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Variable Strike Bermudan Swaptions (HW-Tree)

HWTree_BermReceiverSwaption(argument list…)

HWTree_BermPayerSwaption(argument list…)

These functions return the value per $1 notional (e.g. 0.03 means 3% of notional) of Bermudan Put (Payer) and Call (Receiver) swaptions, using the Hull-White trinomial tree model. When exercised, the holder of the option enters into a swap with a predetermined start and end date. Accruals begin on the swap start date (if exercised before the swap start date) or on the exercise date (if exercised past the swap start date). The functions use the following arguments:

Argument Description Restrictions
Valuation_Date valuation date (e.g. today) valid Excel date number
Exercise_Dates array of exercise dates strictly ascending order; the last date must be <= the swap maturity date
Exercise_Rates array of strike rates corresponding to Exercise_Dates array (constant swap rates that are entered into if swaption is exercised) > 0
Notice_Days minimum notice, in days, required to exercise swaption >= 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
Holidays array of holiday dates valid Excel date numbers
strictly ascending order
Date_Convention 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
Reversion_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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