadType — Type of spread to calculate

spreadforlife (default) | adjustedsimpleadjustedtotal

Type of spread to calculates, specified by type, specified as spreadforlife,adjustedsimple, or adjustedtotal.

Note

If the SpreadType is spreadforlife (default), then the name-value arguments LatestFloatingRate and RateInfo are not used. If the SpreadType is adjustedsimple or adjustedtotal, then the name-value arguments LatestFloatingRate and RateInfo must be specified.

Data Types: double

LatestFloatingRate — Rate for next floating payment set at last reset date

numeric

Rate for the next floating payment set at the last reset date, specified as NINST-by-1 vector.

Note

This rate must be specified for a SpreadType of adjustedsimple and adjustedtotal.

Data Types: double

RateInfo — Interest-rate information

numeric

interest-rate information, specified as NINST-by-2 vector where the:

• First column is the stub rate between the settlement date and the first coupon rate.

• Second column is the reference rate for the term of the floating coupons (for example, the 3-month LIBOR from settlement date for a bond with a Reset of 4).

Note

The RateInfo must be specified for SpreadType of adjustedsimple and adjustedtotal.

Data Types: double

Reset — Frequency of payments per year

1 (default) | numeric

Frequency of payments per year, specified as NINST-by-1 vector.

Data Types: double

Basis — Day-count basis used for time factor calculations

0 (actual/actual) (default) | integers of the set [0...13] | vector of integers of the set [0...13]

Day-count basis used for time factor calculations, specified as a NINST-by-1 vector. Values are:

• 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

Principal — Notional principal amounts

100 (default) | numeric

Notional principal amounts, specified as NINST-by-1 vector.

Data Types: double

EndMonthRule — End-of-month rule flag

1 (in effect) (default) | nonnegative integer 0 or 1

End-of-month rule flag, specified as a NINST-by-1 vector. This rule applies only when Maturity is an end-of-month date for a month having 30 or fewer days.

• 0 = Ignore rule, meaning that a bond coupon payment date is always the same numerical day of the month.

• 1 = Set rule on, meaning that a bond coupon payment date is always the last actual day of the month.

Data Types: logical

Holidays — Dates for holidays

holidays.m used (default)

Dates for holidays, specified as NHOLIDAYS-by-1 vector of MATLAB^® dates using serial date numbers, date character vectors, or datetime arrays. Holidays are used in computing business days.

Data Types: double | char | datetime

BusinessDayConvention — Business day conventions

'actual' (default) | character vector with values'actual', 'follow', 'modifiedfollow', 'previous'or 'modifiedprevious'

Business day conventions, specified as a NINST-by-1 cell array of character vectors of business day conventions to be used in computing payment dates. The selection for business day convention determines how nonbusiness days are treated. Nonbusiness days are defined as weekends plus any other date that businesses are not open (for example, statutory holidays). Values are:

• 'actual' — Nonbusiness days are effectively ignored. Cash flows that fall on non-business days are assumed to be distributed on the actual date.

• 'follow' — Cash flows that fall on a nonbusiness day are assumed to be distributed on the following business day.

• 'modifiedfollow' — Cash flows that fall on a non-business day are assumed to be distributed on the following business day. However if the following business day is in a different month, the previous business day is adopted instead.

• 'previous' — Cash flows that fall on a nonbusiness day are assumed to be distributed on the previous business day.

• 'modifiedprevious' — Cash flows that fall on a nonbusiness day are assumed to be distributed on the previous business day. However if the previous business day is in a different month, the following business day is adopted instead.

Data Types: char | cell

Output Arguments

Margin — Spreads for floating-rate bond

numeric

Spreads for the floating-rate bond, returned as a NINST-by-1 vector.

AdjPrice — Adjusted price used to calculate spreads for SpreadType of adjustedsimple and adjustedtotal

numeric

Adjusted price used to calculate spreads for SpreadType of adjustedsimple and adjustedtotal, returned as a NINST-by-1 vector.

References

[1] Fabozzi, Frank J., Mann, Steven V. Floating-Rate Securities. John Wiley and Sons, New York, 2000.

[2] Fabozzi, Frank J., Mann, Steven V. Introduction to Fixed Income Analytics: Relative Value Analysis, Risk Measures and Valuation. John Wiley and Sons, New York, 2010.