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instrangefloat

Construct range note instrument

Description

example

InstSet = instrangefloat(Spread,Settle,Maturity,RateSched,Reset,Basis,Principal,EndMonthRule) creates a range instrument from data arrays.

example

InstSet = instrangefloat(___,Reset,Basis,Principal,EndMonthRule) creates a range instrument from data arrays using optional arguments.

example

InstSet = instoptstock(InstSet,___) adds new range set instrument to an existing instrument set.

Examples

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Create an instrument portfolio with a range note.

Spread = 100;
Settle = 'Jan-1-2011';
Maturity = 'Jan-1-2014';

RateSched.Dates = {'Jan-1-2012'; 'Jan-1-2013'  ; 'Jan-1-2014'};
RateSched.Rates  = [0.045 0.055; 0.0525  0.0675; 0.06 0.08];

% Create InstSet
InstSet = instrangefloat(Spread, Settle, Maturity, RateSched);

% Display the portfolio instrument
instdisp(InstSet)
Index Type       Spread Settle         Maturity       RateSched FloatReset Basis Principal EndMonthRule
1     RangeFloat 100    01-Jan-2011    01-Jan-2014    [Struct]  1          0     100       1           
 

Add a second range note instrument to the portfolio. Second Range Note:

Spread2 = 200;
Settle2 = 'Jan-1-2011';
Maturity2 = 'Jan-1-2013';
RateSched2.Dates = {'Jan-1-2012'; 'Jan-1-2013'};
RateSched2.Rates  = [0.048 0.059; 0.055  0.068];

InstSet = instrangefloat(InstSet, Spread2, Settle2, Maturity2, RateSched2);

% Display the portfolio instrument
instdisp(InstSet)
Index Type       Spread Settle         Maturity       RateSched FloatReset Basis Principal EndMonthRule
1     RangeFloat 100    01-Jan-2011    01-Jan-2014    [Struct]  1          0     100       1           
2     RangeFloat 200    01-Jan-2011    01-Jan-2013    [Struct]  1          0     100       1           
 

Input Arguments

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Instrument variable, specified only when adding stock option instruments to an existing instrument set. For more information on the InstSet variable, see instget.

Data Types: struct

Number of basis points over the reference rate, specified as a scalar numeric.

Data Types: double

Settlement date of floating-rate note, specified as an NINST-by-1 vector of date character vectors or serial date numbers.

Data Types: char | double

Maturity date of floating-rate note, specified as an NINST-by-1 vector of date character vectors or serial date numbers.

Data Types: char | double

Range of dates within which cash flows are nonzero, specified as an NINST-by-1 structure where each element of the structure array contains two fields:

  • RateSched.DatesNDates-by-1 cell array of dates corresponding to the range schedule.

  • RateSched.RatesNDates-by-2 array with the first column containing the lower bound of the range and the second column containing the upper bound of the range. Cash flow for date RateSched.Dates(n) is nonzero for rates in the range RateSched.Rates(n,1) < Rate < RateSched.Rate (n,2).

Data Types: double | char

(Optional) Frequency of payments per year, specified as an NINST-by-1 vector.

Data Types: double

(Optional) Day count basis, specified as an NINST-by-1 vector.

  • 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) Notional principal amounts, specified and an NINST-by-1 vector.

Data Types: double

(Optional) End-of-month rule flag for generating dates when Maturity is an end-of-month date for a month having 30 or fewer days, specified as an NINST-by-1 vector.

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

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

Data Types: logical

Output Arguments

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Variable containing a collection of instruments, returned as a structure. Instruments are divided by type and each type can have different data fields. Each stored data field has a row vector or character vector for each instrument. Values are:

  • FieldListNFIELDS-by-1 cell array of character vectors listing the name of each data field for this instrument type.

  • ClassListNFIELDS-by-1 cell array of character vectors listing the data class of each field. The class determines how arguments are parsed. Valid character vectors are'dble', 'date', and 'char'.

  • TypeString — Character vector specifying the type of instrument added. TypeString = 'RangeFloat'.

For more information on the InstSet variable, see instget.

More About

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Range Note Instrument

A range note is a structured (market-linked) security whose coupon rate is equal to the reference rate as long as the reference rate is within a certain range.

If the reference rate is outside of the range, the coupon rate is 0 for that period. This type of instrument entitles the holder to cash flows that depend on the level of some reference interest rate and are floored to be positive. The note holder gets direct exposure to the reference rate. In return for the drawback that no interest is paid for the time the range is left, they offer higher coupon rates than comparable standard products, like vanilla floating notes.

References

[1] Jarrow, Robert. “Modelling Fixed Income Securities and Interest Rate Options.” Stanford Economics and Finance. 2nd Edition. 2002.

Introduced in R2012a