Financial Derivatives Toolbox

Portfolio Creation

The instadd function creates a set of instruments (portfolio) or adds instruments to an existing instrument collection. The TypeString argument specifies the type of the investment instrument: 'Bond', 'OptBond', 'CashFlow', 'Fixed', 'Float', 'Cap', 'Floor', or 'Swap'. The input arguments following TypeString are specific to the type of investment instrument. Thus, the TypeString argument determines how the remainder of the input arguments is interpreted.

For example, instadd with the type string 'Bond' creates a portfolio of bond instruments

• InstSet = instadd('Bond', CouponRate, Settle, Maturity, Period, 
  Basis, EndMonthRule, IssueDate, FirstCouponDate, LastCouponDate, 
  StartDate, Face)
  

In a similar manner, instadd can create portfolios of other types of investment instruments:

• Bond option

• InstSet = instadd('OptBond', BondIndex, OptSpec, Strike, 
  ExerciseDates, AmericanOpt)
  

• Arbitrary cash flow instrument

• InstSet = instadd('CashFlow', CFlowAmounts, CFlowDates, Settle, 
  Basis)
  

• Fixed rate note instrument

• InstSet = instadd('Fixed', CouponRate, Settle, Maturity, 
  FixedReset, Basis, Principal) 
  

• Floating rate note instrument

• InstSet = instadd('Float', Spread, Settle, Maturity, FloatReset, 
  Basis, Principal)
  

• Cap instrument

• InstSet = instadd('Cap', Strike, Settle, Maturity, CapReset, 
  Basis, Principal) 
  

• Floor instrument

• InstSet = instadd('Floor', Strike, Settle, Maturity, FloorReset, 
  Basis, Principal) 
  

• Swap instrument

• InstSet = instadd('Swap', LegRate, Settle, Maturity, LegReset, 
  Basis, Principal, LegType)
  

To use the instadd function to add additional instruments to an existing instrument portfolio, provide the name of an existing portfolio as the first argument to the instadd function.

Consider, for example, a portfolio containing two cap instruments only.

• Strike = [0.06; 0.07];
  Settle = '08-Feb-2000';
  Maturity = '15-Jan-2003';
  
  Port_1 = instadd('Cap', Strike, Settle, Maturity);
  

These commands create a portfolio containing two cap instruments with the same settlement and maturity dates, but with different strikes. In general, the input arguments describing an instrument can be either a scalar, or a number of instruments (NumInst)-by-1 vector in which each element corresponds to an instrument. Using a scalar assigns the same value to all instruments passed in the call to instadd.

Use the instdisp command to display the contents of the instrument set.

• instdisp(Port_1)
  
  Index Type Strike Settle      Maturity    CapReset Basis 
  Principal
  1     Cap  0.06   08-Feb-2000 15-Jan-2003 NaN      NaN   NaN      
  2     Cap  0.07   08-Feb-2000 15-Jan-2003 NaN      NaN   NaN 
  

Now add a single bond instrument to Port_1. The bond has a 4.0% coupon and the same settlement and maturity dates as the cap instruments.

• CouponRate = 0.04;
  Port_1 = instadd(Port_1, 'Bond', CouponRate, Settle, Maturity);
  

Use instdisp again to see the resulting instrument set.

• instdisp(Port_1)
  
  Index Type Strike Settle      Maturity    CapReset Basis 
  Principal
  1     Cap  0.06   08-Feb-2000 15-Jan-2003 NaN      NaN   NaN      
  2     Cap  0.07   08-Feb-2000 15-Jan-2003 NaN      NaN   NaN 
  
  Index Type CouponRate Settle      Maturity    Period Basis ...
  3     Bond 0.04       08-Feb-2000 15-Jan-2003 NaN    NaN ...
  

Creating and Managing Instrument Portfolios

Portfolio Management