Portfolio Creation Using Functions

Introduction

The instadd function creates a set of instruments (portfolio) or adds instruments to an existing instrument collection. The TypeString argument specifies the type of the investment instrument. For interest-rate-based derivatives, the types are: Bond, OptBond, CashFlow, Fixed, Float, Cap, Floor, and Swap. For equity derivatives, the types are Asian, Barrier, Compound, Lookback, and OptStock.

The input arguments following TypeString are specific to the type of investment instrument. Thus, the TypeString argument determines how the remainder of the input arguments is interpreted. For example, instadd with the type character vector for Bond creates a portfolio of bond instruments.

InstSet = instadd('Bond', CouponRate, Settle, Maturity, Period,
Basis, EndMonthRule, IssueDate, FirstCouponDate, LastCouponDate,
StartDate, Face)

Interest-Rate-Based Derivatives

In addition to the bond instrument already described, the toolbox can create portfolios containing the following set of functions for interest-rate-based derivatives:

• Bond option

  InstSet = instadd('OptBond', BondIndex, OptSpec, Strike, ExerciseDates, AmericanOpt)

• Arbitrary cash flow instrument

  InstSet = instadd('CashFlow', CFlowAmounts, CFlowDates, Settle, Basis)
  

• Fixed-rate note instrument

  InstSet = instadd('Fixed', CouponRate, Settle, Maturity, FixedReset, Basis, Principal)

• Floating-rate note instrument

  InstSet = instadd('Float', Spread, Settle, Maturity, FloatReset, Basis, Principal)

• Cap instrument

  InstSet = instadd('Cap', Strike, Settle, Maturity, CapReset, Basis, Principal)

• Convertible bond instrument

  InstSet = instcbond(CouponRate,Settle,Maturity,ConvRatio)
  

• Floor instrument

  InstSet = instadd('Floor', Strike, Settle, Maturity, FloorReset, Basis, Principal)

• Swap instrument

  InstSet = instadd('Swap', LegRate, Settle, Maturity, LegReset, Basis, Principal, LegType)

• Swaption instrument

  InstSet = instadd('Swaption', OptSpec, Strike, ExerciseDates, Spread, ...
  Settle, Maturity, AmericanOpt, SwapReset, Basis, Principal)

• Bond with embedded option instrument

  InstSet = instadd('OptEmBond', CouponRate, Settle, Maturity, OptSpec, Strike, ...
  ExerciseDates, 'AmericanOpt', AmericanOpt, 'Period', Period,'Basis', Basis, ...
  'EndMonthRule', EndMonthRule,'Face',Face,'IssueDate', IssueDate, 'FirstCouponDate', ...
  FirstCouponDate, 'LastCouponDate', LastCouponDate,'StartDate', StartDate)

Equity Derivatives

The toolbox can create portfolios containing the following set of functions for equity derivatives:

• Asian instrument

  InstSet = instadd('Asian', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt, ...
  AvgType, AvgPrice, AvgDate)

• Barrier instrument

  InstSet = instadd('Barrier', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt, ...
  BarrierType, Barrier, Rebate)
  

• Compound instrument

  InstSet = instadd('Compound', UOptSpec, UStrike, USettle, UExerciseDates, UAmericanOpt, ...
  COptSpec, CStrike, CSettle, CExerciseDates, CAmericanOpt)
  

• Convertible bond instrument

  InstSet = instcbond(CouponRate,Settle,Maturity,ConvRatio)
  

• Lookback instrument

  InstSet = instadd('Lookback', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt)

• Stock option instrument

  InstSet = instadd('OptStock', OptSpec, Strike, Settle, Maturity, AmericanOpt)