[Price,PriceTree]
= floorbyhjm(HJMTree,Strike,Settle,Maturity) computes
the price of a floor instrument from a Heath-Jarrow-Morton interest-rate
tree. floorbyhjm computes prices of vanilla floors
and amortizing floors.
This example shows how to price a 3% floor instrument using an HJM forward-rate tree by loading the file deriv.mat, which provides HJMTree. The HJMTree structure contains the time and forward-rate information needed to price the floor instrument.
Interest-rate tree structure, specified by using hjmtree.
Data Types: struct
Rate at which the floor is exercised, specified as a NINST-by-1 vector
of decimal values.
Data Types: double
Settlement date for the floor, specified as a NINST-by-1
vector using a datetime array, string array, or date character vectors. The
Settle date for every floor is set to the
ValuationDate of the HJM tree. The floor argument
Settle is ignored.
To support existing code, floorbyhjm also
accepts serial date numbers as inputs, but they are not recommended.
Maturity date for the floor, specified as a NINST-by-1
vector using a datetime array, string array, or date character vectors.
To support existing code, floorbyhjm also
accepts serial date numbers as inputs, but they are not recommended.
(Optional) Reset frequency payment per year, specified as a
NINST-by-1 vector.
Data Types: double
(Optional) Day-count basis representing the basis used when annualizing the input
forward rate, specified as a NINST-by-1 vector
of integers.
(Optional) Notional principal amount, specified as a
NINST-by-1 of notional principal amounts, or a
NINST-by-1 cell array, where each element is a
NumDates-by-2 cell array where the first
column is dates and the second column is associated principal amount. The date
indicates the last day that the principal value is valid.
Use Principal to pass a schedule to compute the price for an
amortizing floor.
Data Types: double | cell
(Optional) Derivatives pricing options structure, specified using derivset.
Expected price of the floor at time 0, returned as a NINST-by-1 vector.
Tree structure with values of the floor at each node, returned as a MATLAB® structure of trees containing vectors of instrument prices and a vector
of observation times for each node:
A floor is a contract that includes a guarantee
setting the minimum interest rate to be received by the holder, based on an otherwise
floating interest rate.
Although floorbyhjm supports serial date numbers,
datetime values are recommended instead. The
datetime data type provides flexible date and time
formats, storage out to nanosecond precision, and properties to account for time
zones and daylight saving time.
To convert serial date numbers or text to datetime values, use the datetime function. For example:
t = datetime(738427.656845093,"ConvertFrom","datenum");
y = year(t)
y =
2021
There are no plans to remove support for serial date number inputs.
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