HW_BondEuroCall() and HW_Bond_EuroPut() functions

HW_BondEuroCall() and HW_Bond_EuroPut() functions

HW_BondEuroCall(argument list…)

HW_BondEuroPut(argument list…)

These functions return the value of European call and put options on coupon-bearing bonds using the Hull-White analytical model. Note that the market price of the bond is not passed as an argument to the function. Rather, the entire zero curve (including shocks) are passed as arguments, which imply a price for the bond. A function is provided to compute the OAS given a bond price and an unshocked zero curve (see HW_CurveBondPriceOAS). The functions use the following arguments:

Argument	Description	Restrictions
Valuation_Date	valuation date (e.g. today)	valid Excel date number
Bond_Settlement_At_Expiry	bond settlement date when the option expires	valid Excel date number >= Valuation_Date
Maturity_Date	bond maturity date	valid Excel date number >= Bond_Settlement_At_Expiry
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)
Option_Maturity	option expiry date	valid Excel date number >= Valuation_Date <= Bond_Settlement_At_Expiry
Strike	option strike per $100 par	> 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
Short_Rate_Vol	annual standard deviation of the short rate of interest, in decimal form	> 0
Reversion_Rate	mean reversion rate of the short rate of interest, in decimal form	>= 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