Simple Callable Bonds (HW-Tree)

Simple Callable Bonds (HW-Tree)

HWTree_SimpleCallable (argument list…)

This function returns the value of a level-coupon bond which is callable at par. 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	bond coupon rate in decimal form (e.g. six percent entered as 0.06)	>= 0
Coupon_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)
First_Call_Date	first date that the bond is callable	must be a valid coupon date
Call_Freq	call frequency per annum	1, 2, 4, or 12 must be lower than Coupon_Freq
Notice_Days	minimum notice, in days, required to call the bond	>= 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
Tree_Steps_per_Coupon	tree steps per fixed coupon period in the trinomial lattice	> 0 (typically 3 to 10)