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Price Interest-Rate Instruments

Create interest-rate instrument object, associate the object with a model, and specify pricing method

An interest-rate instrument is a derivative with a value that is linked to the movement of interest rates. This toolbox provides functionality to price, compute sensitivity, and perform hedging analysis for many interest-rate securities. You can price bonds, floating-rate notes, vanilla swaps, futures, bond options, amortizing bonds, caps, and floors with pricing models that include lattice models, Monte Carlo simulations, and multiple closed-form solutions.

The object-based framework supports a workflow for creating instruments, models, and pricer objects to price financial instruments. Using these objects, you can price interest-rate, inflation, equity, commodity, FX, or credit derivative instruments. The object-based workflow is an alternative to pricing financial instruments using functions. Working with modular objects for instruments, models, and pricers, you can easily reuse these objects to compare instrument prices for different models and pricing engines. You can use the object-based workflow to price a single instrument or to price a collection of instruments in a portfolio. For more information on the workflow, see Get Started with Workflows Using Object-Based Framework for Pricing Financial Instruments.

Create an interest-rate instrument with or without optionality.

  • To create an interest-rate instrument object without optionality, use fininstrument, associate a ratecurve object using ratecurve, and then specify a pricing method using finpricer.

  • To create an interest-rate instrument object with optionality, use fininstrument, associate a ratecurve object using ratecurve and a model object using finmodel, and then specify a pricing method using finpricer.

Functions

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fininstrumentCreate specified instrument object type
finmodelCreate specified model object type
finpricerCreate pricing method
setExercisePolicySet exercise policy for FixedBondOption, FloatBondOption, or Vanilla instrument
setPutExercisePolicySet put exercise policy for OptionEmbeddedFixedBond, OptionEmbeddedFloatBond, or ConvertibleBond instrument
setCallExercisePolicySet call exercise policy for OptionEmbeddedFixedBond, OptionEmbeddedFloatBond, or ConvertibleBond instrument
cashflowsCompute cash flow for FixedBond, FloatBond, Swap, FRA, STIRFuture, OISFuture, OvernightIndexedSwap, or Deposit instrument
fairdeliveryCompute fair delivery price of underlying asset for BondFuture, CommodityFuture, EquityIndexFuture, or FXFuture instrument
cashsettleCompute cash settlement for BondFuture, CommodityFuture, EquityIndexFuture, or FXFuture instrument
parswaprateCompute par swap rate for Swap instrument
volatilitiesCompute implied volatilities when using SABR pricer
priceCompute price for interest-rate, equity, or credit derivative instrument with Analytic pricer
priceCompute price for interest-rate instrument with Discount pricer
priceCompute price for interest-rate instrument with IRTree pricer
priceCompute price for interest-rate instrument with IRMonteCarlo pricer
priceCompute price for interest-rate instrument with Future pricer

Objects

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ratecurveCreate ratecurve object for interest-rate curve from dates and data
DepositDeposit instrument object
FixedBondFixedBond instrument object
FixedBondOptionFixedBondOption instrument object
FloatBondFloatBond instrument object
FloatBondOptionFloatBondOption instrument object
OptionEmbeddedFixedBondOptionEmbeddedFixedBond instrument object
OptionEmbeddedFloatBondOptionEmbeddedFloatBond instrument object
ConvertibleBondConvertibleBond instrument object
CapCap instrument object
FloorFloor instrument object
SwapSwap instrument object
SwaptionSwaption instrument object
FRAFRA instrument object
OvernightIndexedSwapOvernightIndexedSwap instrument object
STIRFutureSTIRFuture instrument object
OISFutureOISFuture instrument object
BondFutureBondFuture instrument object
HullWhiteCreate HullWhite model object for Cap, Floor, Swaption, Swap, FixedBond, FloatBond, FloatBondOption, FixedBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
BlackKarasinskiCreate BlackKarasinski model object for a Cap, FloorSwaption, Swap, FloatBond, FixedBond, FixedBondOption, FloatBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
BlackCreate Black model object for Cap, Floor, or Swaption instrument
NormalCreate Normal model object for Cap, Floor, or Swaption instrument
SABRCreate SABR model object for Swaption instrument
SABRBraceGatarekMusielaCreate SABRBraceGatarekMusiela model object for Cap, Floor, FixedBond, FloatBond, FloatBondOption, FixedBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
BraceGatarekMusielaCreate BraceGatarekMusiela model object for Cap, Floor, FixedBond, FloatBond, FloatBondOption, FixedBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
LinearGaussian2FCreate LinearGaussian2F model object for Cap, Floor, Swaption, Swap, FixedBond, FloatBond, FloatBondOption, FixedBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
DiscountCreate Discount pricer object for Deposit, FRA, Swap, FixedBond, FloatBond, OISFuture, STIRFuture, and OvernightIndexedSwap using ratecurve object
IRTreeCreate IRTree pricer object for Cap, Floor, Swap, Swaption, FloatBond, FixedBond, FixedBondOption, FloatBondOption, OptionEmbeddedFixedBond, or OptionEmbeddedFloatBond instrument
IRMonteCarloCreate IRMonteCarlo pricer object for interest-rate instruments using HullWhite, BraceGatarekMusiela, or LinearGaussian2F model
NormalCreate Normal pricer object for Cap, Floor, or Swaption instrument using Normal model
SABRCreate SABR pricer object for Swaption instrument using SABR model
BlackCreate Black pricer object for Cap, Floor, or Swaption instrument using Black model
HullWhiteCreate HullWhite pricer object for Cap, Floor, or Swaption instrument using HullWhite model
FutureCreate Future pricer object for BondFuture, CommodityFuture, EquityIndexFuture, and FXFuture using ratecurve object

Examples and How To

Concepts