HW_CurveBondPriceVarOAS() function  Previous topicNext topicFirst topicLast topic

HW_CurveBondPriceVarOAS() function

HW_CurveBondPriceVarOAS(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 variable bond options with the Hull-White model. It returns the OAS of a bond relative to the zero curve rates given a price and bucket shift. A bond with a higher OAS is relatively "cheap" compared to bonds priced exactly on 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
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)
Coupon_Dates array of bond coupon dates First element must be the last coupon date before the settlement date, or an even older coupon, and last element must be the maturity date of the bond. Dates must be in ascending order, and consistent with the coupon frequency and maturity date.
Coupon_Rates array of bond coupon rates, as annualized rates, in decimal form (e.g. six percent entered as 0.06) >= 0, and corresponding to the Coupon_Dates array
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
Bond_Price quoted bond price > 0
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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