cfbyhjm (Financial Derivatives Toolbox)

Price cash flows from HJM interest rate tree

Syntax

[Price, PriceTree] = cfbyhjm(HJMTree, CFlowAmounts, CFlowDates, 
Settle, Basis, Options)

Arguments

HJMTree
Forward rate tree structure created by hjmtree.

CFlowAmounts
Number of instruments (NINST) by maximum number of cash flows (MOSTCFS) matrix of cash flow amounts. Each row is a list of cash flow values for one instrument. If an instrument has fewer than MOSTCFS cash flows, the end of the row is padded with NaNs.

CFlowDates
NINST-by-MOSTCFS matrix of cash flow dates. Each entry contains the date of the corresponding cash flow in CFlowAmounts.

Settle

Settlement date. A vector of serial date numbers or date strings. The Settle date for every cash flow is set to the ValuationDate of the HJM tree. The cash flow argument, Settle, is ignored.

Basis
(Optional) Day-count basis of the bond. A vector of integers.
0 = actual/actual (default), 1 = 30/360, 2 = actual/360,
3 = actual/365.

Options
(Optional) Derivatives pricing options structure created with derivset.

`HJMTree`	Forward rate tree structure created by `hjmtree`.
`CFlowAmounts`	Number of instruments (`NINST`) by maximum number of cash flows (`MOSTCFS`) matrix of cash flow amounts. Each row is a list of cash flow values for one instrument. If an instrument has fewer than `MOSTCFS` cash flows, the end of the row is padded with `NaN`s.
`CFlowDates`	`NINST`-by-`MOSTCFS` matrix of cash flow dates. Each entry contains the date of the corresponding cash flow in CFlowAmounts.
`Settle`	Settlement date. A vector of serial date numbers or date strings. The `Settle` date for every cash flow is set to the `ValuationDate` of the HJM tree. The cash flow argument, `Settle`, is ignored.
`Basis`	(Optional) Day-count basis of the bond. A vector of integers. `0` = actual/actual (default), `1` = 30/360, `2` = actual/360, `3` = actual/365.
Options	(Optional) Derivatives pricing options structure created with `derivset`.

Description

[Price, PriceTree] = cfbyhjm(HJMTree, CFlowAmounts, CFlowDates, Settle, Basis, Options) prices cash flows from an HJM interest rate tree.

Price is an NINST-by-1 vector of expected prices at time 0.

PriceTree is a tree structure with a vector of instrument prices at each node.

Examples

Price a portfolio containing two cash flow instruments paying interest annually over the four year period from January 1, 2000 to January 1, 2004.

Load the file deriv.mat, which provides HJMTree. HJMTree contains the time and forward rate information needed to price the instruments.

load deriv 
CFlowAmounts =[5 NaN 5.5 105;5 0 6 105];
CFlowDates = [730852, NaN, 731582,731947; 
              730852, 731217, 731582, 731947];

[Price, PriceTree] = cfbyhjm(HJMTree, CFlowAmounts,... 
CFlowDates, HJMTree.RateSpec.ValuationDate)

Price =

   96.7805
   97.2188
PriceTree = 

    FinObj: 'HJMPriceTree'
      tObs: [0 1.00 2.00 3.00 4.00]
     PBush: {1x5 cell}

You can visualize the prices of the two cash flow instruments with the treeviewer function.

```
treeviewer(PriceTree)
```

See Also

cfamounts, hjmprice, hjmtree, instcf

cfbybdt cfbyzero