HW_CurveBondPriceOAS() function |

**HW_CurveBondPriceOAS() function**

**HW_CurveBondPriceOAS(argument list…)**

This function is not derived from the Hull-White model per se, but is provided as a utility which is useful when pricing bond options with the Hull-White model. It returns the OAS of a bond using *given* a zero curve and the observed bond price. An interpretation of the OAS can be given in relative value terms – the higher the OAS, the cheaper a bond is relative to the zero curve. The function uses the following arguments:

Argument |
Description |
Restrictions |

Valuation_Date |
valuation date (e.g. today) | valid Excel date number |

Settlement_Date |
bond settlement date | valid Excel date number >= Valuation_Date |

Maturity_Date |
bond maturity date | valid Excel date number >= Settlement_Date |

Coupon |
annual bond coupon in decimal form (e.g. six percent entered as 0.06). For zero coupon (strip) bonds, enter 0. | >= 0 |

Freq |
number of bond coupons per annum | 1, 2, 4, or 12 |

DCB |
day count basis | 0 = 30/360 (US) 1 = act/act for CAD/US T-Bonds 2 = act/360 3 = act/365 4 = 30/360 (European) |

Zero_Dates |
array of zero coupon curve dates | strictly ascending orderThe first date of this array must be Valuation_Date |

Zero_Rates |
array of continuously compounded riskless rates in decimal form (e.g. six percent entered as 0.06) corresponding to Zero_Dates | > 0 |

Bond_Price |
bond price per $100 par | > 0 |

In this context, OAS is defined as the parallel shift in the continuously compounded zero curve which makes the computed bond price from the zero curve equal to the observed market price. This proves useful in pricing options on off-the-run bonds (i.e. bonds not used in constructing the zero curve) and in situations where the market prices are moving rapidly, and as a result updating the zero curve is impractical.

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