HW_CMT_Cap() and HW_CMT_Floor() functions |

**HW_CMT_Cap() and HW_CMT_Floor() functions**

**HW_CMT_Cap(argument list…)**

**HW_CMT_Floor(argument list…)**

These function return the price of a cap or floor. However, the index rate is a CMT or a CMS rate, unlike a regular cap or floor. The CMS cap/floor can be valued by making the Treasury zero curve input identical to the swap curve. A proprietary technique is used to generate the valuation, within the framework of the Hull-White model. The function uses the following arguments:

Argument |
Description |
Restrictions |

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

Strike |
option strike rate in decimal form (e.g. six percent entered as 0.06) | > 0 |

Last_Reset_Rate |
previous CMT rate in decimal form, used for valuing seasoned caplets/floorlets | > 0 |

Cap/Floor Start_Date |
start date of cap/floor | valid Excel date number |

TIM |
term of the structure in months | > 0 |

CMT_Rate_term_months |
term of the rate underlying the floating (CMT) index | > 0 |

CMT_Rate_freq |
frequency of the CMT indexing rate | 1, 2, 4, or 12 |

CMT_Year_Basis |
year basis for the CMT rate | 360 or 365 |

CMT_Cap/Floor_freq |
the frequency of the cap or floor | 1, 2, 4, or 12 |

Holidays |
array of holiday dates | valid Excel date numbers strictly ascending order |

Govt_Zero_Dates |
array of zero coupon curve dates for the treasury curve | strictly ascending orderThe first date of this array must be Valuation_Date |

Govt_Zero_Rates |
array of continuously compounded zero coupon treasury rates in decimal form (e.g. six percent entered as 0.06) corresponding to Govt_Zero_Dates | > 0 |

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

Swap_Zero_Rates |
array of continuously compounded zero coupon swap rates in decimal form (e.g. six percent entered as 0.06) corresponding to Swap_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 swap zero curve in decimal form | |

Precision |
the degree of precision required | 3 to 80 (the higher the number, the more accurate the result, at least 50 is recommended) |

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