Fixed End-Date American Swaptions (HW-Tree)  Previous topicNext topicFirst topicLast topic

Fixed End-Date American Swaptions (HW-Tree)

HWTree_AmerReceiverFixMat(argument list…)

HWTree_AmerPayerFixMat(argument list…)

These functions return the value per $1 notional (e.g. 0.03 means 3% of notional) of American Put (Payer) and Call (Receiver) swaptions, using the Hull-White trinomial tree model, where the underlying swaps have fixed start and end dates. The functions allow for a no-exercise (lock out) period, and accruals begin upon exercise. The functions use the following arguments:

Argument Description Restrictions
Valuation_Date valuation date (e.g. today) valid Excel date number
Swaption_Mat_Date the final exercise date for the option >= Valuation_Date
First_Exercise_Date first option exercise date <= Swaption_Mat_Date
Notice_Days minimum notice, in days, required to exercise swaption >= 0
Strike_Rate strike rate for the swaption in decimal form (e.g. six percent entered as 0.06) > 0
Swap_Start_Date beginning of underlying swap valid Excel date number
TIM length of underlying swap, in months > 0
Fixed_freq number of fixed-side payments per annum 1, 2, 4, or 12
Yr_Basis year basis used in determining payments 360 or 365
Hols array of holiday dates valid Excel date numbers
strictly ascending order
DateConv business date convention 0 = no adjustment
1 = Following business day
2 = Modified following
3 = Previous
Tree_Steps number of steps in trinomial tree BETWEEN FIRST AND LAST EXERCISE DATES > 0, typically 50 to 100, although this should be lowered if the exercise period is a small fraction of the life of the option (otherwise too many tree steps in total)
Short_Rate_Vol annual standard deviation of the short rate of interest, in decimal form > 0
Rev_Rate mean reversion rate of the short rate of interest, in decimal form >= 0
Zero_Dates array of zero coupon curve dates strictly ascending order
The 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
OAS parallel shift of the zero curve in decimal form
Bucket_Start beginning of bucket for zero curve shifts set to 0 if curve shift is not desired
Bucket_End end of bucket for zero curve shift >= Bucket_Start
Bucket_Shift parallel shift of the zero curve between Bucket_Start and Bucket_End in decimal form set to 0 if curve shock is not desired

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